While the Agriculture and Agro-processing Master Plan (AAMP) was still doable, it needed to be adjusted and treated as a recovery plan, Agricultural Business Chamber chief economist Wandile Sihlobo said yesterday.
Sihlobo was exploring the role of the AAMP in South Africa’s recovery and growth story during the latest PSG Think Big webinar held yesterday.
As South Africa adapted and moved forward in the current context, Sihlobo highlighted that many of the issues addressed in the plan had become a lot more complex over the last year.
The master plan hopes to unlock 10% to 15% growth in gross value added and to create roughly one million jobs in the primary agriculture and agro-processing sector.
The master plan depends on South Africa growing its trade footprint, which geopolitical tensions may jeopardise.
However, Sihlobo made it clear that exports needed to increase to grow the agricultural sector and for AAMP to reach its targets, production must expand.
As an export-oriented sector, it was important to maintain trade relations with our most important markets, or “we run the risk of running at a loss”, he said.
This as South Africa appears to be the verge of losing the benefits of the African Growth and Opportunity Act (Agoa) from the US government, due to the country’s decision to remain neutral in Russia’s invasion of Ukraine.
Sihlobo broke down the composition of the $12.8 billion (R229bn) in agricultural exports according to market size.
At 40%, the African market receives most of South Africa’s agricultural exports. Roughly 27% is Asia, 20% goes to the European Union, the UK is at 4%, and the US is about 4%. Russia was fairly insignificant at around 2%.
“So, although the US is an important market for us, the EU is the primary market that we want to nurture a relationship with,” Sihlobo said.
When considering expanding production and facilitating enhanced trade outputs, Sihlobo explained that the master plan also sought to unlock currently under-utilised land.
“We think the South African government currently has close to four million hectares of land. Some of it is agricultural and can be brought into full production and nearly two million hectares of that land has already been audited by the Agricultural Research Council. To put it into perspective, South Africa currently plants about 4.3 million hectares of summer grains and seeds. That number can be increased substantially, for grains, horticulture, and livestock, leading to better output for exports and job creation in the process.”
When asked about how South Africa could reconcile the issue of food security, Sihlobo pointed out that although the sector exported roughly 51% of the food that it produced, this created the funds for vital sector input needed for items such as fertiliser, certain chemicals and seeds.
“The poverty issue that the country has comes from unemployment, so even if you were to drop the price of a food item, if someone has no income, that will still be too expensive for them,” he said.
He said infrastructure constraints were curbing the supply to locals, referring to the roads, electricity issues, and water.
Evaluating the impact of load shedding, Sihlobo pointed to irrigation usage. The primary agriculture sector irrigates 100% of fruit and vegetables and a third of field crops. About a third of the income generated in agriculture is directly linked to irrigation. And that’s excluding poultry, dairy and other agri-industries.
Before the master plan can be implemented, there were important steps that the Department of Agriculture Land Reform and Rural Development (Dalrrd) Minister Thoko Didiza must take, one of which was all social partners gathering to evaluate the sustainability of the energy plans for the sector going into the next season.
He said once those elements were in place, the sector could look at the AAMP and identify the commodity-by-commodity interventions that needed to be put in place at a regional level and establish who should take what part in the implementation process.
“I think this approach will move us forward, it will ensure we grow the agricultural pie and that we have new players coming in using resources that are currently under-utilised,” he said.
Agbiz/IDC Agribusiness Confidence Index, released this week, remained subdued in the second quarter of this year after a 5-point decline to 44 in the first quarter of this year.
BUSINESS REPORT