AGRICULTURE AND LAND-REFORM CHALLENGES FACING SOUTH AFRICA

Transcription

1 AGRICULTURE AND LAND-REFORM CHALLENGES FACING SOUTH AFRICA AMERICAN CHAMBER OF COMMERCE POSITION PAPER January 2014

2 President s Message As the representative voice of American business operating in South Africa, the American Chamber of Commerce is pleased to publish this Position Paper. It aims to communicate our perspective on Agriculture and Land Reform Challenges facing South Africa to make specific goal-oriented policy recommendations that address some of the challenges facing business and to contribute to South Africa s position as a competitive destination for trade, investment and tourism. Amcham believes that foreign investment into South Africa is good for the country in that it creates sustainable and decent jobs, enhances the standards of corporate governance, promotes environmental and social responsibility, and aids in the transfer of skills. In order for South Africa to achieve the goals set out by government for economic growth, job creation and poverty alleviation; this country needs to position itself competitively. Clear and consistent economic policies are required not only to provide an enabling environment for business, but to also address the evil triplets of poverty, inequality and unemployment. These policies must be developed in order to attract investment, both domestic and foreign, as this will accelerate economic growth which, in turn, will create employment. It is important that the private sector contributes to these policy discussions and that this collaboration creates specific tangible benefits for all stakeholders involved. It is in this light that this position paper, one of seven, was developed. The other titles are: i) Foreign Direct Investment; ii) Healthcare; iii) Infrastructure; iv) Labour and Skills Development; v) Sustainability; and vi) Transformation. This living document will be constantly amended and updated as the South African business environment evolves. We welcome the reader s comments and input. Jeff Nemeth Chairman American Chamber of Commerce in South Africa NPC 2

3 1. INTRODUCTION While South Africa s range of agricultural produce is vast and extremely varied, only 12% of its land surface is suitable for rain-fed cultivation as compared to India, for instance, where the figure is 53%. Much of South Africa s arable land is marginal in the extreme and it is only thanks to technological advances that it is possible to cultivate this land at all. In the post-apartheid era, land ownership and the political imperative of reforming ownership has been a central theme of national debate. The government s recently released Green Paper on Land Reform reaffirmed the ruling party s acute awareness and sensitivity to the centrality of land (the land question) as a fundamental element in the resolution of the race, gender and class contradictions in South Africa. 1 At present South Africa enjoys food security and is a net exporter of food but commercial agriculture remains overwhelmingly concentrated in white hands. It is government policy to have 30% of the country s 14 million hectares of arable land transferred to black ownership by With a growing population that is set to surpass 80 million by 2035, South Africa faces mounting food-security challenges. According to the survey released by the Human Sciences Research Council in August 2013, more than half of South Africans do not have regular access to enough food and only 45.6% of households are food secure. 2 This figure has declined since 2008 where 48% of households were food secure. In the second quarter of 2013, the agricultural sector expanded by R19 billion and contributed to overall growth in nominal GDP for that period. 3 However, according to the UN population prediction of 9.1 billion in 2050, food production would have to increase by 70%. The South African agricultural sector would have to maintain current expansion in order to fulfill the demand of a growing population. 1 Department of Rural Development and Land Reform, Green Paper on Land Reform, August Available at: 6 August Available at: 28 November

4 2. RECENT DEVELOPMENTS 2.1. Land reform and restitution Finance Minister Pravin Gordhan has cut more than R600 million from the land reform s appropriation budget for 2013/14 in his medium-term budget policy statement. 4 The overall budget for land reform and rural development has decreased by 7%. Despite these cuts the government has reopened claims for land restitution which many believe will be pointless due to the absence of funding. 5 These budget cuts along with the reopening of land restitution claims will be severely detrimental to the land reform process The National Development Plan The recent farm workers minimum wage increase will have an effect on the potential for job creation set out by the National Development Plan. However, the Plan does provide a framework that can be used in agriculture as a basis for policy, legislation and the implementation of programmes. More money and time will need to be invested in farm workers as new machines require certain skills-sets. 6 Agriculture contributes only 2.2% to GDP. The core goal of the National Development Plan is to alleviate poverty and allow each South African to attain a decent standard of living. 7 One of the factors that contributes to a decent standard of living is adequate nutrition. There are various ways in which this can become a reality; one being the encouragement of small subsistence farming and another is to make large scale farming more sustainable. 4 Farmers Weekly, Land reform budget cut by Denene Erasmus, November Business Day, ANC dangles land restitution carrot in front of voters by Carol Paton, November Farmers Weekly, Agri SA to farmers: be realistic, yet positive, November The National Development Plan 2030 complied by the National Planning Commission of the Republic of South Africa. 15 August Page 38. 4

