Agriculture, forestry and fisheries (AFF) are widely recognised as sectors with significant job creation potential and with strategic links to beneficiation opportunities. However, although between 1994 and 2012 the real contribution of AFF to GDP increased by 29%, over the same period employment declined in both primary production and agro-processing by about 30% to 40%. This combination of slow-to-modest growth and declining employment, continues a longer-term trend evident since at least the 1970s.

The challenges facing AFF are numerous: rising input costs, an uneven international trade environment, lack of developmental infrastructure (rail, harbour, electricity), and a rapidly evolving policy and production environment. At the same time, transformation of the AFF sectors has been slow and tentative.

While there have been a variety of sector strategies established in the past, and while some progress has been made, there is recognition of a need to sharpen our analysis of what accounts for sluggish growth and job losses in AFF, and what is required to reverse this trend. At the same time, it is recognised that while the Agriculture, forestry and fisheries sectors play various strategic roles in respect of food security, agrarian transformation and rural development, and in supporting industrial development, it is also the case that AFF is under-funded: according to National Treasury’s estimates of consolidated government budgets and expenditure (‘functional classification’), the share of public money going to agriculture, forestry and fisheries has been at around 1,7% over the past four years, and is expected to decline to 1,6% over the next two. The OECD recognises South Africa’s agriculture sector as among the least supported in the world: South Africa’s Producer Support Estimate is currently 3,2%, versus 4,6% for Brazil, 7,1% for the US, and 18,6% for the OECD. Of particular concern is the lack of attention to R&D: according to the 2009/10 R&D survey conducted by HSRC on behalf of the Department of Science and Technology (the most recent survey for which the results are available), agriculture accounted for only 6,9% of South Africa’s total R&D spend. This state of affairs can in part be explained by the absence of a compelling, widely-supported strategy and implementation plan.

A detailed analysis of the various challenges is given in the Integrated Growth and Development Policy for Agriculture, Forestry and Fisheries, or ‘IGDP’. Based on this analysis, the IGDP also outlines appropriate responses. The Agricultural Policy Action Plan (APAP) seeks to translate the high-level responses offered in the IGDP into tangible, concrete steps. However, this first iteration of APAP is not offered as a fully comprehensive plan; rather, based on the model of the Industrial Policy Action Plan (‘IPAP’), it identifies an ambitious but manageable number of focused actions, in anticipation of future APAP iterations that will take the process further. APAP is planned over a five-year period and will be updated on an annual basis. Aligning itself with the New Growth Path (NGP), the National Development Plan (NDP) and Industrial Policy Action Plan (IPAP), APAP seeks to assist in the achievement of Outcome 4, Decent Employment through Inclusive Growth, and that of Outcome 7, Comprehensive Rural Development and Food Security.

APAP proposes a number of transversal interventions that complement but also go beyond the specific sectoral interventions identified. Altogether seven transversal interventions – or ‘Key Action Programmes’ (‘KAPs’) – are included, which collectively seek to strengthen the agriculture, forestry and fisheries sectors in diverse ways. One of these is Trade, agribusiness development and support.

Trade, agribusiness development and support

Problem statement

South Africa’s agro-food market landscape has changed in line with changes occurring internationally as a result of globalisation and market reforms. As a result agricultural production portfolio is diversifying and moving towards producing high value products (i.e. fruits, vegetables & animal products) in response to the changing tastes and preferences of the consumer. These changes present opportunities as well as challenges for agriculture in South Africa.

Although consolidation of the market is evident since the 1950s, market liberalisation reforms undertaken by government in the mid-1990s, fast tracked the process in which agriculture grew to the exclusion of the smaller commercial sector, and smallholder producers. Globalised market structures, further characterised by amongst others long chains of transactions between the producers and consumers, poor access to appropriate and timely information, led to many struggling smaller commercial business in the sector, let alone smallholder, being bought out by bigger corporates.

The lack of access to markets both domestic and international has been identified as one of the constraints faced by small-scale operators in the agriculture, forestry and fisheries sectors. Firstly, the entry of large retail supermarket chains into smaller rural towns has largely replaced the role of small-scale farmers as local food producers. Secondly, the procurement requirements of many supermarket chains and agribusinesses are too heavy for the smallholder to comply because of the numerous standards such as food quality and safety. Their access to the market is further constrained by factors such as low volume (with small marketable surplus), poor quality, erratic suppliers, etc. As a result, smallholder farmers cannot benefit from market access opportunities offered by these agro-food chains.

On the international front, the changing global environment and increasing standards on food safety excludes smaller farmers to play a critical role in international market access. Over and above this is the cost to access foreign markets. Stringent sanitary and phytosanitary, private standards, labelling and other technical requirements have gone beyond compliance capacity of many smallholders. Lack of market access could constraint growth and the targeted jobs that the sector intend to create.

Strategic interventions are required to integrate smallholder and struggling smaller commercial farms to participate in the mainstream economy and take advantage of both domestic agro-food chains and international markets.

Aspiration

• To increase market access for agriculture, forestry and fisheries products both domestically and internationally through targeted/product specific interventions. The priority should be given to smallholder farmers through research, capacity building and technical assistance.

Policy levers

• Agriculture, Forestry and Fisheries Trade and Agro-processing strategy

Nature of the intervention

The interventions in this area should be tailored to address both trade and market access opportunities for SMMEs including smallholder farmers. Evidence has shown that smallholder farmers do participate and make a sizeable contribution to the production of high value food commodities, but their links to markets are not strong. DAFF has various programmes to support smallholder farmers, however, some of these interventions have a narrow focus on production with very little or no support directed to activities of market access. On the domestic front, government support and intervention should focus on the creation of smallholder commodity associations, marketing cooperatives, enhance programmes supporting market access information and build on existing production systems and support sectors in which smallholder farmers are involved. Development efforts to resuscitate the smallholder farmer should also be linked with improvements in food safety and development of national food standards and regulations. This could stimulate the smallholder to continue earning income and creating jobs.

Regarding access to international markets, exports orientated programs must be integrated at early stage of production. The specific intervention by government will be to embark to directly assist smallholders by providing training and technological upgrade (in terms of standards for production, quality, packaging and delivery). This will enable smallholder farmers to meet export market requirements. Other interventions in these areas should focus on business networking events, including trade shows, business to business and direct buyer’s engagements. The trade strategy developed by DAFF should further guide the integration of smallholder farmers into global markets.