Economist urges African countries to learn from South Africa’s agricultural sector

By Daniel Itai

Wandile Sihlobo, a South African agricultural economist, has urged African countries to learn from South Africa’s agricultural sector.

According to Sihlobo, limited trade and commodity price interventions are essential as they enable more private sector investments to drive market corrections in instances of price swings.

Investments in infrastructure are critical as they can reduce the costs of doing business.

Embracing technological advancements in seeds, genetics, and agrochemicals is vital in boosting productivity, as they create market systems that can deliver these technologies efficiently and at a low cost, making farming competitive.

Supporting commercial farming is essential for the growth of the agro-processing sector of various countries’ food systems and as a source of employment.

“Agriculture remains one of the success stories in South Africa’s economic progress, irrespective of the various challenges the country has faced over the past few decades. While primary agriculture’s share in the economy has declined from around 10 percent in the 1960s to just under three percent today, the sector has grown tremendously in real terms. This decline in share only illustrates the classic story of how the South African economy has advanced over time, with various industries such as finance, manufacturing, and transport growing much faster than agriculture,” said Sihlobo.

In addition, Sihlobo said that production growth has been made possible by a range of trading agreements the South African government secured over the past couple of years, with the most important being the African, European, and Asian regions.

“The African continent and Europe now account for about two-thirds of South Africa’s agricultural exports. Asia is also an important market for South Africa’s agricultural exports, demanding roughly 25 percent of the export share.”

Moreover, the private sector has been a core part of the South African agriculture success story, while the government has had to ensure that policies remain favorable for investors and farmers. The government’s priorities were to ensure that there are no interventionist trade policies (blocking exports) or price caps, and that infrastructure (roads, rail, water, and electricity) is in place. Strong protection of property, proper land governance, and openness to scientific advancements in seed breeding, agrochemicals, and genetics are some of the positives that the South African government ensured. This was all anchored in the sound financial system that supported commercial production and international trade.

Furthermore, inclusivity is crucial, and here the South African government has a tremendous opportunity (which we hope can be realized through the country’s newly launched Agriculture and Agro-processing Master Plan) to leapfrog the development of a multitude of businessmen and women who are already in the sector but require support in terms of extension, credit, and infrastructure. These hidden middlemen hold potential for employment generation and bring vibrancy to rural towns,” said Sihlobo.

However, Sihlobo said the government has fallen short in delivering a range of basic services such as water, roads, rail, and ports, which are now presenting risks for the long-term growth prospects of the sector if there is no urgent intervention. He cited that both the government and the private sector have a plan in place.

“Both the government and the private sector have a plan for the next decade through the Agriculture and Agro-processing Master Plan, which speaks to direct value change and regional requirements to boost the growth of this sector. This will entail resolving policy ambiguity, creating enabling infrastructure, providing farmer support and supporting research and development, financing through a blended finance structure, and expanding export markets.”

“We also encourage farmers to focus on high-value, labor-intensive crops for exports. This is to ensure that the agricultural sector helps address the unemployment issues in the country. This will require the government to fully utilize its over two million hectares of underutilized land, focusing on promoting commercial production and small-scale farming only where conditions do not permit commercialisation,” said Sihlobo.