5 2.3. Agricultural concerns Citrus Black Spot (CBS) is caused by a fungus which results in superficial blemishes on fruits affecting the cosmetic appeal of the fruit and has been found on South African citrus exports. 8 This could be potentially damaging for South African citrus farmers if exports to the European Union are banned as a result of CBS. This could result in job loss and loss of income. 3. AMCHAM POSITION ON AGRICULTURE AND LAND REFORM Members of the American Chamber of Commerce in South Africa represent some of the world s leading multinational players in the field of agricultural research and product innovation. The member companies have a vested interest in a dynamic, productive farming sector that is capable of feeding the population, of contributing to economic growth and job creation, and that is perceived as being equitable. AMCHAM shares the widely-held view that land reform is critical for this country s sustainable development. More than 80% of commercial land is still in white hands and affirmative steps must be taken to address this imbalance. As the reform process unfolds, there needs to be an understanding that land reform will necessarily entail a move away from large-scale commercial farming to a model that is largely based on smaller, less productive operators. The emergence of viable smaller farmers should not be confused with subsistence farming. Subsistence farming simply traps those involved in its practice into a cycle of poverty and exposure to climactic risk. To move away from this vicious circle, diversification of production is essential. The challenges facing emerging farmers are starkly illustrated by a comparison of the average yield per hectare between commercial (white) maize farmers and their smaller, black counterparts. The average yield of maize per commercial hectare is in the order of eight to 12 8 The Department of Agriculture, Forestry and Fisheries Republic of South Africa, Media release, December

6 tons (in Brazil and the United States this figure typically exceeds 20 tons per hectare). For emerging South Africans, the average yield is less than one ton, often a meagre 200 to 500kg per hectare. When launching its Green Paper, the South African government acknowledged that the target of 30% of arable land being in black hands by 2014 would not be achieved. Government admitted that there are simply insufficient funds available from Treasury to fund the rate of government acquisition that this target entails. Additional challenges that the new farmer from a previously disadvantaged background faces include: i) Knowledge transfer (education) and agronomic support; ii) Owning land is not a complete restriction; however, the lack of ownership does result in it being harder to access finance commercially as land cannot be offered as collateral; iii) Access to appropriate agricultural mechanization practices and equipment; iv) Financial solutions for procurement of equipment and agricultural inputs; v) Lack of agents with agronomic and mechanization expertise to monitor, mentor and guide new farmers; vi) Lack of mechanization support and back up services, including funding to support much needed training; vii) Lack of a national strategy for the emerging farmer; and viii) Lack of access to markets to sell produce. This is hampered by the logistical cost to get produce to markets. The measures envisaged in the Green Paper, including the Land Management Commission and the Land Valuer-General are attempts to address the continuing need for an effective redress to South Africa s racially skewed land ownership. However, as matters stand, concerns about the independence and accountability of any expropriation process are understandable. Without security of tenure, commercial farmers are unwilling to make the substantial, long-term investments that will ensure the sustainability of their enterprises. In fact, in April 2011, Agri SA estimated that two-thirds of the commercial farmers operating in 1994 had left the sector for economic reasons. 6

