Agricultural Policy Monitoring and Evaluation 2022

24. South Africa

Support to agriculture

South Africa reduced support to agriculture during the reforms of the mid-1990s and support to farms has remained below 5% of gross farm receipts since 2010. In 2019-21, support to agriculture was 2.6% of gross farm receipts.

Market price support (MPS) and payments based on input use are the largest components of support to farmers. The level of price distortions is low and domestic prices for most commodities align with world prices – except for sugar and, to a lesser extent, wheat, mainly due to import tariffs. Consequently, only those two commodities receive single-commodity support, worth 30% and 5% of their respective gross receipts. Most direct payments are provided as an input subsidy (fuel tax refund) and investment subsidies to support smallholder farmers.

Support for general services to the sector (GSSE) declined relative to the size of the sector. Its level is below the average of other countries in this report, and below the OECD average. The GSSE averaged 1.4% of the value of agricultural production during 2019-21, below the 3.8% observed in the early 2000s. Most payments to general services go to the agricultural knowledge and innovation system, and expenditure on infrastructure. Support in these categories targets an enabling environment for small-scale farming, which emerged following the ongoing land reform process that began in the mid-1990s. Expenditures for inspection and control are also an important and growing element of services. Overall, support fell in relative terms from an average of 0.6% of GDP in 2000-02 to 0.3% in 2019-21.

Recent policy changes

In recent years, policy changes sought to enhance land reforms, including the redistribution of commercial farmland to Black producers to redress the outcomes of past discriminatory laws that limited Black people from occupying and buying land. Significantly, a bill amending the Constitution to provide for the expropriation of land without compensation was rejected by the National Assembly in December 2021.

The national budget item on Agriculture, Land Reform and Rural Development (Vote 29), passed into law by the National Assembly in 2021, provides the Department of Agriculture, Land Reform and Rural Development (DALRRD) with resources and a mandate to develop agricultural value chains, provide agricultural inputs, increase equitable access to land, and facilitate rural development.

On 18 March 2021, the ZAR 1 billion (USD 67.6 million) Agri-Industrial Fund launched to support the development and expansion of the agricultural sector by assisting Black producers and entrepreneurs in developing, expanding, acquiring and integrating operations in prioritised value chains. It also aims to accelerate land redistribution and increase exports.

During the 2020-21 period, the wheat and sugar import tariffs were adjusted four and two times respectively, ending 55% lower compared to 2019-20 for wheat and 17.5% lower for sugar.

South Africa committed to lowering its economy-wide greenhouse gas (GHG) emissions 12-32% by 2030, as outlined in its Nationally Determined Contribution (NDC), updated in September 2021. The NDC does not set sector-specific targets, nor does it commit to a carbon neutrality goal. If it is passed into law, the Climate Change Bill approved by Cabinet in September 2021 will serve as the legal framework for action on climate change to move to a net-zero emissions economy by 2050. It will establish sectoral emission targets, including for agriculture.

Assessment and recommendations

• The Carbon Tax Bill is an integral part of government policy on climate change, but it does not apply to agricultural emissions in Phase 1 (2019-22). Agriculture is only indirectly affected in this phase, through increased input costs for fuel and energy, and energy-intensive inputs such as fertiliser, although the fuel tax rebate dilutes incentives to lower fossil fuel energy use. Expanding the scope of the carbon tax in its next phase after 2022 to include agricultural emissions, along with social safety net policies to offset potential food price increases and income losses for poor households and producers caused by this change, would incentivise agricultural emission reductions. Alternatively, the creation of an offset mechanism that enables the agricultural sector to sell emission reduction credits to taxed sectors would avoid additional costs for farmers and food consumers. Furthermore, a sectoral emissions target for agriculture should be established under the Climate Change Bill once it becomes law.

• With significant policy reforms in the mid-1990s, South Africa successfully opened its markets for the agricultural sector by eliminating MPS for most products. MPS for sugar remains high, and the government should consider reducing import tariffs as progress is made implementing the 2020 Sugarcane Value Chain Master Plan, which aims to stabilise and restructure the sector to make it more resilient and inclusive.

• Since the 1990s reforms, increases in budgetary spending have financed the land reform process and supported its beneficiaries (mainly smallholders and emerging commercial farmers). This mostly finances general services to the sector through R&D, knowledge transfer and infrastructure. The challenge continues to be the timely funding of economically viable projects and the coordination and targeting of support programmes tailored to the needs of emerging farmers.

• Increasing the involvement of experienced and willing commercial farmers in developing support programmes is key to building the capacity of emerging entrepreneurs who seek to become commercial producers. Public-private partnerships and industry associations can facilitate this. This approach could address weaknesses in programmes and services by public authorities. Expropriation of property without compensation remains a concern. Despite the failed attempt to amend the constitution for this purpose, uncertainty about property rights remains and could undermine investor confidence in the sector.

