Growth and Jobs in South Africa s Agricultural Sector Wandile Sihlobo Agbiz Info Day D Olyfboom, Paarl 15 November 2018
Overview of the presentation International experience Domestic picture Issues that could constrain growth and job creation in SA agricultural sector Looking ahead, which subsectors have a potential to create jobs and growth in SA agriculture? Where should expansion happen? Concluding remarks 2
International experience 3
Falling employment in agriculture Source: Romer (2017) 4
5 Agricultural employment in various countries Source: Federal Reserve Bank of St. Louis, Statistics South Africa, Agbiz Research
Domestic picture 6
'000 ha ha Evolution of farm sizes in South Africa Area of farm land (hectares), Number of farms 140,000 120,000 100,000 80,000 Farming Units & Farming Area in South Africa Farm size 2,500 2,000 1,500 60,000 40,000 20,000 0 1918 1928 1938 1948 1958 1968 1978 1988 1998 Year # of Farms Area Size Estimate 1,000 500 0 Source: Liebenberg, Stats SA, BFAP, South African Grain Information Service, Agbiz Research 7
R million The SA agricultural sector is mechanising 80 000 Value of South Africa s agricultural machinery, implements, motor vehicles and tractors 70 000 60 000 50 000 40 000 30 000 20 000 10 000-1980 1985 1990 1995 2000 2005 2010 2015 Source: Department of Agriculture, Forestry and Fisheries, Agbiz Research 8
000 jobs which somewhat led to a decline in employment The total number of people employed on South African farms increased from levels around 780 00 in 1910 to a peak of 1.8 million in 1961. Thereafter, it decreased to about 800 000 in 2010s. It is also worth noting that the mix of regular and seasonal labour in agriculture has also shown marked changes over the years from levels around 35% share in 1910 to about 53% in the 2000s, according to data form Liebenberg (2013). The aforementioned changes in the labour market were partially caused by changes in regulations particularly the introduction of the Basic Conditions of Employment Act of 1993, as well as the Extension of Security of Tenure Act of 1997. Literature shows that these legislative changes led to farmers favouring seasonal labour, instead of permanent (Liebenberg, 2013). 1 800 1 600 1 400 1 200 1 000 800 600 400 200 - Jobs in the South African agricultural sector 1910's 1920's 1930s 1940s 1950s 1960s 1970s 1980s 1990s 2000s 2010's Source: Liebenberg, Statistics South Africa, Agbiz Research 9
000 jobs 10 SA agricultural employment trends by subsector and province The field crop and horticultural industries are the leading employers in South African agriculture 100% 80% 60% 40% 20% 0% Jan-Mar 2008 Apr-Jun 2009 Jul-Sep 2010 Oct-Dec 2011 Jan-Mar 2013 Apr-Jun 2014 Jul-Sep 2015 Oct-Dec 2016 Jan-Mar 2018 Field crops and horticulture Livestock Other subsectors the provincial (agriculture) employment trends also supports this view. The WC, LP and KZN are amongst the leading horticulture producing provinces 200 160 120 80 40 0 Western Cape Limpopo KwaZulu Natal Mpumalanga Eastern Cape Free State North West Gauteng Northern Cape Jul-Sep 2017 Jul-Sep 2018 Source: Statistics South Africa, Agbiz Research
US Dollar ('000) % Growth in production 11 South Africa s agricultural production and trade performance Perspective: SA agricultural production performance (2011-2015) 7% 6% 5% 4% 3% 2% 1% 0% -1% -2% -3% -4% SA is a net exporter of agricultural products 12000 000 10000 000 8000 000 6000 000 4000 000 2000 000 - -2000 000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Exports Imports Trade Balance Source: Department of Agriculture, Forestry and Fisheries, BFAP, Trade Map and Agbiz Research
US Dollar ('000) South Africa s agricultural exports by region 5000 000 4000 000 3000 000 2000 000 1000 000 Top export products Edible fruits Beverages and spirits Processed vegetable and fruit Grains Wool Sugar Meat Animal and vegetable fats Dairy produce Tobacco - 2001 2003 2005 2007 2009 2011 2013 2015 2017 Africa EU Asia Americas ROW ROW represents Rest of the Source: Trade Map, Agbiz Research Key takeaway In 2017, South Africa s agricultural exports grew past US$10.0 billion for the first time. This is a 15 percent increase from 2016 a year that was characterised by El Niño induced drought. 12
