13 July 2020
This past week, the Economic Transformation Committee of the African National Congress and Business for South Africa (B4SA) each released their discussion documents about the post-Covid-19 inclusive economy for South Africa.
On the priority sectors for growth and job creation, agriculture features prominently in both documents.
On a positive note, both the ANC and the recently created business formation’s agricultural development views are framed from chapter six of the National Development Plan, which highlights the need to expand irrigated agricultural land by one-third by 2030, expand commercial agricultural production, and prioritise sub-sectors and regions that have high potential and are labour intensive. There is also a focus on the need for increased transformation in agriculture and its value chain.
Both plans recognise that poor infrastructure in the former homeland regions of South Africa and an improvement in general logistics to move produce to ports and processing plants are areas that need urgent attention. Another point of commonality is the need to improve agricultural finance through stabilising the Land Bank.
What these documents are silent on, is a recognition that the aforementioned agricultural ideas have been touted since 2012 with limited success. This is not to suggest that there is a need for change in the framing of agricultural development, I certainly agree that there is no need for such. The focus, however, should be on understanding why the implementation has lagged over the past couple of years and what will make things different this time around.
Three key reasons
The lack of implementation of agricultural government policy, and infrastructure-related constraints are down to three broad reasons.
First, limited government capacity to execute government programmes and the misalignment of functions and priorities between the three spheres of government. Second, the misallocation of budgets by national and provincial governments. Third, the poor coordination and alignment of transformation programmes and general misalignment of incentives – and vision in some cases – between the government and the private sector.
To solve these challenges, the task largely lies on the government through its various Sector Master Plans to continue working with the private sector and civil society. As I’ve previously stressed in these pages, agricultural growth and job creation will be through the development of under-utilised land, especially in former homeland areas and underperforming land reform farms (about 400 000 jobs); the expansion of export-led high growth areas (250 000 jobs); and investment in agro-processing with integrated up-and downstream linkages (350 000 jobs).
The ANC also notes that “the state should mobilise development partners, including the World Bank, the African Development Bank, the private sector and impact funders to contribute towards developing a thriving rural economy centred on agriculture.” I concur with this view. There is evidence that partnerships between the private sector and government have, in some cases, piloted successful programmes to drive transformation. These include projects of the Sernick Group, the Humansdorp Co-op and the Mohair Trust, amongst others.
Three common themes run throughout these programmes: first, public-private-partnership structured finance; second, market linkages; and lastly, farmer training and the adoption of technology in production practices. The task ahead, particularly the agriculture and agro-processing Master Plans, should be that of upscaling and replicating these strategic partnerships in various value chains across the country.
Incentives for agro-processing could be in a form of tax incentives for various agricultural hubs which will be determined by the type of agricultural activity. For agricultural production, the selection of the value chains to prioritise should follow the NDP’s view of higher growth and labour-intensive value chains, such as horticulture. In regions where this is not possible, livestock and field crops remain key subsectors for agriculture expansion.
The one important point of deviation between the ANC and B4SA is land reform, which is crucial to fully realise the aforementioned vision of agricultural expansion. On this point, B4SA argued for strengthened property rights and the extension of secure tenure or tradable leases in government land as part of means to attract investment, which in the long run leads to growth.
Meanwhile, the ANC argues that the state should release land to individuals but is not clear on whether on tradeable leases or another form of tenure rights will be afforded to the holders and occupiers of these land parcels.
Moreover, the ANC argued that “to acquire land for redistribution, the programme to expropriate land in line with the existing legal and constitutional prescripts should be continued. To further accelerate land redistribution consideration should also be given to the taxation of unused land.” A position which was not shared by B4SA.
Overall, the ANC and B4SA agricultural development plans have more in common than opposites.
The broader land reform question needs urgent attention, as does water (infrastructure and policy) since this will hold the key to development in the areas that have the potential to deliver the envisaged million jobs.
Given the current fiscal constraints, development in the sector will be private-sector driven as acknowledged by both the ANC and B4SA, but the private sector involvement will require clear policy guidance on land reform. And increased investment will need assurance on property rights.
The release of the land the ANC argued for, will need to be on long-term tradable leases so that investment could flow, particularly in areas with better infrastructure.