• The pace of land reform should be linked to developing an enabling environment for its beneficiaries, including education, training, infrastructure, and access to modern farming equipment, finance and markets. Particularly important is upskilling public extension officers and providing them with resources to service rural communities and emerging commercial producers. Capacity in the private sector and learning and training institutions can be leveraged to accelerate revitalising public extension services. Without these developments, land redistribution cannot deliver the expected outcomes, such as improving the welfare of rural Black populations, increasing food security in rural areas and developing a viable commercial sector.

  Very low nutrient balances (negative in the case of nitrogen) across South Africa raise questions about soil fertility in parts of the country. The government should focus on improving soil fertility through conservation agriculture practices and improving market access to fertilisers where appropriate.

Figure 24.1. South Africa: Development of support to agriculture

 

 

 

 

 

Source: OECD (2022), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), http://dx.doi.org/10.1787/agr-pcse-data-en.

 

Source: OECD (2022), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), http://dx.doi.org/10.1787/agr-pcse-data-en.

 

Source: OECD (2022), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), http://dx.doi.org/10.1787/agr-pcse-data-en.

Table 24.1. South Africa: Estimates of support to agriculture

Million USD

	2000-02	2019-21	2019	2020	2021p
Total value of production (at farm gate)	6 824	21 947	20 264	20 318	25 259
of which: share of MPS commodities (%)	74.75	72.52	72.67	71.85	73.03
Total value of consumption (at farm gate)	6 000	19 189	18 788	17 767	21 012
Producer Support Estimate (PSE)	477	579	594	553	589
Support based on commodity output	438	409	416	400	412
Market Price Support1	438	409	416	400	412
Positive Market Price Support	451	409	416	400	412
Negative Market Price Support	-13	0	0	0	0
Payments based on output	0	0	0	0	0
Payments based on input use	36	168	173	154	177
Based on variable input use	25	131	134	121	139
with input constraints	0	0	0	0	0
Based on fixed capital formation	11	36	38	32	38
with input constraints	0	0	0	0	0
Based on on-farm services	1	1	1	1	1
with input constraints	0	0	0	0	0
Payments based on current A/An/R/I, production required	3	1	4	0	0
Based on Receipts / Income	3	1	4	0	0
Based on Area planted / Animal numbers	0	0	0	0	0
with input constraints	0	0	0	0	0
Payments based on non-current A/An/R/I, production required	0	0	0	0	0
Payments based on non-current A/An/R/I, production not required	0	0	0	0	0
With variable payment rates	0	0	0	0	0
with commodity exceptions	0	0	0	0	0
With fixed payment rates	0	0	0	0	0
with commodity exceptions	0	0	0	0	0
Payments based on non-commodity criteria	0	0	0	0	0
Based on long-term resource retirement	0	0	0	0	0
Based on a specific non-commodity output	0	0	0	0	0
Based on other non-commodity criteria	0	0	0	0	0
Miscellaneous payments	0	0	0	0	0
Percentage PSE (%)	7.32	2.62	2.90	2.70	2.32
Producer NPC (coeff.)	1.08	1.02	1.02	1.02	1.02
Producer NAC (coeff.)	1.08	1.03	1.03	1.03	1.02
General Services Support Estimate (GSSE)	264	310	306	301	323
Agricultural knowledge and innovation system	146	126	126	124	129
Inspection and control	39	67	62	68	70
Development and maintenance of infrastructure	78	96	95	89	103
Marketing and promotion	0	21	23	20	21
Cost of public stockholding	0	0	0	0	0
Miscellaneous	0	0	0	0	0
Percentage GSSE (% of TSE)	34.18	34.89	34.05	35.20	35.37
Consumer Support Estimate (CSE)	-350	-372	-465	-325	-325
Transfers to producers from consumers	-347	-324	-399	-264	-309
Other transfers from consumers	-17	-48	-66	-61	-17
Transfers to consumers from taxpayers	0	0	0	0	0
Excess feed cost	14	0	0	0	0
Percentage CSE (%)	-6.03	-1.93	-2.48	-1.83	-1.55
Consumer NPC (coeff.)	1.07	1.02	1.03	1.02	1.02
Consumer NAC (coeff.)	1.06	1.02	1.03	1.02	1.02
Total Support Estimate (TSE)	741	889	900	854	912
Transfers from consumers	364	372	465	325	325
Transfers from taxpayers	394	565	501	590	603
Budget revenues	-17	-48	-66	-61	-17
Percentage TSE (% of GDP)	0.62	0.25	0.26	0.28	0.22
Total Budgetary Support Estimate (TBSE)	304	479	484	454	500
Percentage TBSE (% of GDP)	0.25	0.14	0.14	0.15	0.12
GDP deflator (2000-02=100)	100	316	300	316	332
Exchange rate (national currency per USD)	8.69	15.23	14.45	16.46	14.78

Note: p: provisional. NPC: Nominal Protection Coefficient. NAC: Nominal Assistance Coefficient. A/An/R/I: Area planted/Animal numbers/Receipts/Income. 1. Market Price Support (MPS) is net of producer levies and excess feed cost. MPS commodities for South Africa are: wheat, maize, sunflower, sugar, milk, beef and veal, pig meat, sheep meat, poultry, eggs, groundnuts, grapes, oranges and apples.

