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Desember 2018
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RELEVANT
MMATLOU KALABA,
lecturer in Agricultural Economics,
University of Pretoria
POLITICAL
analysis
South Africa’s struggling agricultural
sector:
What went wrong 20 years ago
S
outh Africa’s decision to play by the global rules of free
trade post-1994 put the country’s agricultural sector in a
difficult position. While it was expected to compete against
the best in the world, the support that could have helped it,
was taken away.
At the same time, the countries it was competing against were
extremely supportive of the sector – sometimes as much as three
times more. This meant that new black farmers missed out on the
opportunity to catch up with farmers who had been supported
previously. Beyond that, there was the problem of land reform
which needed to be addressed without putting the spirit of reconcili-
ation as well as productivity at risk.
South Africa has limited agricultural potential and produces at a
relatively high cost to attain the same unit of output as most coun-
tries in the world. It is classified as a semi-arid area, meaning its
rainfall is low and erratic. The country has an average annual rainfall
of less than 500 mm compared to the global average of 860 mm.
Only 12% of its 1,2 million square kilometres is suitable for agricul-
tural use.
Political imperatives
Although the agricultural sector had to provide food, the new demo-
cratic government also needed it to address political challenges re-
lated to rural development, social and political issues. The focus at
the time was on transforming the sector to achieve these political
goals rather than to prepare for global competition.
Looking at land ownership, this is understandable. More than 80%
of agricultural land was owned by white commercial farmers, yet the
white population constituted about 13% of the country. Addressing
the unequal and racially skewed land distribution would also contrib-
ute to overcoming the socioeconomic challenges the country faced.
These included unemployment, income inequality, food insecurity,
poverty and malnutrition.
Possibly the biggest of them all is unemployment, which has re-
mained at more than 20% in this 20-year period. The majority of the
unemployed is unskilled or have low skills and are affected by low
and poor levels of education. The agricultural and mining sectors
absorb the majority.
Employment in the sector has declined substantially over time.
In the 1970s agriculture used to employ over 2 million people on
farms alone, or about a quarter of the employed. By 2014, fewer than
700 000 were employed on farms, less than 5% of the employed.
Tracing the problem
Within a year of the democratic government coming into power, it
had to accede to the World Trade Organisation (WTO). This meant
that South Africa entered into an agreement that exposed its econ-
omy to global competition and had to play by global rules, both at
home and internationally.
Other agreements were signed with the European Union (EU) and
southern African countries. Some are still being negotiated.
The direction taken by the new government was contrary to the
stance adopted by the apartheid government which protected and
supported white South African businesses. The agricultural sec-
tor was a beneficiary through various forms of support. This in-
cluded direct subsidies or through institutions such as commodity
boards. The boards were responsible for regulating and supporting
commodities through price setting, inputs, throughput and final
products.
But the support was a burden to the national fiscus. To reduce costs
the new government got rid of the boards. The government would
not have managed to finance 60 000 white commercial farmers only
– there were an estimated 3 million smallholder farmers who did not
receive support from the pre-democratic government. To balance
the scales, it was more convenient to remove most of the support
than to expand it.
The consequences
Two decisions – accession to the WTO and deregulation – put the
sector in a very difficult position. In terms of job creation, the sector
has performed poorly. In addition, its contribution to gross domestic
product (GDP) has shrunk to less than 3% of GDP from 4,6% in 1994.
Land redistribution has also not succeeded. Only 7,5% of the land
targeted for black people has been transferred. The problem with
this failure is that it has led to radical proposals that could lead to
outcomes similar to those experienced in Zimbabwe. Government