JEREMY MAGGS: Agriculture – and agricultural processing – is a vital contributor to the South African economy. It represents around 10% of the country’s GDP.
It is, as you well know, a major source of employment. It generates more than a million direct and indirect jobs. Agricultural exports play an important role in the South African economy, accounting for around 25% of total exports.
All of that sounds very good, doesn’t it? But there are problems, including poorly developed agricultural infrastructure.
Agri-investments have stagnated in South Africa due to a lack of confidence in the sector.
South Africa, as you well know, has introduced land-reform policies that have resulted in the redistribution of land from white to black farmers. However, the process has been complicated to a degree by inadequate support for the new farmers under the lack of clear regulations on land tenure. Then, of course, there is climate change. It’s expected to have a major negative impact on agriculture.
South Africa’s agricultural productivity is low, compared to other countries. That’s due in part to outdated technology and limited access to improved farming methods. Small-scale and commercial farmers here in South Africa often lack access to adequate financing, limiting their ability to invest in new technologies and improved production systems.
A very warm welcome to FixSA. Our guests in coming weeks are going to be asked how we can make things better, how we can improve matters, how we in the shortest space of time can become a competitive and successful nation.
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Well, you’ve guessed it. We are talking agriculture today, and my guest is Wandile Sihlobo. He’s the chief economist of the Agricultural Business Chamber of South Africa, perhaps better known to us as Agbiz. He’s also the author of Finding Common Ground: Land, Equity and Agriculture. Wandile, a very warm welcome to you. Let’s wade straight in. As far as the sector is concerned, what in your opinion is the biggest problem?
WANDILE SIHLOBO: Thanks for having me on Jeremy, and I think you have already highlighted some of the important issues that we need to tackle in this sector. I may just try to frame those, Jeremy, in about five points that in my view we have to really focus on.
I would start on the first one, which you began to highlight, to say we are increasingly facing productivity problems. This is a new thing in South Africa, because we’ve been a leader when we think about technologies – agri-technologies – that are necessary for boosting productivity.
But I would say somewhere around 2015 or so we were starting to drag our feet a little. By that, Jeremy, I’m particularly talking about what we call Act 36 of 1947, which is a regulation that deals with the registration of certain fertilisers, farm feeds, seeds and remedies. All of these are important when you think about productivity – for livestock farmers, fruit farmers or crop farmers – because they depend on some of these biological materials to be able to boost productivity.
What we need in South Africa is [to] smooth and modernise those regulations. That’s the first thing I would say we need to focus on.
I would say issues around biosecurity are part and parcel of that conversation.
The second problem, Jeremy – and you make the point of saying – is we are an important sector. When one thinks about the GDP of South Africa, we contribute a lot to the fortunes of the country. But we are increasingly facing a problem when we think about infrastructure … rural roads are in a bad condition. Think of the Free State, all the way to the Eastern Cape [and] North West.
Anyone who drives around South Africa will agree with us that we are in bad shape. Water infrastructure is another thing that I think requires urgent attention.
I would add to that second point, the issue around ports and rail. We already see improvements, but there’s a lot that can be done.
And, very quickly, the three other points, Jeremy, I would add to that list … we need to focus on the security of stock.
Stock theft for small-scale black farmers is a big problem. Farm attacks are another issue. There is vandalisation of infrastructure.
And I would also say, guys, as South Africa, let’s focus a lot on research and development and widening export markets.
So for me, taking all of these position points together … I think a solution would begin to help us grow the farm economy, agro-processing, and also the rural economy which is an important area of our society.
JEREMY MAGGS: If we don’t get this right, it will have a negative impact in time on food security and our ability to provide.
WANDILE SIHLOBO: Absolutely, Jeremy, because I think we have to appreciate the fact that agriculture is very important. This is a clear effect if you look at some literature, which [came out] in Asia, in much of Latin America, and even on the African continent [that] gives us important insight into that.
If you look at growth in agriculture in general, it typically is two or three times more effective in reducing poverty than the equivalent amount of growth generated outside agriculture …
Which means if you grow your agricultural sector you are dealing with a lot of societal problems in South Africa – poverty – and of course the issue of unemployment.