Source: OECD (2022), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), http://dx.doi.org/10.1787/agr-pcse-data-en.

Description of policy developments

Overview of policy trends

Widespread support, regulation, and price and production control within a closed economy characterised agricultural policy in South Africa under the apartheid regime between 1955 and 1990.

Post-apartheid, quick and substantial reforms in the mid-1990s reduced state intervention in agricultural markets, and led to more market-oriented commercial farming. Domestic marketing of agricultural products was deregulated, and barriers to agricultural trade were reduced by replacing direct import controls with tariffs, removing state controls over exports, and eliminating export subsidies. These reforms reduced market price support and budgetary support to commercial farming.

As stated in the White Paper on Land Policy of 1997, land reform aimed to redress past injustices, foster reconciliation and stability, support economic growth, improve household welfare, and alleviate poverty. Key elements of the land reform included land restitution, land redistribution and land-tenure reform. The land reform process is on-going and further legislative regulations have been submitted to facilitate the acceleration of the land reform process. 13.22 million hectares (or 17% of land used for agriculture) has been transferred away from white landowners (this includes restitution, redistribution, private transactions, and State procurement) by 2020 (Sihlobo and Kirsten, 2021[1]). Of this, 3.08 million hectares have been transferred to the state and 10.14 million hectares have been transferred to black owners. In several instances, communities elected to receive financial compensation where land was successfully identified for restitution (2.34 million hectares). Sihlobo and Kirsten (2021[1]) therefore argue that 15.56 million hectares (20%) of total area of agricultural land rights have been restored since 1994. Since it started, the land reform has been accompanied by agriculture support exclusively targeting black smallholders and emerging producers (mainly provided within the Comprehensive Agricultural Support Programme [CASP]). These include subsidies for variable and fixed input credit and financial support, extension, marketing, and training services (Table 24.2).

Table 24.2. South Africa: Agricultural policy trends

Period	Broader framework	Changes in agricultural policies
Prior to mid-1990s	Closed economy under the apartheid regime	Large subsidies for commercial agricultural producers Import controls; export subsidies for agricultural products Price and production controls under the Agricultural Marketing Act of 1937
Mid-1990s-present	Post-apartheid period; democratic government; market deregulation and trade liberalisation Land redistribution; emphasis on black small-scale producers’ development	Marketing of Agricultural Products Act (1996) brings market deregulation and trade liberalisation WTO accession Agricultural tariffs replace import controls Import tariffs applied to sugar, wheat and maize (0 tariffs for maize from 2007) and livestock products (except eggs) Land restitution and redistribution Land reform-related programmes supporting black smallholder farmers: - Increased spending to finance the land reform process - Direct support targeting black smallholders

Support to farmers has been decreasing as a share of gross farm receipts (with some year-to-year variation) during 1995–2007 because of policy reforms and deregulation of the market. Since then, support has tended to stabilise at a relatively low level, around 4% of gross farm receipts. Market price support is the main component of support, provided mainly to sugar (Figure 24.4). Budgetary support to producers, mostly input subsidies, is targeted to black smallholders. Budgetary expenditures on general services to the sector are increasing and spent mainly on knowledge transfer and infrastructure.

 

Notes: A/An/R/I:Area planted/Animal numbers/Receipts/Income.

Payments not requiring production include Payments based on non-current A/An/R/I (production not required) and Payment based on non-commodity criteria. Other payments include Payments based on non-current A/An/R/I (production required) and Miscellaneous payments.

Source: OECD (2022), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), http://dx.doi.org/10.1787/agr-pcse-data-en.

Main policy instruments

The current system has no domestic market support interventions or export subsidies. Border measures, applied on Southern African Customs Union (SACU1) common borders, are the only price support policy for all commodities except sugar (see Sugar Agreement below).

Import protection for agricultural and food products is based on specific and ad valorem tariffs. The average applied Most Favoured Nation (MFN) tariff for agricultural products is 8.7%, well below the average bound tariff on agricultural products of 39% (WTO, 2022[2]). Tariff rate quotas (TRQs) exist for a range of agricultural products under the WTO minimum market access commitments. The zero import-tariff for maize applies since 2007. There is also a variable tariff formula in place for maize and wheat.

The Sugar Agreement of 2000 (between agents in the sugar production chain) permits exports of raw sugar only through a single-channel industry arrangement and allocates quotas to individual sugar mills for sugar sold on the domestic and export market.

