Skewed distribution of farm incomes is a threat to social cohesion
The launch of South Africa’s Agriculture and Agro-processing Master Plan (AAMP) this year was a momentous event in the history of agriculture in the country. The AAMP is a social compact developed by the government, agribusiness, labour and other stakeholders, and aims to bring notable changes to the sector by 2030. It seeks to consolidate gains made and ready the sector for the future, including through transformation. Covid, the war in Ukraine, supply-chain bottlenecks and high food inflation have put agriculture in the spotlight.
The plan could not have come at a better time, given signs of waning globalisation and a re-emergence of nationalism. This social compact will have to ensure that South Africa is not left behind in the race for sovereign food security.
Study of the past can shed light on the present and offer insights into the future. But facts have become perishable and the new world of today is a fastbreaking story. The inability to be certain about the
future, however, is not an excuse not to plan. The AAMP represents the imagination and insight of the social partners. It is a consensus and compromise between their contending interests and will always reflect balance of power of the social partners.
In almost three decades South Africa’s population grew by 20-million to 60-million in 2021. The agricultural sector fed these multitudes — and some globally, as the country is a net food exporter. Over that same period, gross agricultural value grew at a compound annual rate (CAGR) of 7.1%. This was made possible by rising farm values, which grew at a CAGR of 7.6%. This led to improved availability of securitised capital. Consequently, farming debt grew by 11 times to R204bn by the end of 2021.
Even at this heightened level of debt, farmers — particularly commercial farmers — maintained significant “skin in the game” that averaged between 30% to 40%. Testament to productive deployment of debt, gross capital formation grew from R3.8bn per year in 1994/95 to R20.7bn in 2021. Support to the sector also came from expanded export markets that continue to show demand for South African produce.
Many of these successes accrued to commercial farmers, who constitute about 20% of the farming population but account for 80% of output. Persistent skewed distribution of farm incomes should be viewed as a threat to future sustainability of the sector and requires the government to be more active with measures aimed at equitable income distribution.
The agricultural environment has been uneven, but the direction of change has been unmistakably upward. The strength of a system is its continuity.
Armed with the AAMP, it is possible to pierce the veil that separates the future from the present. It can be argued that investment patterns of the past in the agricultural sector will accelerate. It can be expected that commercial farmers will continue playing outsize roles in the sector and the economy.
Agricultural trade surpluses have hit record highs lately and will have to be saved, invested, or consumed. Evidence points to a proclivity for productive investments. Consolidation will also play its part in maintaining the duality of the agricultural sector. Land reform programmes seek to transfer
30% of agricultural land to black farmers, while the AAMP has a 20% target for output contribution by black farmers. The difference between land reform and AAMP contribution targets can be taken as a tacit acknowledgment of differential farm productivities between the two groups of farmers.
There is anecdotal evidence of productive farms turning to brown fields after land reform transfers. Concerted efforts can improve productivity of land in the hands of emerging farmers. Miners have also expressed interest in making excess land available for agriculture as an alternative to traditional community outreach programmes.
The AAMP seeks to promote agricultural corridors in provinces according to areas of promise. This has potential to revive rural economies that have been threatened by poor service delivery, which results in shrinking communities because of emigration.
This could see closure of local shops, post offices and village schools. The loss of amenities generates an ever-quickening shift towards rural depopulation and leads to a loss of something less tangible —a traditional way of life.
Gauteng, KwaZulu-Natal and the Western Cape are rapidly urbanising, hollowing out other provinces. As agriculture is a rural or peri-urban activity, urbanisation has implications for transportation, logistics and final pricing levels. Transnet has not made additional infrastructure investment specifically dedicated to servicing the sector. The implications are huge: higher prices, which affect the cost of living.
Overall, the AAMP’s objectives are achievable, under the following conditions:
Availability of investment capital. Any plan ● requires funding. More fiscal support should be provided to development financial institutions for financial intermediation of high-risk emerging farmers. Commercial farmers with significant equity will continue to have good access to capital;
Allocation of research funding. South Africa ● should recommit to the Comprehensive Africa Agriculture Development Programme, particularly regarding research funding. This will foster innovation, research and development for global competitiveness, even in the face of deglobalisation;
Opening up new markets. The government, in ● collaboration with industry, has been successful in opening new Asian markets. The African Continental Free Trade Area has the potential to further diversify export markets; and
Training and development. The effectiveness of ● extension services will require a re-examination of ways to revitalise agricultural colleges.
In conclusion, agriculture will continue to respond to growing demand for food and jobs and will continue modernising. Farmers face another challenge — to produce food while protecting nature, safeguarding biodiversity and contributing to decarbonisation of production and logistic networks. Using natural resources prudently is essential for our food production and for our quality of life and that of future generations.
The challenge of inclusivity along all major value chains, including high value export-oriented horticulture, will remain and this is an area where government must double down, be active and intentional and not settle for just being a catalyst.
Failure to tackle this may lead to continuation of income disparities between commercial and emerging and small-scale farmers — another threat to social cohesion. The AAMP has set a path, has broad support, and it is now up to stakeholders and role players to get to work.