SA’s agriculture master plan has become more complicated ‘but can still work’

South Africa’s Agriculture and Agro-processing Master Plan, an inclusive growth strategy for the agricultural sector to build competitiveness, attract more investment, improve inclusion and create jobs was launched a year ago. But will it work?

Wandile Sihlobo, chief economist of the Agricultural Business Chamber of South Africa, says the answer is yes. He was participating in the latest PSG Think Big webinar to explore the role of the plan in South Africa’s recovery and growth story.

He says the master plan is still fit for purpose given the heightened level of local and global challenges in the operating environment but needs to be adjusted and treated as a recovery plan. He also pointed out that many of the issues in the plan became a lot more complex over the past year.

The master plan aims to unlock 10% to 15% growth in gross value added and create roughly one million jobs in the primary agriculture and agro-processing sector.

“However, it will require close collaboration between all the stakeholders who came together to co-create the plan: government, labour, private sector and communities to explore opportunities for all the high-value commodities.”

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It has become impossible to avoid the mention of geopolitics when it comes to food and the recent tension between South Africa and the US shows how important trade is. Sihlobo says exports must increase to grow this sector and for the plan to reach its targets. However, for exports to increase, production must expand.

Size of SA’s agricultural exports

Sihlobo broke down the composition of South Africa’s $12.8 billion in agricultural exports according to market size. South Africa’s agricultural exports to the African market are the biggest at 40%, while about 27% goes to Asia, 20% goes to the EU, 4% to the UK and another 4% to the US. Russia is fairly insignificant at around 2%.

“Although the US is an important market for us, the EU is the primary market where we must nurture the relationship.”

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He also referred to the master plan seeking to unlock under-utilised land when considering expanding production and facilitating enhanced trade outputs.

“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.

“This means 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.”

South Africa currently exports just over half of its produce in value terms, which equated to $12.8 billion in 2022.

Poverty and load shedding

Sihlobo highlighted two major issues that affect agriculture: poverty and load shedding. He emphasised that although the sector exports roughly 51% of the food it produces, this profit is used for vital inputs, such as fertiliser, certain chemicals and seeds. Exporting roughly half of what we produce in value terms also does not mean that consumers are left without supplies or that consumers must pay more for food.

“The country’s poverty issue comes from unemployment. 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. A large part of the problem is the infrastructure constraints curbing supply to locals, namely roads, electricity issues and water.”

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He says load shedding is a major problem for agriculture, as 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, excluding poultry, dairy and other agri-industries.

Agro Energy Fund

The Department of Agriculture tabled a capital investment initiative, called the Agro Energy Fund, which encourages farming entities to subsidise a portion of their loan to put towards generating their own power through a range of renewable energy solutions.

Private sector players were invited to participate in the fund to support farmers, but Sihlobo says before the master plan can be implemented, there are important steps that Agriculture Minister Thoko Didiza must take. One of these is that all social partners must evaluate the sustainability of the energy plans for the sector going into the next season.

Once those elements are in place, he says, we can look at the master plan and identify the commodity-by-commodity interventions that must 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 underutilised. I see a vibrancy in the agri-processing and business space that can generate the jobs that we so desperately need. Although this policy is not a perfect one, it is supportive of growth in this sector and we must focus on that.”