Socio-Economic Analysis and Policy Implications of the Roles of Agriculture in Developing Countries Country sythesis report: South Africa Nick Vink Johann Kirsten

Introduction Dualism Three institutional sectors: Commercial farming Traditional rural Other rural: closer settlements, etc.

South African agriculture and agricultural policies Macroeconomic trends GDP growth Export growth Inflation lower Exchange rate No employment growth Agriculture Location of production Contribution to GDP Composition of production Employment in agriculture

Policy shifts in agriculture Monetary and fiscal policy Marketing policy Land reform Institutional restructuring in the public sector Water law reform Labour market policy Trade policy

Policy shifts in agriculture State support to agriculture State support for rural infrastructure Soil conservation measures The maintenance of biodiversity Social security policies Culture

Sectoral effects of deregulation Producer Support Estimate (PSE) lower than all countries other than New Zealand. Increased Total Factor Productivity (TFP) Decreasing capital intensity Increasing mobility of factors of production Decline in real price of food in the rural areas

Policy effects on the mode of production Employment Field crops

Policy effects on the location and composition of production Field crops Wheat, maize out of marginal areas Sugar Livestock Feedlots Dairy Horticulture New areas (Orange river, wine expansion) New varieties

Other policy effects Policy effects on farm size structure Policy effects on export orientation Policy effects on the rural economy Increased opportunities for SMME Increase in agro-tourism Better market access for small-scale farmers

Structural effects on the roles of agriculture Environmental The overexploitation of groundwater; The effects of soil degradation; Positive effects of the switch to minimum and low tillage production systems; Loss of biodiversity because of bush encroachment, alien plant invasion and deforestation; Working for Water: greater availability of water and increases in biodiversity.

Structural effects on the roles of agriculture Social, poverty and food security A small but important buffer against poverty for some households A cushion for the poorest A strategy for wealth creation for wealthier households. As the most important determinant of food security is cash in hand rather than the ability to produce food, unless agricultural production moves out of subsistence, little impact is possible on food insecurity and poverty.

Structural effects on the roles of agriculture In the Western Cape, where export growth stimulates economic activity, the incomes of skilled workers have increased relative to urban incomes, suggesting a positive impact on rural poverty; Households involved in agriculture have a better nutritional status, thus the improvement of agricultural productivity has the potential to improve household and child nutritional status; The withdrawal of labour intensive public works programmes in rural areas has not only reduced employment but also failed to deliver much-needed infrastructure;

Structural effects on the roles of agriculture Structural changes impact positively on the livelihoods of: Permanent workers on commercial farms, Participants in small grower schemes Those who benefit from up-stream employment associated with the value chains of export sectors. Structural changes impact negatively on The victims of casualisation and externalisation Those who lose from competition for part-time and seasonal work and from the shift from rural to urban areas of up-stream jobs.

Structural effects on the roles of agriculture Commercial farming provides institutional capacity to facilitate state delivery of social services or provides such services directly. This ensures greater household security and stability than in the traditional sector; In the traditional sector, institutional authority is crumbling as the agrarian economy continues to deteriorate; Migration has a number of effects on the sending and receiving communities. In the former, lower population pressure favours those left behind, although migration of the able bodied leaves them vulnerable. In the latter, the effect depends on the destination. In most cases, people end up in the ‘other rural’ areas, hence are likely to remain unemployed and poor.

Structural effects on the roles of agriculture Cultural Agriculture did not contribute to ‘sameness’ in the past, nor is it contributing now. Strategies to get access to land are dividing people; Agriculture can contribute to greater connectedness, as there is a growing consensus among white and black farmers on the need for successful land reform and for support from white farmers; Connectedness through agriculture will depend on how Government manages the tempo of land reform.

Positive and negative complementarities Positive complementarities include: The environmental benefits from lower population pressure in the former homelands because of the collapse of agriculture. Less cropping has allowed land to revert to a more pristine state. The food security benefits, better access to social services and lower poverty rates for those farm workers lucky enough to remain in full time employment; The positive effect on livelihood strategies for some poor households who can are able to supplement their income from agriculture

Positive and negative complementarities Positive complementarities include: That some black farmers are successful has a positive effect on attitudes among black and white farmers and farm workers, and fosters connectedness; Working for Water not only reduces alien invasions, but also increases food security. Adherence to environmental and socially friendly production has contributed to increased export earnings with some positive employment and poverty impacts, especially in the horticultural industry.

Positive and negative complementarities Negative complementarities include: W eakened food security, access to social services and poverty for unemployed farm workers who find themselves in the ‘other rural’ sector, sometimes as seasonal workers; The less invasive cropping patterns in commercial farming have beneficial environmental effects but have resulted in unemployment for especially unskilled workers, with adverse social consequences; The deleterious impact on women of the loss of biodiversity and the social implications from reliance on firewood as a source of fuel.

Synthesis: Commercial farming Field crops An increase in productivity A geographic and sectoral shift in the multiplier effect A positive influence on the environment A negative social impact An ambiguous impact on culture. Sequencing of policy Institutional restructuring – lack of farmer support ESTA and BCEA (minimum wage) Land taxes Lack of SMME support

Synthesis: Commercial farming Horticulture Greater access to export markets A shift in the location of production Replanting of established production areas. Adoption of IPM Compliance with standards of importing supermarkets Sequencing of policy Higher barriers to entry (interest rates, food safety) Driving higher wages and diversification e.g. agro- tourism Lack of SMME support

Synthesis: traditional sector