South African agri economy still ‘in good shape’

Mzansi's agricultural economy still in good shape.

The numbers speak for themselves: Save for the wine and tobacco industries, almost all agricultural sub-sectors have seen good economic performances this year. Photos: Supplied/Food For Mzansi

Mzansi’s agricultural economy is in good shape despite the varied challenges which torment the food-producing sector.

This was the report given by Wandile Sihlobo, chief economist of the Agricultural Business Chamber of South Africa (Agbiz), during a recent webinar hosted by the University of the Free State (UFS).

The webinar, held on 9 September, zoomed in on the state of South African agriculture, the impact of Covid-19 and how farmers and agri-businesses can respond to the opportunities and challenges within the sector.

Wandile Sihlobo, chief economist at Agbiz. Photo: Supplied/Food For Mzansi

It was stressed during the webinar, hosted in partnership with Standard Bank and the Mangaung Chamber of Commerce and Industry, that SA agriculture was faring well despite the devastating Covid-19 pandemic.

According to Sihlobo, the agricultural growth numbers speak for themselves.

The gross value added by agriculture increased by 6.2% in the second quarter, after contracting by 1.0% quarter-on-quarter (seasonally adjusted) in the first quarter of this year.

The improvement was supported by increased production of field crops and horticulture, and relatively better production conditions within the livestock subsector.

“But obviously…there are some stuff which we know have not had a good run. One of those is the wine industry. And the tobacco industry. Those are the two sub-sectors that have experienced a tough run over the past few months,” he cautioned.

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Focus on land infrastructure

Expanding on the driving force behind all other sub-sector performances, Sihlobo pointed out that it was thanks to favourable rainfalls over the past two years.

“This gave us a space to recover, because around 2018 there was almost (no rain), which speaks to the drought that we experienced,” Sihlobo said.

The renowned economist also cautioned that some existing constraints fundamentally prevented faster and more inclusive growth in the agricultural economy. These included inefficiencies in state administration, infrastructure issues, security and uncertainty on the land policy.

According to Sihlobo, “Land infrastructure is an area that we need to focus on because we need to appreciate the fact that in SA, 80% of our grains are transported by roads.

“If you are embarking on a strategy of road to rail, you really need to be putting enough resources into that. I think private sector partnering with Transnet and government coming to the fore on that, could be enough to see that being a reality.”

Stakeholder relationships are key

Unpacking opportunities and challenges within the agricultural sector, Tommie van Zyl said that understanding the importance of stakeholder relationships as a prerequisite for success was vital. Van Zyl is the chief executive officer of the ZZ2 farming group.

ZZ2 CEO Tommie van Zyl. Photo: Supplied/PMA

“To understand challenges and opportunities in SA agriculture, we need to understand who the stakeholders are and affirm them. The point is, if there’s excessive demands from any stakeholder, it will cause…a trust deficit and non-alignment, which will cause insufficient performance,” van Zyl  said.

Stakeholders, he explained, all referred to customers, input providers, trading partners, government, society, competition, knowledge partners, business partners future generations, employees, shareholders or owners and even nature.

Van Zyl also said that the present vocabulary describing South Africa is not very encouraging. These include strong words such as corruption, nepotism, dishonesty, crime and malfeasance.

This, he explained, further leads to uncertainty, absurdity, divisions, blaming and shaming and a very difficult business environment for producers. “We have to make sure that the promises made to stakeholders are realistic and can be kept in order to have a conducive climate and business environment.”

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Institutional problems need to be addressed  

Because agriculture contributes less than 3% to South Africa’s GDP, it has a small role to play in the economy and financial wellbeing of the country. However, the industry is playing a very significant role in terms of food security, job security, creativity and innovation, van Zyl said. This is especially true in terms of rural reconstruction and the maintenance of stability in these areas.

Just like Sihlobo, he believes that institutional problems are causing constraints and challenges within the agricultural economy. The main challenges are increasing energy costs, unreliable energy supply and logistical constraints, especially in rural areas. “We also have deteriorated national produce markets and the weakening sales agents system,” van Zyl noted.

A lack of efficient state research and development programmes and extension services was another problem flagged during the webinar.

“Maybe we also have a role to play with our thought processes,” said van Zyl, “to create the right tone at the top, the tune in the middle and the resultant proper beat of the feet on the ground.”  

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