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Performance of the agricultural sector in South Africa

Performance of the agricultural sector in South Africa. Prepared by the National Agricultural Marketing Council Presented by Ronald Ramabulana Agri Food Summit, Polokwane, 31 July 2008. 1. Agriculture’s contribution to the GDP.

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Performance of the agricultural sector in South Africa

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  1. Performance of the agricultural sector in South Africa Prepared by the National Agricultural Marketing Council Presented by Ronald Ramabulana Agri Food Summit, Polokwane, 31 July 2008 1

  2. Agriculture’s contribution to the GDP • Contribution to GDP dropped from 21% in 1910 to between 3 – 5% over the last decade. • Declining contribution frequently misinterpreted as agriculture’s declining role in the country’s economy. • Rather, agricultural growth was slower relative to other sectors. • Part of a broader transformation of the economy, i.e. • Moved from economy dependant on primary sector (agriculture and mining) to a broadly diversified manufacturing and services economy.

  3. It macro economic impact much clearer when looking at inflation trends in South Africa • Latest information published by Statistics South Africa food price inflation year-on-year (May 08) was 17 percent Source: Stats SA, 2008.

  4. Earner of foreign exchange • Agriculture a net earner of foreign exchange, e.g. in 2006 • Exports amounted to approximately R26.9 billion, and • Imports to approximately R20.5 billion. • Agriculture has made an enormous contribution to foreign exchange earnings • This in turn helped the country to meet its foreign debt obligations, often under difficult circumstances.

  5. Earner of foreign exchange • However, net trade more or less sideways since 2002. • In 2007 imports were more than the value of exports in 2007, using WTO definition. • Includes primary and processed agricultural products • The main challenges lies with processed agricultural products

  6. Other, 15% Edible Fruit and Nuts, 30% Wool, Not Carded Or Combed, 3% Miscellaneous Food, 3% Cereals, 4% Tobacco, 5% Preserved Food, 9% Beverages, 19% Sugars, 10% South African Agricultural Export Products (Million Rands) - 2006

  7. Top Agricultural Export Destinations – 2006 (R mill) Source: South African Revenue Service (World Trade Atlas)

  8. Cereals, 17% Other, 20% Cocoa, 3% Fats and Oils, 13% Baking Related, 3% Sugars, 3% Meat, 10% Preserved Food, 3% Spices, Coffee, Tea, 3% Beverages, 9% Tobacco, 3% Food Waste, 8% Miscellaneous Food, 5% South African Agricultural Imports (Million Rands) 2006

  9. Top Agricultural Import Origins – 2006 (R mill) Source: South African Revenue Service (World Trade Atlas)

  10. Agriculture as employer • Since 1996 the total number of workers in agriculture has remained fairly constant • Ratio between permanent and other workers has changed. • Currently agriculture accounts for between 8 and 9 percent of total employment. • In 1950’s it 28 percent of the labour force • Supplementing household income and/or contributing towards food supply for more than 2,5 million rural households • This is invaluable and can not be under estimated.

  11. Agriculture’s linkages with the rest of the economy • 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 • Approximately 70 percent of agricultural output is used as intermediary products in other sectors

  12. Agriculture’s linkages with the rest of the economy • GDP multiplier for agriculture is 1.51. (Mullins ,2004) • Increase of one rand in agric production will result in an R 1.51 increase in the GDP of the country. • On par with the GDP multiplier for the total average economy of 1.58. • Labour multiplier of 24.17 outweighs all other sectors (Mullins, 2004) • Well above the same multiplier for the economy as a whole of 8.16.

  13. Provider of food: Production struggling to keep up • Population grew by 32.2% from 1991 – 2007 • population growth does not include unregistered immigrants • Increase in per capita income • Agricultural production increased by 10% over the same period • Challenges: • Climate change • Drought policy • Availability of water and quality of water • Increase productivity • Maintain and improve profitability

  14. Rising input costs • Rising input costs globally and domestically seriously threatens the sustainability of the agricultural sector • Mainly three factors reasons for increasing input costs, namely: • the ongoing hikes in oil and natural gas prices, • very high demand for fertilizer due to increased production for food and bio-fuel and • very high demand for food in world and specifically in China and India.

  15. Rising input costs(…continue) • Crude oil prices have soared nearly 70 percent in the past 12 months • Local prices are further negatively influenced by high shipment cost and the Rand/US$ exchange rate. • Diesel 0.05% S Gauteng and diesel 0.05% S Coast increased by 90.4 and 92.8 percent, respectively from December 2005 to June 2008. • Comparing year-on-year for June 2008 prices increased by 61.4 and 62.9 percent, respectively. Source: South African Petroleum Industry Association (SAPIA), 2008.

  16. The effect of diesel price increases on the cost of production Source: Department of Minerals and Energy, 2008 Media GrainSA, 2008

  17. Rising input costs(…continue) • Fertilizer prices experienced significant increased over the last year or so. • From 2007 to June 2008 selected fertilizer prices increased as follows: • Local MAP and international DAP increased with 103.3 and 134.7 percent, respectively. • Safex Spot Price of white maize and wheat increased by 15.3 and 58.2 percent, respectively.

  18. Investment in agriculture Source: DoA, 2008. 18

  19. Research and Development (R&D) Public-sector financing remains the dominant source of funding of R&D, But public funding has come under severe pressure in South Africa in recent years. Total spending: Research related institutions 19 Source: Liebenberg, 2008.

  20. Public Agricultural Research Intensities Source: Pardey and Liebenberg, 2007 20

  21. Current events a window of opportunity!! • Agriculture can respond if the environment is created • Both emerging and commercial • Agriculture the backbone of the rural economy of SA, thus ability to revive rural economies • It can provide a significant contribution to address current socio-political challenges, e.g. food price crises

  22. Consider changes in maize production on food prices Much larger crop expected

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