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17
April 2016
member, Justice Malala in
We have now begun our descent
, express-
es dismay at what is happening in South Africa today.
Issues they highlight:
Government borrowings have risen from 24% of the gross
domestic product (GDP) to 46% since 2008.
Social grants, public sector wages and cost of servicing the
national debt – uses 60% of the budget.
The public service has grown by over 250 000 employees since
2005 and comprises 26% of the country’s labour force.
The public sector salary bill has doubled in just five years.
Endemic corruption, theft, misuse of state funds and resources.
In 1994 there were 18 Cabinet Ministers, six Deputy Ministers
and 18 DG’s. Today there are 35 Cabinet Ministers, 38 Deputy
Ministers and 159 DG’s.
Unemployment, especially among the youth, is a ticking time-
bomb.
Globalisation has exported jobs from South Africa (an exam-
ple of South Africa’s naivety in its trade negotiations in the free
trade environment). From clothing and textiles to steel and en-
gineering – we have gone from a food exporter to an importer.
Credit Rating Agencies list South Africa close to ‘junk’ or ‘specula-
tive’ status. South Africa’s outlook has gone from stable to nega-
tive. McBain also suggested that the International Monetary Fund
(IMF) prediction of South Africa’s GDP growth at 1,4% for 2015 and
0,7% for 2016 could very well be optimistic since the drought is like-
ly to impact this further. Of concern is that a further downgrade by
a credit rating agency will force overseas fund managers to offload.
South Africa is at a crossroad
South African scenarios and red flags according to McBain:
15% probability – a South African ‘Arab spring’: A cause of
the Middle East uprisings was increased food prices. This will
surely follow the current drought here.
15% probability – orderly regime change: A return to economic
growth in an inclusive democracy. McBain said not to expect an
orderly regime change anytime soon.
30% probability – acceptance of failure (and an IMF bailout):
Growth could be as low as 0,5% – a further downgrade is like-
ly. South Africa won’t be the first country in the world to need
such help, but it will come with conditions e.g. reducing the
size of the civil service and getting rid of the loss-making state-
owned enterprises.
40% probability – enforced ‘passive acceptance’: The major-
ity will still vote for the ANC despite high levels of unemploy-
ment and dissatisfaction. Concerns are more violence, a blind
eye turned to land invasions and finding new ways of extracting
taxes.
Scenarios in South African agriculture
The consequences of this drought are enormous. The immediate
impact will be on food prices and inflation.
McBain listed key challenges as:
New legislation and regulations.
Food security challenges.
Addressing growing perceptions arising from a failed land
redistribution programme.
Productivity in agriculture for global competitiveness.
Reducing transaction costs.
Managing water resources.
Striving to preserve our institutions.
McBain’s red flags are:
Disruptive land legislation.
A blind eye turned on land invasions.
Increased transaction costs: Oil, electricity, fertiliser, chemicals,
and water.
Collapsed institutions – research and sectoral associations
which are not funded adequately.
Government control of markets – price controls, control of
exports/imports.
Agriculture is just managing to cope. Right now it’s plodding along.
Any disruptive legislation could push agriculture into a slow death
scenario or alternatively any quick and drastic changes could give
rise to a Zimbabwe-like begging bowl situation.
McBain said we must strive to push for the cornucopia scenario,
which he gives a 10% chance.
Grain SA can help influence change
The invitation is found entrenched in Cabinet’s nine point plan to
revitalise South Africa: Revitalising agriculture and the agro-pro-
cessing value chain, encouraging private sector investment and
moderating workplace conflict.
Challenges which need to be confronted and reach beyond the
drought are of concern. In particular the supposed shared vision
for a united and prosperous agricultural sector, whereas the reality
is a serious disconnect.
Regarding food security and failure of land redistribution issues
McBain said ‘Grain SA needs to document the facts (not only give
an opinion), and put them in front of government with an offer to
help to resolve the issues.’
He said working together as an interest group is more effective.
Grain SA must find the solutions and change the perception of
commercial agriculture. He also believes time is long overdue for an
AgriDESA where government and the private sector work together
to establish common goals.
A final call to action:
Counter disruptive legislation and reduce uncertainty.
Change perceptions of commercial agriculture.
Improve on-farm productivity.
Reduce transaction costs.
Use water resources more effectively.
Ensure commercial agriculture is treated fairly.
Improve food security and influence trade negotiations.
Assist stakeholders to understand the reality of the risks.
Protect and gather support for institutions.
Make an AgriDESA happen.
Figure 1: McBain’s scenario for South African agriculture.