If you don’t do that, then the eventuality could be the likely outcome you just alluded to.
JEREMY MAGGS: If we look at some of the points you’ve just raised – dragging our feet on regulation, the issues of infrastructure, security, research and development – which is the most serious?
WANDILE SIHLOBO: I would say security and infrastructure are the important areas. I say this because if you look at South Africa’s agricultural sector we are a country that exports about 51% of what we produce in value terms. In 2022, that was about $12.8 billion, a record level, up 4% from the previous year.
That’s not to say [we] feel good about ourselves. It’s just to demonstrate the fact that we need to have ports being efficient and operating well. We need to have roads that can actually take the product from where it’s produced to export markets, and also to local markets.
I think the road network and rail is an important and an urgent one.
In addition, I would say let’s deal with security, because at the end of the day we know there is evidence that where crime and theft arises, investments tend to decline, especially now that [criminals are] seen to be vandalising key infrastructure in the railway industry and some of the water infrastructure.
All these [challenges] do not bode well for the goals we have for South Africa’s agriculture [sector] and for any other business in our economy.
JEREMY MAGGS: So where do we start fixing the deficiencies in infrastructure?
WANDILE SIHLOBO: Well, we are starting to fix the deficiencies in infrastructure, Jeremy. I would say it’s multi-layered.
The first [aim] is ensuring we have municipalities managed by people who are competent, passionate, and devoted to the work they are doing [and that] they have good engineers. That begins to improve the operational efficiency of small towns, which is where agri-businesses and farmers are largely operating.
In South Africa all the highways are in relatively good condition. The problem begins with roads managed by municipalities.
But I think agri-businesses and farmers have a certain role to play, partnerships could be struck … but we should be careful not to transfer the responsibilities that are supposed to be [for] the public budget, of course, to rely more on the private-sector.
I would say at municipality level, dealing with roads. And of course the Department of Transport as well as the Department of Agriculture, who can speak for the farming sector [are the first starting points].
Regarding the others, related to rail and road, there’s already a good conversation between Transnet and organised agriculture groups like ours, the Agricultural Business Chamber, AgriSA and the others.
We recently signed what we call the ‘interface agreement’, which allows us to share knowledge about where the problems are and to think about the areas of core investment so that we see some better levels of efficiency in facilitating our exports and logistics.
JEREMY MAGGS: Are you suggesting that agriculture doesn’t have a loud enough voice in government, both national and provincial?
WANDILE SIHLOBO: I think the voice is loud and is there. But because the sector has seen enormous growth over the past two or three years we may fall into thinking that all is blooming and going well in agriculture, but there are problems that are [bubbling] out, and if they are not addressed down the line we may face some problems.
I’m just thinking about, for example, the other point I was mentioning about regulations, [where] Act 36 of 1947 allows us to import certain fertilisers and [pharmaceuticals]. That, Jeremy, is critical to the point you mentioned – that they start [dealing with] climate change – because we don’t need these biological solutions just for the sake of having them.
But we are saying with climate change there are new problems, there’s a change in rainfall patterns, there’s a change in temperature.
But then there are technologies that assist farmers to a certain extent to cope with these ever changing climatic conditions.
If you think about the farming sector alone and add agro-processing as you rightly did, you are looking at roughly over 1.3 million South Africans who are directly working in the space. So when you bring these technologies in, ensuring there is progress in the sector, there’s a wide number of people who benefit from the sustainability.
And of course the multipliers then of those jobs are quite huge.
JEREMY MAGGS: When agri-business and small agriculture raise these problems, whether it be at municipal, provincial or national level, do you feel that you’re being heard?
WANDILE SIHLOBO: Right now, Jeremy, we are in a great place of having someone that is dedicated and knowledgeable about the sector, such as Minister [of Agriculture, Land Reform and Rural Development] Thokozile Didiza.