7 It is apparent that not only are white farmers investing less and less in agriculture, some are leaving to farm elsewhere in Africa, while the majority are not encouraging their children to earn their living from farming. Tertiary agricultural courses struggle to enroll students and, across all races, farming is not considered an aspirational career choice. This is of profound significance. The greatest single challenge South Africa faces in transforming it s agricultural and land sectors and in feeding its people is the shortage of skills. This shortage largely explains the dismal failure of land reform and the almost universal failure of those benefitting from this process to create sustainable farming enterprises. Allied to this is a reduction in the quality and output of publicly-funded research. The Agricultural Research Council has been negatively impacted by funding and skills shortages while foreign investment in local agriculture and the skills transfer that this would entail is being stymied by policy uncertainty. Government s efforts to train emerging farmers are insufficient, and as borne out by the widespread failure of such farmers, of limited impact. While skills shortages in areas such as agricultural research, soil science and plant pathology are concerning, the country needs to train thousands of capable, well-equipped officers for deployment in support of struggling new farmers. South African farmers enjoy no subsidy support while the import-tariff regime means that several foodstuffs (notably wheat and even processed potatoes) can be imported at prices with which local producers often cannot compete. Given political sensitivities around food prices (especially as they impact on the poor), any moves to protect local farmers through tariff interventions are likely to prove extremely unpopular. In the absence of agricultural subsidies, it is imperative that the public sector supports the agricultural sector by ramping up investment in infrastructure that affects rural communities and farmers in particular. Transport is the single largest cost input for most farmers. An efficient, affordable rail network and improved, more competitively priced cargo-handling at the country s ports are prerequisites for the continued expansion of agricultural exports. Another key area in which government can and should assist agriculture is in the development of new export markets. Government s New Growth Path envisages opportunities being created for 7

8 households in smallholder schemes, as well as the creation of jobs in agroprocessing by This thinking and the emphasis on agriculture s job-creating potential are welcomed, as is government s commitment to support small-scale agriculture through marketing and service cooperatives and accessible banking facilities. However, AMCHAM firmly believes that any lasting solution to South Africa s agricultural and land challenges has to put the private sector firmly at the centre of policy formulation and implementation. 10 Agricultural development has been and continues to be the backbone of economic development in rural areas. Experience has proven that the transfer of skills to emerging farmers by commercial farmers and mentors does not necessarily produce optimum results. A more constructive role can be played by the commercial farmer being the Off-Taker for new farmers around him or her as the commercial farmer has effective access to markets. Mentors should be independent agents who are contracted to provide the required services to guide new farmers. Not only should commercial farmers and the private sector be encouraged to share expertise, commercial farmers should be incentivised to forge co-operative relationships with smallholders and other emerging farmers to assist with farming inputs and advice, and buy and then market these farmers produce. In this way new farmers will acquire skills and expertise and not have to shoulder the responsibility of competing with more established players in marketing their produce and livestock. This will help these farmers to incrementally expand their investments and operations. 9 The New Growth Path: The Framework, Department of Economic Development, The respected DuPont Advisory Committee on Agricultural Innovation and Productivity for the 21 st Century, report, 2011, recommended that: the agricultural sector should partner globally with governments, other private sector companies in the value chain, and NGOs to offer financing mechanisms so farmers can afford the tools to produce more. Global partners should find ways to create access to financing for smallholders, and the private sector should explore creative business models that focus on longer-term market development in emerging markets. 8

9 4. RECOMMENDATIONS Mindful of the many challenges facing agriculture, AMCHAM proposes that the following recommendations be seriously considered by all role players: That government convene a forum in which representatives of all sectors of agriculture, government departments, development institutions, non-governmental organisations and the private sector can meet to draft a framework for public-private partnerships in agriculture; That companies be incentivised to invest in agricultural research and related higher education. It is proposed that government undertake to match, on a rand-for-rand basis, all private-sector contributions to tertiary departments of agriculture and related fields; That the Land Bank be capitalised by the Treasury so as to dramatically increase its financing support for new farmers; That government urgently address the obstacles that are impeding the development and trialling of new crops and seeds; Structures should be pursued to drive entrepreneurial behaviour by new farmers and the transfer of experience from successful ventures of this type should be pursued. In order to facilitate this, the Land Bank should provide affordable financial solutions for technology and develop structures that would lead to a lower cost of commercial training; NGOs should be leveraged to provide educational programmes around agronomic principles and the utilization of technology to help new farmers understand how to farm more effectively and productively; That government, farmers representative bodies and corporates (including food retailers) sponsor an awareness programme aimed at promoting agriculture as a career path and highlighting the successes of individual emerging farmers; and Training and skills development of farm workers is essential for the expansion of the agricultural sector as new methods and machinery enter the industry. 9