The Sugarcane Value Chain Master Plan, signed off in 2020, has various strategies to make sugar production profitable, including investment in value addition and crop diversification strategies. The Master Plan aims to stabilise and reverse a steep decline in the performance of the sector, which has experienced 25% decline in output 60% of sugar farmers over the past two decades. The Master Plan has a phased approach, with an initial phase focusing on immediate actions to stabilise and prevent a collapse of the sugar industry, with the objective of creating a window of 2-3 years during which a programme of restructuring is planned to improve the foundations of the industry for the future. Actions in the first phase include: retail, wholesale and industrial stakeholder commitments for the procurement of local sugar; the labelling and promotion of local sugar; commitments by the sugar industry prevent the price of sugar from exceeding the annual average consumer price index; the provision of protection by government from deep-sea imports; and provide tariff rate flexibility and rebates where the local sugar industry is unable to meet demand by retail, wholesale and industrial users; provide support in the form of preferential cane pricing and interventions to improve value-chains and yields. Stakeholder commitments for restructuring include: skills development and actions to increase ownership and participation by small-scale growers and workers through the value-chain; and actions to re-balance growing, milling and refining capacity in line with market requirements (Sugar Master Plan 2020).

Other policy instruments include input subsidies, mainly in the form of a diesel tax rebate for farmers; programmes supporting new farmers benefiting from land reforms; and general services provided to the sector, mainly research, extension and inspection services. The National Land Care Programme (NLP) is a community-based and government-supported approach promoting sustainable management and use of natural agricultural resources.

During the reforms concerning land restitution and land redistribution launched in 1994, a range of programmes (e.g. the Comprehensive Agricultural Support Programme, Illima/Letsema projects and Micro-agricultural Financial Institutions of South Africa [MAFISA]) were implemented to create an enabling environment for previously disadvantaged farmers (subsistence, smallholders and commercial). Support measures included input subsidies, capacity building, provision of information services and infrastructure development.

The Department of Rural Development and Land Reform (DRDLR) has an ongoing commitment to build sustainable rural livelihoods. As part of this commitment the Agricultural Land Holding Account (ALHA) was established. The ALHA was established in terms of the Provision of Land and Assistance Act, 1993 (Act No. 126 of 1993). Through the ALHA the state can proactively and legally target and acquire land from funds appropriated by parliament and merge this with the demand or need for land. The Integrated Food Security Strategy (IFSS), introduced in 2002 based on public and private civil society partnerships, focuses on household food security as the building block for national food security. One of the strategic approaches increases household food supplies by providing production support services to households’ own food production. The food security objective is further supported by Fetsa Tlala, an integrated food production initiative introduced in 2013, which aims to produce staple foods on fallow land with agricultural potential in communal areas.

The Ilima/Letsema Programme implemented in 2008 aims to increase food production, particularly by smallholder farming. Through provincial departments, it finances mostly conditional grants for projects such as upgrading irrigation schemes and other infrastructure and on-farm investments to strengthen production capacity.

The Comprehensive Agricultural Support Programme (CASP) was founded to assist new beneficiaries of Land reform to access credit and means of support from commercial banks and the government-owned Land and Development Bank. The CASP focuses on providing on- and off-farm infrastructure and production inputs; targeted training, skills development and capacity building; marketing and business development and support; information and knowledge management; technical and advisory services; regulatory services; and financial services.

The Micro-finance Financial Institutions of South Africa (MAFISA) provides financial services to smallholders in the agriculture, forestry and fisheries sector. The objective of the scheme is to address the financial services needs of smallholders. Services provided through the scheme include production loans, the facilitation of MAFISA clients to save, and capacity building for member-owned financial institutions (intermediaries).

The Comprehensive Rural Development Programme (CRDP) launched in 2009 supports the development of rural areas through two main policy instruments, both related to the agricultural sector. The Rural Infrastructure Development (RID) programme promotes investment in rural infrastructure providing access to basic services, particularly sanitation, irrigation and roads. The Rural Enterprise and Industrial Development (REID) policy, signed in 2017, aims to stimulate social transformation that is integrated with inclusive growth by harnessing the potential of the rural enterprise sector for sustainable development including employment and income generation in rural areas.

South Africa is a founding member of the SACU, a full customs union with a common external tariff. In 1994, South Africa became a member of the Southern African Development Community (SADC2). From 2012, the SADC free trade agreement (FTA) was fully implemented. Trade between South Africa and the European Union takes place under the SADC-EU Economic Partnership Agreement (EPA) regime. This is a free trade agreement between the SADC EPA States (comprised of all SACU Member States plus Mozambique) and the European Union. The most important benefit for South Africa is the enhanced market access for agricultural products such as sugar, wine, some dairy products, flowers, fruits and nuts as well their preparations. The Agreement has contributed to an increase in South Africa’s exports of agricultural products to the European Union in recent years.

The Agreement establishing the African Continental Free Trade Agreement (AfCFTA) came into force on 30 May 2019. Member states committed to eliminate 90% of tariff lines over a five-year period and ten years for the “least developed countries”. Negotiations to finalise outstanding issues are expected to be completed during 2022, along with the implementation the agreement in practice. The AfCFTA will bring together all 55 Member States of the African Union covering a market of more than 1.2 billion people, with a combined GDP of more than USD 3.4 trillion. In terms of numbers of participating countries, the AfCFTA will be the world’s largest free trade area since the formation of the World Trade Organization.

