Agriculture
Key role players must pull together For growth and development
Agriculture can contribute tremendously to growth and development in South Africa but policymakers and key role players must “ pull together ” to improve access for new entrants , former Finance Minister Nhlanhla Nene told a Standard Bank Agribusiness event recently .
“ We need a more holistic approach that doesn ’ t just look at agriculture but also rural development . Polices - whether sectoral or broad - should not put obstacles in the way to driving business in rural areas , which is an environment conducive to diversification ,” he said .
High levels of concentration in the value chain and access to infrastructure are among key challenges facing the sector , according to the National Development Plan ( NDP ). Finance is also seen as a critical challenge for new and black owned businesses .
“ Much needs to be done in terms of implementing existing policies if agriculture is to play the role the NDP envisions for it ,” said Nene .
Commercially viable
Nico Groenewald , Standard Bank head of agriculture said while funding needs to make commercial sense , Standard Bank places emphasis on providing funding across the full spectrum of farmers – from small-scale to major agriculture businesses .
“ While a farming venture needs to make commercial sense before funding can be provided – and we prefer to deal with lending up to a
15-year term - this does not mean if you start small , the farm will not be at a commercially viable level ,” he said .
Collaborative solutions are being harnessed , for example , where the bank works with other institutions that step in as equity partners when there is a lack of equity .
While the worldwide trend is for farms to become bigger and more commercial , South Africa has at least 20m people in rural land areas where small-scale farming takes place . “ The bottom line is to be able to do it at a commercially viable level . But that does not mean niche markets , for example , can ’ t be served by a smaller-scale farm ,” said Groenewald .
Rainfalls
While the agriculture sector has had to survive a number of recent shocks , like a debilitating drought , policy uncertainty over land rights and currency and global volatility , chief executive officer of the Agricultural Business Chamber , Dr John Purchase told delegates that recent rainfalls have made an enormous difference to the prospects for the sector . The latest maize crop estimate is more than a third higher than the paltry 7.9m tonnes of last year .
“ The issue around rain and maize crop affects the entire value chain and this improvement could add a full percentage point to GDP in SA ,” he said .
Another big trend creating exciting opportunities is that more than 50 % of agricultural produce now goes to Africa . However , Dr Purchase cautions that innovation and efficiencies will be key .
“ To survive in the agro food industry you have to improve efficiency by at least 2 % a year just to stay competitive with the rest of the world – you need to raise productivity and this means using technology and skilled labour to make those goods more productive ,” he said .
Independent scenario strategist Chantell Ilbury said a worst case scenario for the industry – which would lead to unsustainable production – would be driven by issues like policy uncertainty , distrust , unrest , land grabs and corruption , among others . However , the industry could move into an optimal scenario in which production is highly sustainable by achieving an optimal mix between large and emerging farmers , as well as having agricultural-friendly government policies .
Scenarios and trends
“ The best case scenario also includes affordable food prices , public-private partnerships , investment into research and development , an integrated climate change response security of tenure and stable exchange rate ,” she said .
Economist Roelof Botha said there were reasons for “ modest ” optimism about the economy , driven by factors like South African households having a lower debt / disposable income ratio than most key trading partners and real retail trade sales regularly reaching new record highs . Competitiveness strengths to build on the soundness of banks and financial services meeting business needs .
“ However , leadership , teamwork and smart policies are required ,” he said .
Food buying behaviour researcher Nadia van der Colff told the conference a growing global population is one of the major external drivers placing increased pressure on the agri sector to provide more food . A big trend is urbanisation , with the number of households increasing rapidly . Another key demographic trend is a growing middle class in developing economies that needs to be fed .
She said consumers are searching for healthy , wholesome foods , but also short ingredient lists . Plant based proteins are “ buzzing ”.
“ Technology , information , networks and opinion leaders are driving transparency , sustainability , health and wellness . “
34
SABI | APRIL / MAY 2017