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Annelize crosby agri sa perspectives


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The evolution of the agriculture value chain over the past decade - Agrarian reform to 2025

Published in: Economy & Finance
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Annelize crosby agri sa perspectives

  1. 1. 3rd Bridge Perspective on land issues
  2. 2. Outline • Who is Agri SA? • The evolution of the agriculture value chain over the past decade • How the industry views the quality and price of imports versus domestic agriculture • The industry views on drought and related indicators • The land debate • The short to medium term outlook on investment in the agricultural sector and food price developments
  3. 3. 3rd Bridge Perspective on land issues Who is Agri SA?
  4. 4. • Agri SA is a federation of agricultural organisations • Established in 1904 as the Southern African Agricultural Union • Members include: 9 provincial organisations, 26 commodity organisations and 38 corporate members • Through its affiliated membership, Agri SA represents a diverse grouping of individual farmers regardless of gender, colour or creed Who is Agri SA?
  5. 5. Farmers represented in each province ±28 000 Farmers -------------------------- ±1 000 Farmers’ Unions Provincial Affiliates9
  6. 6. Animal Production Milk Producers’ Organisation, National Wool Growers Association of South Africa, Red Meat Producers’ Organisation, South African Mohair Growers’ Association, South African Ostrich Business Chamber, South African Pork Producers’ Organisation, Wildlife Ranching SA, Aquaculture SA Horticulture Banana Growers’ Association of South Africa, Canning Fruit Producers’ Association, Dried Fruit Technical Services, South African Garlic Growers’ Association, South African Nursery Association, South African Subtropical Growers’ Association, South African Table Grape Industry, Tomato Producers’ Organisation Growers’, Vinpro, South African Rooibos Council, Macadamias South Africa Agronomy Cotton SA, Dry Bean Producers’ Organisation, Forestry South Africa Medium Growers Group, Grain SA, South Africa Sugar Association, Tobacco Institute of Southern Africa, SA Cane Growers’ Association 26 Commodity Organisations
  7. 7. 3rd Bridge Perspective on land issues The evolution of the agriculture value chain over the past decade
  8. 8. Land: Agriculture and food chain Input companies Food companies Farmers Traders Retailers Consumers • Seeds • Fertilizer • Crop protection • Animal health and nutrition • Crop insurance • Food ingredients • Field crops • Horticulture • Animal production • Aquaculture • Forestry • Game • Crops • Meat • Oils/meal • Biofuels • Meat • Snacks • Beverages • Bakery • Dairy • Hyper markets • Super markets • Small/spaza shops • Rural • Urban Objective: To produce profitably while facing • Drought • Climate change • Predation • Theft • Diseases • Market conditions/Labour costs • Land reform - EWC • Farm attacks • Ever changing consumer preferences & choice of products Employment:843000
  9. 9. Employment by industry Agriculture; 843,000 Mining, 435,000 Manufacturing 1,744,000 Utilities, 161,000 Construction; 1,476,000 Trade, 3,219,000 Transport; 1,014,000 Finance and outher business services; 2,399,000 Community and social services; 3,692,000 Private households; 1,296,000 Unskilled/ semi-skilled 92% Skilled 8% Source: Stats SA, Own calculations
  10. 10. Economic importance of agriculture • Agriculture also creates strong demand for goods and services, especially in rural areas • Impact of agriculture on other sectors in terms of forward and backward linkages is considerable, with the impact of irrigated agriculture being relatively large Backward linkages •Purchases of goods such as fertilizers, chemicals and implements Forward linkages •Supply of raw materials to industry and the food supply chain in general 11 Approximately 70 percent of agricultural output is used as intermediary products in other sectors
  11. 11. About the sector (2017/2018) 12% of the surface area can be used for crop production of which only 22% is high potential Expenditure on intermediate goods and services amounted to R146 billion (6,4% increase). Farm feeds remained the biggest expenditure item, followed by maintenance/repairs and labour Net farm income increased by ± 1% Cash flow of farmers decreased by ± 5% The value of exports increased by 6%, from R97,429 billion in 2016/17 to R104,577 billion in 2017/18 Debt level increased to R166 billion. Collateral is still available and investment is still taking place The primary formal sector employs approx. 843 000 people. Labour remuneration is a major cost item, approx. R19 billion in 2017/18 The contribution to GDP, if the entire value chain of agriculture is considered, can be approximately between 10% & 12%. Agriculture is an important part of our economy and in addition, ensures South Africa’s food security. Source: DAFF
  12. 12. Provider of food • In 2035, South African population is estimated to reach more than 66,9 million • Population grew by 59% from 1991 to 2018 • Agricultural production increased more than the population growth over the same period Challenges: – Climate change/Drought – Cost of transport/input costs – Availability of water and quality of water – Improving productivity – Maintain and improve profitability – Restrictive legislation/regulations – Limited government support – Cost of crime – Insufficient service delivery – Infrastructure constraints 6.0 7.0 8.0 9.0 10.0 11.0 12.0 Volume index of Agricultural Production in RSA Field Crops Horticulture Animal Production Food Production Source: DAFF 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018* 42000 44000 46000 48000 50000 52000 54000 56000 58000 60000 ‘000 Population