South Africa is also a beneficiary of the US African Growth and Opportunity Act (AGOA), a non-reciprocal trade preference programme that grants eligible Sub-Saharan African countries duty-free, quota-free (DFQF) access to the United States for selected export products. AGOA was enacted in 2000 for eight years. The Act was extended to 2015, and further to 2025. AGOA has a positive impact on some of South Africa's agricultural sub-sectors, in particular exports of wine, macadamia nuts and oranges.

Climate change mitigation policies in agriculture

Total GHG emissions in South Africa amounted to 482 MtCO₂eq in 2017, and agriculture contributed 10.0% of these.

Climate change mitigation goals and priorities for South Africa adopted by Cabinet are documented in the revised NDC, the Climate Change Bill and South Africa’s negotiating position for COP26. A signatory to the 2016 Paris Agreement on Climate Change, South Africa committed to reduce its GHG emissions. As outlined in its NDC updated in September 2021, the country set economy-wide mitigation targets for 2025 and 2030, which represent a 0-17% reduction and a 12-32% reduction, respectively, against the same business-as-usual range of 398-614 MtCO₂eq, per each reference year. Sector-specific mitigation targets are not set in the NDC.

The policy instrument currently in place to deliver South Africa’s mitigation commitments is the national carbon tax (established by the Carbon Tax Act in August 2017), being implemented via a phase-in approach. The current Phase 1 covers 2019-22 and exempts primary agriculture from the carbon tax. This exclusion might be reconsidered for Phase 2 (after 2022).

If it is passed into law, the Climate Change Bill approved by Cabinet in September 2021 will serve as the legal framework for action on climate change and guide stakeholders to optimal pathways to a net-zero emissions economy by 2050. It includes a mandatory carbon budget programme and the establishment of sectoral emission targets (SETs) (Republic of South Africa, 2021). The SETs will be implemented through national government departments’ planning instruments, referred to as Policies and Measures (PAMs). Once the Climate Change Bill becomes law, SETs will be defined and allocated for three rolling five-year periods.

Additional policies pertaining to agriculture were developed with the objective that at least 30% of agricultural land is under sustainable land management, including climate-smart practices. These include: the Climate Smart Agriculture Strategic Framework & Climate Change Adaptation and Mitigation Plan, including departmental policies related to climate change developed and approved by the national department and sector; guidelines for the implementation of climate change agricultural sector policies, plans and strategies by provinces; and Climate Change Adaptation and Mitigation programmes developed to implement sector policies, plans and strategies (including, research, education, awareness and capacity building programmes). These should contribute to the SET for agriculture once it is formalised.

Domestic policy developments in 2021-22

Land reform and development

In order for the government to use the expropriation of commercial farms without compensation as an option for accelerating land redistribution, the South African Constitution would need to be changed. Accordingly, the Constitution 18^th Amendment Bill – Section 25, was introduced to amend Section 25 of the Constitution (property rights) to provide for expropriation without compensation in circumstances deemed just and equitable (Saxby, 2021[3]). However, the Bill failed to reach a sufficient majority to be passed by the National Assembly on 7 December 2021.

The Land Court Bill was introduced to the National Assembly on 19 May 2021. It proposes to establish two new courts to provide administration and judicial functions such as mediation and arbitration procedures, including matters related to expropriation without compensation. However, since the amendment of the Constitution was unable to capture the majority votes for it to pass Parliament, the remaining Expropriation Bill is still under Parliament’s consideration.

The national budget item on Agriculture, Land Reform and Rural Development (Vote 29), passed into law by the National Assembly in 2021, aims to provide equitable access to land, integrated rural development, sustainable agriculture and food security for all. It provides the Department of Agriculture, Land Reform and Rural Development (DALRRD) with resources and a mandate to develop agricultural value chains, provide agricultural inputs, and facilitate rural development.

The budget item on Agriculture, Land Reform and Rural Development is informed by DALRRD medium-term strategy, and it focuses on implementing the Agriculture and Agro-processing Master Plan (AAMP). Once finalised, the AAMP aims to improve agricultural production and revitalise essential agricultural infrastructure, and accelerate land reform. All of the Department’s programmes are being aligned with the AAMP. The Department’s expenditure is expected to increase at an average annual rate of 4.5% from ZAR 15.2 billion (USD 1.0 billion) in 2020-21 to ZAR 17.4 billion (USD 1.2 billion) in 2023-24.

DALRRD re-launched the Blended Finance Scheme (BFS) in March 2021 to leverage private funding to support investments that will enhance agricultural production, agro-processing and land acquisition by black producers. National Treasury has endorsed the collaboration between DALRRD and the Industrial Development Corporation (IDC) collaboration and agreed to a seed funding of ZAR 200 million (USD 13.5 million) in 2020/21; and National Treasury has provided the baseline allocation for BFS of ZAR 1.1 billion (USD 74.4 million) over MTEF 2021–2023/24 period.

Water

On 9 November 2021, the Supreme Court of Appeal (SCA) ruled on the transfer on water rights and that water rights holders are entitled to transfer such rights in accordance with the National Water Act (NWA) (Arnoldi, 2021[4]). This is an important ruling for the agricultural sector as it will allow the transfer of water rights between water users in the agricultural sector. Following the SCA’s ruling on the matter the Department of Water and Sanitation filed an appeal to the Constitutional Court against the decision (Arnoldi, 2021[4]).

