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AGRICULTURE: Key Role Players in Agriculture Must Pull Together to Drive Growth and Development


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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 on last Wednesday.

“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.

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.

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.

“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.

“There is a lot of noise at the moment and an interesting development is different businesses and sectors are saying they don’t want to talk too much about politics but rather look at every day events,” she said.

Economist Rudolf 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. “

Ahead of the implementation of a sugar tax locally, sugar replacements and alternatives area key trend being seen around the world.

“Consumers are impatient, with convenient options being sought. Demand for convenient packaged food is increasing,” said van der Colff.

Dr Purchase concluded that while the consumer is generally “spoilt for choice” in a country like SA, affordability remains a problem for lower LSM groups.

“You need to understand consumer trends, like how niche markets are growing and you need to know the regulatory environment as there will be greater levels of compliance,” he said.


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