As you know, Jeremy, she was one of the early ministers at the dawn of democracy in this sector. So, she brings a lot of focus on the sector. I think the relationship between organised agriculture and her department has strengthened over time and there is good listening and good interaction.
But what we are now asking is that she goes further to say how she pushes her colleagues in Water Affairs. How does she push her colleagues that are responsible for roads to assist us?
Portia Derby, who runs Transnet, has also been engaging with our sector quite strongly and that relationship is growing stronger and stronger, and there’s good cooperation happening.
So in those areas we do see that, but I still think the minister of agriculture can go forward and even broaden that influence for the sector in some of the other portfolios of government that influence us, but are not under her authority.
JEREMY MAGGS: Yours is an industry that is also hit hard, sometimes, by a lack of cooperative partnership – in other words, people talking out of the silos and at each other. How would you make that happen? How would you get more people to engage in that constructive partnership that you’re referring to?
WANDILE SIHLOBO: You’re a hundred percent correct that in our sector there’s always what I typically call a ‘conflict of visions’, not only between government and the private sector, but even ourselves as the private sector where [some] desire a certain path, and others desire a [different] path for growth. But I think where we could tap ourselves on our shoulders, is that over the past two years we’ve managed to come up with what we call the ‘Agriculture and Agro-processing Master Plan’.
I know many South Africans are bored with hearing about master plans – but this one introduces something interesting.
Because what it begins to do is follow the general ethos of Chapter 6 of the NDP [National Development Plan], which talks about inclusive growth. But then it goes deeper than just the vision and it begins to map what we call the commodity corridors – to say in the former Transkei region of Lusikisiki … what can we specialise in? Which private-sector players have an interest? When we go down to KZN to Richmond, what can we do? When you look up north in Limpopo, you are in Molemole, on the outskirts there, what can be grown, what agri-businesses can get into those areas?
But also understand, in each of these regions, there are constraining factors. When we say ‘infrastructure’ it is a broad theme. Is it roads, is it water? What is it? Is it fencing? Is it farm infrastructure, is it silo, storages … all of those?
This is what has been mapped up, per commodity, in this master plan.
JEREMY MAGGS: Where have you seen progress in that sector specific approach, or that area’s sector specific approach?
WANDILE SIHLOBO: This area sector specific approach … was not created by government and imposed on the private sector. It was a core creation where all social partners were at the table – private sector, labour, community, as well as the government.
Now we are seeing the progress because we are beginning to say, ‘let’s move to the second stage of implementation’. There’s a launch of blended finance that has just been done at the end of last year, with the Land Bank and the government, which is one of the ingredients needed.
We are now marching on [with] that implementation … when we speak somewhere at the end of 2023 we would be able to judge if we are cracking the ground and seeing some of the implementation that already has happened. But right now, all is general ethos, and in farmer meetings that I go to, everyone is eager. And that message is also shared by government. That’s where I draw optimism.
JEREMY MAGGS: That cooperative ideology seems to be very successful, but conventional wisdom also suggests there is a divide in interest between small agriculture and big agri-business. How do you get those two sides working together more cooperatively?
WANDILE SIHLOBO: That is an important point you’re raising. It is baked in the history of South Africa, which I was talking to, a conflict of vision where black farmers are saying, ‘We want to get to the table’. And it looks like commercial farmers, largely white farmers, are already asking how they can modernise and get into the global business, while black farmers are still trying to get to [the table].
In South Africa, particularly in agriculture – and allow me to make this point – there is always confusion where some people think of transformation as if it’s taking from the white farmer and giving to a black farmer. But what we are trying to look at in agriculture is growing what we call the agricultural pie, taking some of the land that is underutilised, bringing black farmers in under the ethos of ‘better a few, but better’, which means you better have a few commercial black farmers, but ones that are excelling and making sure they are taken care of.
But where is that land coming from? In the government’s books right now we have at minimum about 1.8 million hectares that the government will begin to release, hopefully with title deeds, to new beneficiaries.
As they come in and as they partner, as they get supported and grow in the sector, then you are narrowing that gap, because if we don’t narrow the gap and we don’t commercialise black farmers, we end up with the current problem … If you look at South Africa’s food production, black farmers, with the statistics we have, make up roughly 10-15% of commercial agricultural output.