Other policies

On 18 March 2021, the Minister of Agriculture, Land Reform and Rural Development and the Minister of Trade and Industry launched the Agri-Industrial Fund with the IDC (DALRRD, 2021[5]), to support economically viable activities in agro-processing (food and non-food) sectors (IDC, 2021[6]). The ZAR 1 billion (USD 67.6 million) fund supports the development and expansion of the agricultural sector by assisting black producers and investees in developing, expanding, acquiring and integrating operations in prioritised value chains. It also aims to accelerate land redistribution, increase exports and contribute to job creation. The fund will also aim to eliminate barriers to entry by providing grants to qualifying beneficiaries (DALRRD, 2021[5]).

Institutional change

The President has assented to the 1991 Upgrading of Land Tenure Rights Act on 26 May 2021. The Act provides for the application for conversion of land tenure rights to ownership in addition to offering interested persons applications to enable converting land tenure rights into ownership. The Act further provides an opportunity for interested persons to object to conversion of land tenure rights into ownership. The Act supports aggrieved persons to apply for appropriate relief in courts, and provides recognition of conversions that took effect in good faith in the past (Government Gazette, 2021[7]).

Domestic policy responses to the COVID-19 pandemic

The Solidarity Fund Food Relief came into effect on 23 March 2020, primarily as a result of COVID‑19, and is a short-term intervention measure to respond to the COVID-19 crisis working closely with government and business but is independent of both of them (Solidarity Fund, 2020[8]). The Fund provides a platform for both the public and private sectors to contribute towards the various initiatives supported by the Fund. Donations made to organisations established to carry out benefits for the public are generally exempt from donations tax. The fund aims to provide accelerated aid for South Africa’s most vulnerable households and communities during the COVID-19 pandemic (Solidarity Fund, 2020[8]). The fund is organised around three pillars, namely health, humanitarian efforts and communication. The humanitarian pillar encompasses, amongst others, provision of food parcels, food vouchers and farming input vouchers. In July 2021 the Humanitarian Crisis Relief Fund (HCRF) was created in response to the looting that occurred in KwaZulu-Natal (KZN) and Gauteng to ensure that families receive food.

The Farming Input Voucher Relief Programme issued 46 864 vouchers by 31 May 2021 to rural subsistence farmers in all nine provinces in South Africa to the value of ZAR 74.5 million (USD 5.0 million) (Solidarity Fund, 2021[9]). The efficacy of the farming input voucher programme was hampered by competing initiatives, such as the Presidential Employment Stimulus Initiative (PESI). The PESI initiative identified the same input suppliers as the fund that exacerbated problems such as stock availability.

PESI is intended to address unemployment challenges and sustain self-employment for subsistence producers. Beneficiaries of the programme would receive financial support ranging between ZAR 1 000 (USD 68) and ZAR 12 000 (USD 812) (Masiwa, 2021[10]). The first phase of the PESI programme supported 88 251 subsistence farmers. The programme was suspended on 12 January 2022 on the grounds of inflated fees charged to subsistence farmers when procuring goods with the vouchers (Masiwa, 2022[11]).

The Humanitarian Crisis Relief Fund (HCRF) is set up as a separate from the Solidarity Fund COVID response. According to the Solidarity Fund (2021), ZAR 100 million (USD 6.8 million) as part of the HCRF was allocated for the procurement, packaging and distribution of food parcels in the KZN and Gauteng by the Department of Social Development (DSD) Food Relief Response.

After a first ban on the sale of alcohol from stores, restaurants and bars between 28 December 2020 and 15 January 2021, total bans on the sale of alcohol were imposed five times during 2021 in response to surging case numbers of COVID-19. These bans were introduced for the purpose of reducing infection rates and to alleviate the strain placed on hospitals by the admission of patients with alcohol-related injuries, and to ensure sufficient hospital resources would be available to cope with surging hospitalisations of COVID-19 patients. There was a cumulative period of 26 weeks over which the sale of alcohol was totally banned. There were an additional 9 weeks over which alcohol could only be purchased and consumed onsite in licenced premises.

The Loan Guarantee Scheme (LGS) is part of the Economic Stimulus Package to support small and medium-sized businesses that have experienced financial difficulties as a result of the COVID-19 pandemic (South African Government, 2021[12]). The LGS was launched on 12 May 2020 by the National Treasury and the Reserve bank, alongside the Banking Association South Africa (BASA). The LGS was originally scheduled to expire in April 2021, but was extended to July 2021. As of March 2021 banks have approved ZAR 18.16 billion (USD 1.26 billion) comprising 14 827 loans.

Trade policy developments in 2021-22

For wheat and sugar South Africa applies a variable, formula based, import tariff reflecting the price changes on world markets. During the 2020-21 period, the wheat and sugar import tariffs were adjusted four and two times respectively, ending 55% lower for wheat and 17.5% lower for sugar compared to their levels for the 2019-20 period.