Issues that could constrain growth and job creation in SA agricultural sector 13
Issues that could constrain growth and job creation in SA agricultural sector The uncertainty regarding SA s land reform policy is a key risk in the near term Climate change (the sector s ability to adapt) Water rights regulations Lack of biosecurity measures for domestically produced and consumed products Infrastructure constraints in some farming areas, particularly former homelands 14
15 Sentiment in SA agricultural sector at the moment and the potential impact on investment? Agbiz/IDC agribusinesses confidence and Investment. Index 65 60 55 50 45 40 Rbn Agbiz/IDC Agribusiness Confidence Index GFCF in Agriculture (RHS) 22 20 18 16 14 12 10 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 confidence drives agricultural production (in addition to weather dynamics) q/q GDP (Agriculture) (LHS) Agbiz/IDC Agribusiness Confidence Index (RHS) Index 65 45 25 5-15 -35 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 70 60 50 40 30 Source: South African Reserve Bank, Statistics South Africa, Agbiz Research
Agriculture FDI stock (Rmillions) FDI s declining in SA agriculture. Is the sentiment encouraging to change this trend? 1 750 FDI in South African agriculture Agriculture 0.1% Chart Title Mining 20.5% 1 700 1 650 1 600 1 550 Financial services 42.1% Transport & comms 10.4% Manufacturi ng 20.8% Constructio Utilities n 0.1% Trade 0.1% 4.5% 1 500 1 450 1 400 1 350 1 300 2012 2013 2014 2015 2016 Source: South African Reserve Bank, Agbiz Research 16
LAND REFORM: we should be thinking more about PPP models for fast-tracking the transfer pace Here is an example that we proposed a few months back: Government Grant Contribution (all funds earmarked for land reform) Land Bank Mortgage at subsidised interest rates Contribution by donors and private sector foundations Land reform fund at Land Bank Beneficiary (screened and selected by District Land Committee) Support from agribusiness Support from mentors Agric support funds (CASP) There are many models to be studied and explored such as: Agbiz/BASA model NDP approach (which was never fully implemented), etc Source: Kirsten and Sihlobo (2018)
Closing points: Which subsectors have a potential to create jobs and growth in SA agriculture? Where should expansion happen? 18
Here are the industries areas that we should focus on in the near term The focus should be on labour-intensive commodities, such as horticulture and sugar cane. This could have a positive spill over to job creation. This expansion can potentially happen in the Eastern Cape, KwaZulu- Natal and Limpopo, where there is over a million hectares of underutilised arable land (currently under traditional authorities). Source: Bureau for Food and Agricultural Policy, NDP, Mckinsey Global Institute, Agbiz Research 19
Concluding remarks Can SA agriculture create additional jobs? Yes (to some extent). International experience shows that the agricultural sector can play an important role in absorbing labour and increasing labour participation. This is especially the case when taking into account the fact there is vast untapped potential in KwaZulu- Natal, Eastern Cape and Limpopo. The key subsector to focus on is horticulture (it is labour-intensive), and there is also a growing demand for horticultural products both locally and in the global market. Most importantly, the upskilling of current agricultural labour force to align with changing technological environment, increasing investment, research and development, and financial support (to developing farmers) are key to improving the sector. 20
Thank you for your attention Contact details: Wandile Sihlobo Agribusiness Research, Agricultural Business Chamber (Agbiz) Email: wandile@agbiz.co.za Twitter: @WandileSihlobo www.agbiz.co.za Disclaimer: Everything has been done to ensure the accuracy of this information, however, Agbiz takes no responsibility for any losses or damage incurred due to the usage of this information. 21