You cannot continue to have these parallel processes where they are largely in smallholdings and you have white farmers largely on commercial. We have to be growing at a commercial scale, and dealing with inclusive growth … We will then over time begin to have an unanimous vision – not one where interests differ.
I’m basically saying there are mechanisms in place, but the goal is the commercialisation of black farmers. The needs differ, but if there is a clear understanding and a clear mapping up about how to close that gap, we’ll march forward.
But this is not a given. I must stress that the government has to launch what they say – which is a land reform and agricultural development agency, which the president spoke about in his Sonas [State of the Nation addresses] in 2021 and 2022.
I understand from interacting with the Department of Agriculture that the work has already been done in mapping up that agency. And then if you can deliver and take this land that I mentioned – the 1.8 million plus hectares – and make sure it’s distributed with either title deeds or tradeable long-term leases [with] agricultural finance in place, I think we will begin to see a greener future – more jobs, more food produced and more exports. That’s the prosperity we want for rural South Africa.
JEREMY MAGGS: That certainly is a utopian vision. In every answer you’ve given me, Wandile Sihlobo, to a greater or lesser extent, you have mentioned the role that government has to play. I’m wondering, as we have this conversation, whether there is just too much dependence on government getting things done, and often that in itself is a hindrance?
WANDILE SIHLOBO: There is no way we cannot have the government in this conversation … The whole point of land reform – think back in the history of our country – was started [by saying] you get land reform so that it can be distributed to black farmers, and then agriculture can grow.
So land reform is to my mind, objective, restorative justice and economic development. The state cannot hoard over 1.8 million hectares and not pass it on to people … Act 36 of 1947 is not a bad act in itself because what it says is there shouldn’t be pharmacies and remedies and agrochemicals that hurt the environment, but ones that [we can] use responsibly. And then it outlines those things.
It’s not like the government is coming and doing a bad thing, but government has a responsibility of saying, ‘This was good in 1947 and all the way to the early 2000s, but now there are new developments and they have to change’, which is why we’re bringing it into this conversation.
I’m a bit more optimistic on land. I will make this point because I was familiar with the structuring of this agency that I was talking about and I do think it is key to getting things going. But the private sector will also have to play its part in the mix.
JEREMY MAGGS: One of the big issues that you raised was infrastructural deficiency. The easy solution, of course, is to throw more money at it. That’s how we are going to fix the roads, that’s how we’ll fix the ports, that’s how we’ll fix the railway tracks. But the reality is in this particular economic climate, we simply don’t have the money to do that. So is there a compromise solution in terms of at least making a start to getting the infrastructure build back on track?
WANDILE SIHLOBO: I wish I would tell you that agri-businesses or farmers should be doing certain parts of the roads, which is, again, your point of saying we’re deferring a lot to government, but we’re deferring a lot to government because they have the budget to do this.
It’s not like South Africa doesn’t have the money to do some of this, but it’s about how that money is misallocated by those responsible.
If you think about businesses at this point – take a simple farmer of maize and the pressures you have faced in 2021 all the way to 2023 – you’ve been in an environment where there’ve been higher fertiliser prices, higher fuel prices. Now there are the electricity issues in South Africa.
If you think about fertiliser alone, it makes up about 35% of farmers’ input costs, which means you have really minimal room within your own budget to actually manage your enterprise.
If we begin to say, in addition to managing your farm, we need you to fix the roads, fix the water, but we also need you to pay the taxes, I do think … we are not putting all the trust in government, but we have to insist people do what they are elected and in office to do.
JEREMY MAGGS: You’re absolutely right. That of course would be a bridge too far. Let’s just move the conversation away from the role of an agri-business, to the broader business community within the value chain. We know that business is very good at talking up a storm and criticising from the sidelines often,. But what further role does the broader business community within that value chain have to play to right the agricultural ship in this country? For instance, I’m talking about the logistics industry, I’m talking about the retail industry.