Safeguard duties, which have been applied to all EU countries since 2018, were scheduled to fall away entirely in March 2022. The rate was initially set at 35.3%, falling to 30% in March 2019, 25% in March 2020 and 15% in March 2021.

Tariffs were introduced that apply to over 30% of all imported chicken, but do not apply to the European Union and other SADC countries.

Anti-dumping duties3 on bone-in chicken imports were renewed against the United Kingdom, Germany and the Netherlands for an additional five years on 23 August 2021. The duties, applicable to these countries, were supposed to expire on 26 February 2020, but the International Trade Administration Commission (ITAC) initiated a sunset review on 24 February 2020 and found that if anti-dumping tariffs were removed, material harm would fall upon the poultry industry. South Africa also imposed provisional anti-dumping duties on chicken imports from Brazil, Denmark, Ireland, Poland and Spain until June 2022.

A Tariff Rebate is in place, rebating the full anti-dumping duties on the importation of frozen bone-in cuts chicken meat, imported from or originating in the United States. The rebate is provided on first-come-first-see basis and is subject to an annual quota. For the 2020/21 Quota Year, the quota was increased from 68 590 tonnes to 69 972 tonnes. For the 2021/22 Quota Year, the government approved a further increase to 71 290 tonnes.

The AfCFTA agreement for preferential trade was originally due to start in 2021, but has been delay due to ongoing negotiations to finalise and outstanding issues. Despite this delay, South Africa has already published new tariff rates that apply under this agreement.

Contextual information

South Africa has the most industrialised and diversified economy in Africa, and the second largest economy (after Nigeria) on the African continent. With the largest GDP per capita of the continent, it ranks as an upper middle-income country. However, income inequality is high and widespread poverty persists. South Africa has experienced a relatively moderate and decreasing level of inflation — bellow 5% in most recent years, with inflation targeting in the range of 3% to 6 %. However, a persistently high rate of unemployment remains an obstacle for alleviating poverty. The real GDP growth rate has been declining since 2011 and came close to zero in 2019. The GDP dropped by 10% to -6% in 2020, mainly because of the restriction of economic activities related to the COVID-19 measures, but it rebounded strongly in 2021 to 5% (Figure 24.5).

The importance of agriculture in the economy is relatively low, around 3% of GDP, and 5% of employment (Table 24.3). South Africa has abundant agricultural land, but only 13% of it is arable, while the remaining agricultural area is mostly semi-arid pastures with extensive livestock production. The farm structure is highly dualistic, with a well-developed and market oriented sector of large-scale commercial farms and a large number of smallholder farms.

Table 24.3. South Africa: Contextual indicators

	South Africa		International comparison
	2000*	2020*	2000*	2020*
Economic context			Share in total of all countries
GDP (billion USD in PPPs)	347	717	0.9%	0.7%
Population (million)	44	58	1.0%	1.1%
Land area (thousand km2)	1 213	1 213	1.5%	1.5%
Agricultural area (AA) (thousand ha)	98 125	96 341	3.3%	3.3%
			All countries1
Population density (inhabitants/km2)	37	49	53	63
GDP per capita (USD in PPPs)	7 715	12 096	9 281	20 929
Trade as % of GDP	19	25	12.3	14.0
Agriculture in the economy			All countries1
Agriculture in GDP (%)	3.3	2.7	2.9	4.9
Agriculture share in employment (%)	9.9	5.0	-	-
Agro-food exports (% of total exports)	8.5	12.1	6.2	8.5
Agro-food imports (% of total imports)	5.2	8.6	5.5	7.7
Characteristics of the agricultural sector			All countries1
Crop in total agricultural production (%)	56	56	-	-
Livestock in total agricultural production (%)	44	44	-	-
Share of arable land in AA (%)	14	12	32	34

Note: *or closest available year.

1. Average of all countries covered in this report.

Sources: OECD statistical databases; UN Comtrade; World Bank, WDI and national data.

 

Sources: OECD statistical databases; World Bank, WDI; and ILO estimates and projections.

South Africa is a consistent net exporter of agro-food products (Figure 24.6). The share of agro-food exports in total exports was around 12%, while the share of agro-food imports was around 9% in 2020 (Table 24.3). Nearly three-quarters of agro-food exports are for final consumption, both of primary and processed products. Around three-quarters of agro-food imports are processed products (Figure 24.6).

 

 

Note: Numbers may not add up to 100 due to rounding.

Source: UN Comtrade Database.

Growth in total factor productivity (TFP) contributes most to agricultural output growth in South Africa (Figure 24.7). However, TFP growth has slowed significantly relative to the 1990s and averaged 0.9% per year during 2010-19. As with output growth overall, TFP growth has been well below the world average (Table 24.4). Increased use primary factors and moderate growth in intermediate input use also contributed to the increase in output (Figure 24.7).

