DYING OF THIRST
Agriculture asks for R3bn bailout
● Organised agriculture will ask the government for R3bn in emergency relief after a multi-year drought left five of SA’s nine provinces critically parched and two others extremely vulnerable.
As many as 31,000 jobs have been lost in the affected areas since January last year, AgriSA said on Friday in a comprehensive survey of the sector. Seven out of every 10 farmers were struggling financially and half indicated that they could be forced to retrench workers because of the drought, AgriSA said.
Agriculture accounts for only about 2% of the economy, but punches above its weight in terms of jobs and its role in food security.
A widespread drought that started in 2016 has hit maize producers, fruit growers and cattle farmers.
“We want financial relief for the agricultural sector in the form of bridging finance for some farmers, especially those in animal production, horticulture and crop production” said AgriSA executive director Omri van Zyl. Some needed cash to finance the transport of animal feed to their livestock.
The Eastern Cape, Free State, Northern Cape, Western Cape and North West are classified “critical”. KwaZulu-Natal and Limpopo are at risk if future rainfall disappoints.
The provincial departments of agriculture in the Northern Cape and Western Cape have provided some relief, but more was needed, said Van Zyl. His organisation is approaching the other provinces and the national government for help.
Revenue of R7bn was lost by the sector last year and to tide farmers over, Van Zyl estimated R3bn was needed in financial support — about R1bn of it in cash — to provide assistance where needed most.
Even then sufficient moisture is needed between now and April in the summer rainfall areas and between April and September in the winter rainfall region.
Meetings have been scheduled with the departments of agriculture and co-operative government & traditional affairs (Cogta). The national disaster management centre resides under Cogta, so the department is an important port of call for the sector as it tries to stem job losses and insolvencies.
The plan is to secure money from the fiscus’s contingency reserve. The 2018 budget review put the reserve in 2018/2019 at R8bn, “to allow for uncertainties associated with the economic outlook, the finances of stateowned companies and other spending pressures”.
Citadel economist Maarten Ackerman said: “The [job] absorption rate of agriculture is much higher than other sectors,” and it was an especially important employer in rural communities.
After the devastating drought in 2016, agriculture rebounded strongly in 2017 as the biggest contributor to growth, he said. “With other sectors, such as mining and manufacturing, not really able to grow without further investment, agriculture is an important cylinder in the economy.”
Farmers of long-term crops such as fruit, tropical fruit and grapes were now desperately in need of bridging finance because their recovery phase after a drought could be four to five years. “That form of soft capital is vitally important,” said Van Zyl.
Many food producers are losing hope. AgriSA’s poll also reveals a psychological toll. “More than 50% of respondents also indicated some form of depression, anxiety or other behavioural health issues experienced by members,” said the survey.
The drought in the Western Cape also affected JSE-listed food producers. Tiger
Meat could be cheaper as farmers flood market with animals they cannot feed
Brands flagged it as having a significant impact on the quality and availability of important raw materials such as fruit and wheat.
Lower maize supply is bound to influence prices, which will feed into the entire value chain. Millions of South Africans will feel the hit directly as they rely on white maize as a staple. But more broadly, maize is also used as stock feed and higher prices could also cause meat prices to spike.
In the short term, meat could become cheaper as farmers flood the market with animals they cannot afford to feed, said Van Zyl. But as soon as six months down the line, meat could become much more expensive.
With consumers already browbeaten by a weak economy and high unemployment, this does not bode well for future growth prospects. Trading updates by Massmart, Shoprite and food producer AVI this week revealed how consumer thrift was hitting company results.
Revelations of extensive fraud and corruption add to the tragic story of the failure of the land reform programme, on which the government has spent an estimated R85bn since 1994 — without creating a new class of sustainable black farmers or adding in any meaningful way to SA’s agricultural output or export potential. But if there has been an upside to the expropriation without compensation controversy, it is that agriculture is now firmly on the agenda as a potential driver of economic growth and job creation — and that commercial farmers and those in the government who are serious about growth are talking to each other about how to transform and expand the sector.
Agriculture accounts for less than 2.5% of GDP. But it has significant potential to grow its contribution to employment and exports in ways that integrate new black farmers into the industry. SA has a sophisticated commercial farming industry led by some very large privately owned enterprises that tend to fly below the radar. SA is the world’s second-largest producer of citrus (behind Spain), the largest macadamia producer and one of the largest pecan producers, and that’s not to mention our avocados. It’s in these “superfoods” that much of the potential lies. Some established players have already partnered with local black communities or individual farmers to exploit that potential.
Tommie van Zyl, CE of the family-owned tomato giant ZZ2, points to the great logistical advantages SA has in export markets relative to competitors — it takes 17-19 days to ship produce from Shenzhen to
Durban but 34 days from Lima in Peru. SA has the opportunity to ramp up its exports of superfoods — avocados, dates, cherries, blueberries, almonds, pecans and macadamias. Existing turnover is about R24bn but it’s estimated this could triple with the right enabling environment.
ZZ2 in Limpopo grows half of SA’s tomatoes and is one of the world’s lowest-cost producers of the fruit. It has helped to set up a partnership with the Makgoba community in superfood production, focusing on avocados, and Van Zyl, who participated in the recent economic colloquiums convened by finance minister Tito Mboweni, is a big advocate of a “social compact” in agriculture.
An agri-summit convened last year by AgriSA was a first attempt at that. But this is not a sector in which the private sector can go it alone, and the public sector’s woefully inadequate capacity is one of the biggest constraints to ramping up exports. Unlike Peru, SA doesn’t have the bilateral trade agreements with China, Southeast Asia and India that it needs to access key markets. Those agreements are government-to-government matters. The government is responsible too for the certificates and infrastructure exporters need to comply with phyto-sanitary rules, and if the capacity is not there to tackle outbreaks of disease, exporters can’t access those markets.
As AgriSA CEO Omri van Zyl sees it, transforming agriculture is the biggest opportunity in SA today, but market access and climatological challenges remain major constraints. The private sector is trying to work with the government to provide the capacity to address that. The other issue, he argues, is the need for cheap finance, which could be provided by an agricultural development fund.
From the president down, every statement on economic policy these days refers to agriculture in all its guises as a key driver of labour-absorbing growth. Making this happen will require the know-how of SA’s sophisticated commercial farming sector, and a partnership approach to expand in domestic and export markets. It will require too that the government, whose land and agriculture efforts have focused almost entirely on a flawed redistribution strategy, turns its attention to helping to develop markets and creating an environment in which commercial farmers, black and white, can thrive.
Transforming agriculture is the biggest opportunity in SA today, but market access is a constraint