WANDILE SIHLOBO: There are already structures that can be used even more efficiently – not to insinuate that they are not at the moment.
If you think about Busa [Business Unity South Africa] you have all of the role players sitting there, and ourselves having a seat [at] either Nedlac [National Economic Development and Labour Council] elsewhere.
I think that by sharing experiences of challenges individual businesses face, and how they link to the broader sector and other businesses at the table, we [can] increase the cooperation … on a knowledge and an information sharing [basis].
When we were in Covid, when they released this big economic plan, what they were saying in each of the sectors was that [they] would do ‘X, Y, Z’ to get South Africa growing. That is a sort of initiative reflective of what is happening in manufacturing, of what’s happening in primary sectors – agriculture, mining – and all the way to financing, and then saying who should do what and how this ship should roll going forward.
Unfortunately, that’s not something that received a good uptake, which is a gripe I believe [former] president [Thabo] Mbeki always refers to in public statements I’ve heard him make.
JEREMY MAGGS: You in your job, Wandile Sihlobo, I imagine talk to the farming community. You would talk to the co-ops, the unions, for instance. Is there a sense of any optimism at all, or is it generally despair?
WANDILE SIHLOBO: I will be honest with you. As the Agricultural Business Chamber, as we talk today, we released in the second week of March what we call the Agbiz IDC Agribusiness Confidence Index.
It showed for the past two quarters, which is the first quarter of this year and the last quarter of 2022, there was growing despondency among agri-businesses in South Africa.
And if you were to listen to all the conversations and ask what is it that people talk about – it is about load shedding, high input costs, the issues we’ve just discussed, animal diseases, municipalities that are not working and of course the network industries, which are electricity, water and all those things.
I guess I’m trying to bring a slightly scientific answer in saying no, there is a sense of despondency in the sector and we need to see this changing because if it persists, investments may decline over time.
JEREMY MAGGS: You’ve raised a number of issues and you’ve raised a number of fixes, but there is that old cliché, as I always say on this podcast, that ‘you can’t manage anything unless you can measure it’. So how would you define, in terms of the agri-fix, some of the short-term successes that are achievable in the short term?
WANDILE SIHLOBO: What’s achievable in the short term is what doesn’t need a lot of money – updating and dealing with the regulatory matters where you don’t need to hire people, which means dealing with the modernisation of Act 36, biosecurity challenges, and beginning to say how you advocate better market access for South African products to markets like China, India, Saudi Arabia and Bangladesh.
All those mean there will be demand out there for us to continue to export.
In the process you deal with structural issues of infrastructure and municipalities. All those are medium to long term, but they are regulatory and advocacy things the government and business can do hand in hand, for the good of South Africa’s agriculture and rural economy.
JEREMY MAGGS: And a final question. It’s common cause that it’s not up to your generation, and certainly not up to my generation, to see the fix through to the end.
So when you are talking to young people, perhaps your grandchildren in the next 20 or 25 years, I’d be interested to know what you’ll tell them about the early 2020s and their role in continuing to build the sector. After all, they are the next baton-holding generation, aren’t they?
WANDILE SIHLOBO: Absolutely, Jeremy. We are now at a stage where one of the key things that will stay and remind me is that we spent a lot of time talking about the potential that lies in the former homelands to deal with agriculture.
We have been writing and talking about it since I started practising, and we don’t seem to be actually realising it, which is why I hope the master plans [and] others may deliver. If they don’t, then I’ll be very disappointed.
But with all the indications, I think the big story will be how we transformed the rural economy from being a down place to a more vibrant place that is contributing positively to the South African economy.
And I think with all of that which we plan, Jeremy, and the interactions between the government and the private sector, it seems that it’s a good challenge for all of us to put forward and say, ‘How do we do this?’
And I hope it will be a success we can tell generations after us.
JEREMY MAGGS: Wandile Sihlobo is the chief economist of the Agricultural Business Chamber of South Africa. Thank you for joining us, and thank you for listening.
I’m Jeremy Maggs and we’ll talk to you again on the next FixSA podcast on Moneyweb.