Phosphorus and nitrogen balances are very low and negative, respectively, and well below the OECD average. Although agriculture uses almost 60% of abstracted water, only a few regions have irrigated land, and water resources are scarce in most of the agricultural areas (Table 24.4). The livestock sector is another important user of water in agriculture. Agriculture’s share in energy use has increased and remains above the OECD average.

 

Note: Primary factors comprise labour, land and capital (livestock and machinery). Intermediate input comprises materials (feed and fertiliser).

Source: USDA Economic Research Service Agricultural Productivity database.

Table 24.4. South Africa: Productivity and environmental indicators

	South Africa		International comparison
	1991-2000	2010-2019	1991-2000	2010-2019
			World
TFP annual growth rate (%)	1.7%	0.9%	1.7%	1.4%
			OECD average
Environmental indicators	2000*	2020*	2000*	2020*
Nitrogen balance, kg/ha	-6.3	-7.3	32.1	30.0
Phosphorus balance, kg/ha	0.2	0.3	3.4	2.9
Agriculture share of total energy use (%)	2.6	3.1	1.7	2.0
Agriculture share of GHG emissions (%)	..	..	8.6	9.7
Share of irrigated land in AA (%)	1.5	1.7	-	-
Share of agriculture in water abstractions (%)	61.5	57.9	46.3	43.7
Water stress indicator	41.7	..	9.7	8.6

Note: * or closest available year.

Sources: USDA Economic Research Service, Agricultural Productivity database; OECD statistical databases; FAO database and national data.

References

[4] Arnoldi, M. (2021), Supreme Court confirms water rights can be transferred, https://www.engineeringnews.co.za/article/supreme-court-confirms-water-rights-can-be-transferred-2021-11-09/rep_id:4136 (accessed on 26 November 2021).

[5] DALRRD (2021), Minister Didiza and Minister Patel to launch the Agri-Industrial Fund, DALRRD.

[7] Government Gazette (2021), Acts - Parliament of South Africa, https://www.parliament.gov.za/storage/app/media/Acts/2021/Act_6_of_2021_Upgrading_of_Land_Tenure_Rights_Amendment_Act.pdf (accessed on 3 December 2021).

[6] IDC (2021), Agri-Industrial Fund - IDC, https://www.idc.co.za/2021/03/18/the-agri-industrial-fund/ (accessed on 16 January 2022).

[11] Masiwa, D. (2022), Didiza suspends PESI rollout with immediate effect, https://www.foodformzansi.co.za/didiza-suspends-pesi-rollout-with-immediate-effect/ (accessed on 13 January 2022).

[10] Masiwa, D. (2021), PESI second phase: How to get that dough, https://www.foodformzansi.co.za/didiza-opens-second-phase-of-pesi-how-to-apply/ (accessed on 15 January 2022).

[1] Oqubay, A., F. Tregenna and I. Valodia (eds.) (2021), Agriculture in South Africa. The Oxford Handbook of the South African Economy, https://doi.org/10.1093/oxfordhb/9780192894199.013.10.

[3] Saxby, P. (2021), Constitution 18th Amendment Bill: Is Parliament putting the cart before the horse during expropriation without compensation process?, https://www.dailymaverick.co.za/opinionista/2021-09-13-constitution-18th-amendment-bill-is-parliament-putting-the-cart-before-the-horse-during-expropriation-without-compensation-process/ (accessed on 9 December  2021).

[9] Solidarity Fund (2021), Farming Input Voucher Programme - Solidarity Fund Phase 1 Report, https://solidarityfund.co.za/media/2020/06/SF_-_Food_Relief_Programme_Summary_Report_-_June_2020.pdf (accessed on 15 January 2022).

[8] Solidarity Fund (2020), Solidarity Fund Food Relief Programme Summary Report - June 2020, https://solidarityfund.co.za/media/2020/06/SF_-_Food_Relief_Programme_Summary_Report_-_June_2020.pdf (accessed on 16 January 2022).

[12] South African Government (2021), Treasury on three month extension of COVID-19 Coronavirus Loan Guarantee Scheme, https://www.gov.za/speeches/treasury-three-month-extension-covid-19-coronavirus-loan-guarantee-scheme-12-apr-2021-0000#:~:text=The%20Loan%20Guarantee%20Scheme%20(LGS,of%20the%20COVID%2D19%20pandemic. (accessed on 19 January 2022).

[2] WTO (2022), Tariff profiles - ZA, https://www.wto.org/english/res_e/statis_e/daily_update_e/tariff_profiles/ZA_e.pdf (accessed on 19 February 2022).

Notes

← 1.  The SACU members are: Botswana, Lesotho, Namibia, Eswatini (former Swaziland) and South Africa.

← 2.  The SADC member countries are: Angola, Botswana, Democratic Republic of Congo, Lesotho, Madagascar, Malawi, Mauritius, Mozambique, Namibia, Seychelles, South Africa, Eswatini, Tanzania, Zambia and Zimbabwe.

← 3.  The duties based on rated recommended by ITAC of 30.09% for bone-in chicken imports from the United Kingdom, 22.81% for the Netherlands and 73.33% for Germany, excluding certain exporters found not to be dumping.