  13. 13. Support for Agriculture 22.8 24.8 14 53.5 9 50.9 55.7 3.8 5.9 49.2 12.3 53 18.3 2 17.8 7.5 9.9 17.3 9.6 2.4 0.8 1.9 1.7 2.3 -7.1 14.5 12.1 -20 -10 0 10 20 30 40 50 60 Turkey Philippines China Korea Colombia Switzerland Iceland Kazakhstan Costa Rica Japan Russia Norway European Union Brazil OECD Mexico United States Israel Canada Chile New Zealand South Africa Australia Viet Nam Ukraine All Countries Emerging Economies OECD Producer Support Estimate (PSE) for selected countries, 2017 The Producer Support Estimate (PSE) is shown as a % of gross farm receipts. The OECD defines Agricultural support as “the annual monetary value of gross transfers to agriculture from consumers and taxpayers arising from government policies that support agriculture, regardless of their objectives and economic impacts.” Source: Agricultural Policy Monitoring and Evaluation, OECD (2018)
  14. 14. Drought In recent years, droughts have become a more prevalent challenge to agriculture in South Africa. Within this context, it is important to note Agriculture’s importance for food security, economic development and employment: • Agriculture is 3.2 times better at reducing poverty than non-agriculture • 1% in GDP due to agriculture, increases income of the poorest by more than 6% • Agriculture has substantial multiplier effects such as job creation potential though extensive linkages with the rest of the economy • Agriculture has the potential to create economic opportunities in rural and peri-urban areas Source: Barclays. (2016). Agricultural workstream
  15. 15. 3rd Bridge Perspective on land issues The land debate
  16. 16. Context: Expropriation without compensation • The first question that arises, and this is seemingly the question that the Constitutional Review Committee (CRC) has posed to South Africans, is :”Is section 25 of the Constitution an impediment to land reform?” • Although the CRC found in the affirmative, Agri SA’s view is that it would be unwise, even dangerous to tamper with a fundamental human right for political reasons. • Constitution: finely a balanced property clause is, measures it provides for have not been implemented to their full extent, neither has section 25 been before the courts in sufficient cases for the judiciary to really interpret it and bring clarity; • Agri SA fully supports the findings by the High Level Panel on Key Legislation in this respect. We believe their diagnosis of the problems besetting land reform, are spot on. The Panel found that section 25 was not an impediment to land reform. • We need to jointly create a vision for our rural areas going into the future and concretise the steps to achieve that dream. The NDP should be the basis for that.
  17. 17. Context: Expropriation without compensation • ANC decision on 20 December 2017 • Motion in Parliament: Feb 2018 • CRC process and recommendation • Ad Hoc Committee on changing section 25 • Dissolution of 5th Parliament • Ad hoc committee to initiate and introduce legislation to amend section 25 of the Constitution • Presidential Advisory Panel process • Expropriation without compensation • Impact on economy • Food security • Currently • Evaluate section 25 of the Constitution • Expropriation Bill – 5 categories • High Level Panel on Key Legislation • Biggest challenge standing in the way of land reform is not the property rights clause, but the implementation of land reform policies, procedures and extended entrenched corruption in the system
  18. 18. Value of Capital Assets (2017/18) Land and fixed improvements R264,2 billion Implements, motor vehicles, tractors R74,1 billion Livestock R149,6 billion Total R488,0 billion Source: DAFF Commercial banks Land Bank Agricultural co-operatives Private persons Other debt Other financial institutions Agricultural Credit Act Who Farmers owe money to Farming debt in 2017/18 – R166 billion R51,62 million R975,36 million R1.78 billion R3.22 billion R11,71 billion R47,71 billion R100,57 billion
  19. 19. Solutions • Agri SA believes that the solutions are already catered for in the framework provided for in the Constitution, the NDP, Operation Phakisa and various private sector plans including the Agri SA holistic plan for land reform and rural development • For successful farmer establishment, the following elements should be present:  Land  Equity  Beneficiary selection  Value chain participation  Post settlement support  Partnerships • It is important that we reach consensus on who owns what and how much land has been transferred to date – not only through government programmes, but also through the market
  20. 20. Strategy emanating from land audit
  21. 21. What do we want to achieve? 1. Establish the factual basis of land distribution as a point of departure 2. Sustainable agrarian reform 3. Economic growth and job creation Alignment of the strategy must be in line with: 1. Constitution and the rule of law 2. Property right protection and conversion 3. NDP goals – Chapter 6 4. Operation Phakisa (agricultural development component) Strategy emanating from land audit
  22. 22. 3rd Bridge Perspective on land issues Agrarian reform to 2025 • Implement Chapter 6 of the NDP – utilise the financing models that have been developed • Promote partnership models for joint-farming operations between black and white farmers • Stimulate and support efforts of commodity organisations to assist smallholders in enhancing their productivity and income generating capacity (NWGA and Grain SA projects as examples) • Commercial farmers to get even more involved with social upliftment of farm workers and rural communities • Transfer state farms to beneficiaries: title deeds • Incentivise best practice models as demonstrated at Bela-Bela Summit • Create Agricultural Development Agency (ADA)
  23. 23. Disclaimer Everything has been done to ensure the accuracy of this information, however, AGRI SA takes no responsibility for any loss or damage incurred due to the usage of this information.
  24. 24. Contact details Annelize Crosby Head: Land Centre of Excellence T I +27 (0) 21 554 5642 C I +27 (0) 82 388 0017 E I