20 April 2006
South Africa has a unique opportunity to use its “impressive” economic recovery to help uplift the rural poor by ensuring their greater participation in agriculture, according to a report by the Organisation for Economic Cooperation and Development (OECD) released in Pretoria on Wednesday.
The OECD is a grouping of 30 member countries who share a commitment to democratic government and the market economy. With active relationships with some 70 other countries, NGOs and civil society, the organisation is best known for its publications and statistics on economic and social issues.
Although South Africa is not a member, the study reviewing the country’s agricultural policy – Review of Agricultural Policies in South Africa – was conducted as part of a cooperation programme with non-member economies.
Similar studies have been carried out in China, Brazil and India, countries which, with South Africa, are members of the Group of 20 developing countries.
The report notes that despite growing emphasis on reducing poverty and increasing social spending, South Africa still faces a challenge in meeting the social needs of the poor.
“Because of the impressive change the country has achieved since the early 1990s, agriculture now offers opportunities to a wider range of the population and is more responsive to markets,” the OECD says on its website.
“Further reducing rural poverty and inequality will require a broad range of policies to boost economic growth and tackle such enduring problems as high unemployment, social division, illiteracy and HIV/Aids. But agricultural development has an important role to play.”
Investment and growth
The report says that while the current performance of South Africa’s economy is generally positive, investment and output growth are still below the levels needed for equitable income distribution.
South Africa’s economy is expected to grow to an average of 4.5% over the next three years, and 6% thereafter.
Agriculture contributes under 4% to South Africa’s gross domestic product, and accounts for about 10% of total reported employment.
The OECD estimates that a 50% cut in import tariffs and export subsidies around the world, together with a 50% reduction in domestic support to agriculture in OECD countries, would benefit the South African economy – through higher incomes for consumers and producers – by some US$250-million (R1.5-billion).
This would also benefit other developing countries such as Brazil, China and India.
Exports and subsidies
South Africa’s main agricultural exports – wine and fresh fruit – currently face relatively low tariffs from importing nations because of bilateral agreements. But the EU, South African agriculture’s largest export market, raises its fruit import tariffs during the harvesting season to protect its own produce, hindering South African exports.
“Wide-ranging reforms to liberalise South African agriculture during the 1990s have raised the sector’s competitiveness, and only low levels of subsidy to farmers remain,” the OECD says.
The report found that government policy support accounted for about 5% of farm income between 2000 and 2003, similar to that found in Australia, Brazil and China – and far lower than the 20% support in the US and 34% in the European Union.
Though relatively low, most policy support to South African farmers is used to prop up prices of their produce.
This is one of the most trade distorting-forms of support, the OECD says, and is also unevenly distributed among commodities. Sugar receives by far the largest share of support, through high import tariffs and a preferential pricing system for South African producers.
Although the recent performance of the South African economy has been generally positive, investment and production growth are still below the levels needed to boost jobs and reduce inequality, the report says.
It adds that land reform should remain a priority but that acquisition and resettlement procedures must be improved.
“For commercial farming to develop, the beneficiaries of the reform, particularly the emerging small-scale farmers, need financial support as well as training in technology, marketing and management,” the organisation says.
The report says that commercial agriculture has adapted well to recent liberalisation of the sector but farmers face substantial financial pressures. The ability of the sector to grow and to respond to new market opportunities will determine any gains from global trade liberalisation.
“Because of the constraints on land and water use, farming policies need to target quality and productivity improvements to boost international competitiveness further.”
Government policy initiatives
Responding to the report, Agriculture and Land Affairs Minister Thoko Didiza said the results highlighted the reality of agricultural policy in the country and South Africa’s position in multilateral as well as bilateral trade negotiations.
To ensure that all South Africans shared the country’s wealth, she said, the government was addressing issues of land ownership, equal participation in agriculture and empowerment of all citizens.
The government was fast-tracking the implementation of the Comprehensive Agricultural Support Programme to promote agricultural production among previously disadvantaged communities.
Didiza said the Agriculture Department was had also worked with the financial sector in launching the Micro-Agricultural Financial Institutions of South Africa.
This is the first state-owned scheme to provide micro and retail agricultural financial services in order to increase support to agricultural activities in communal land areas and the emerging farming sector.
Didiza added that her department had also developed the Agricultural Education and Training Strategy to address the education needs of small-scale and emerging farmers, and was in the process of developing a business plan for identified projects in the Accelerated and Shared Growth Initiative for South Africa, or Asgi-SA.
The identified areas include livestock development, the establishment of new and the rehabilitation of existing irrigation schemes, biofuels, land rehabilitation and the development of agricultural development corridors.
“We look forward to meet the new challenges, to achieve higher rates of economic growth and development in the agricultural sector, to improve the quality of life for our people in striving towards realising our vision of a united and prosperous agricultural sector,” Didiza said.
SouthAfrica.info reporter and BuaNews