psg wealth · 10/25/2018 · the value of exports increased by 6%, from r97,429 billion in 2016/17...

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Perspective on land issues

Perspective on land issuesDan Kriek: President Agri SA

PSG Wealth - 25 October 2018

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Outline• Who is Agri SA?

• The evolution of the agriculture value chain over the past decade

• How the industry views the quality and price of imports versus domestic agriculture

• The industry views on drought and related indicators

• The land debate

• The short to medium term outlook on investment in the agricultural sector and food price developments

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Who is Agri SA?

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• Agri SA is a federation of agricultural organisations

• Established in 1904 as the Southern African Agricultural Union

• Members include: 9 provincial organisations, 26 commodity organisations and 38 corporate members

• Through its affiliated membership, Agri SA represents a diverse grouping of individual farmers regardless of gender, colour or creed

Who is Agri SA?

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Farmers represented in each province

±28 000Farmers

--------------------------

±1 000 Farmers’ Unions

Provincial

Affiliates9

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Animal Production

Milk Producers’ Organisation, National Wool Growers Association of South Africa, Red Meat Producers’

Organisation, South African Mohair Growers’ Association, South African Ostrich Business Chamber, South

African Pork Producers’ Organisation, Wildlife Ranching SA, Aquaculture SA

Horticulture

Banana Growers’ Association of South Africa, Canning Fruit Producers’ Association, Dried Fruit Technical

Services, South African Garlic Growers’ Association, South African Nursery Association, South African

Subtropical Growers’ Association, South African Table Grape Industry, Tomato Producers’ Organisation

Growers’, Vinpro, South African Rooibos Council, Macadamias South Africa

Agronomy

Cotton SA, Dry Bean Producers’ Organisation, Forestry South Africa Medium Growers Group, Grain SA,

South Africa Sugar Association, Tobacco Institute of Southern Africa, SA Cane Growers’ Association

26 Commodity Organisations

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The evolution of the

agriculture value chain

over the past decade

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Number of farming units (Commercial)

5798060938

45818

39966

35000

30000 2900027000

1993 1996 2002 2007 2014* 2016* 2017* 2018*

Nu

mb

er

Source: Stats SA

Source: Agricultural Survey 2007

* Estimate

Farming and Agribusiness Profiles

I

II

III

IVLarge commercial farms &

agribusinesses

Small commercial farms &

agribusinesses

Emerging farms and

agribusinesses

Subsistence farms

and agribusinesses

Source: Stats SA

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Land: Agriculture and food chain

Input companies

Food companies

Farmers

Traders

Retailers

Consumers

• Seeds

• Fertilizer

• Crop protection

• Animal health and nutrition

• Crop insurance

• Food ingredients

• Field crops

• Horticulture

• Animal production

• Aquaculture

• Forestry

• Game

• Crops

• Meat

• Oils/meal

• Biofuels

• Meat

• Snacks

• Beverages

• Bakery

• Dairy

• Hyper markets

• Super markets

• Small/spaza shops

• Rural

• Urban

Objective: To produce profitably while facing

• Drought

• Climate change

• Predation

• Theft

• Diseases

• Market conditions/Labour costs

• Land reform - EWC

• Farm attacks

• Ever changing consumer preferences & choice of products

Emp

loym

ent:

84

3 0

00

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Employment by industry

Agriculture; 843,000

Mining, 435,000

Manufacturing1,744,000

Utilities, 161,000

Construction; 1,476,000

Trade, 3,219,000

Transport;1,014,000

Finance and outher business services;

2,399,000

Community and social services;

3,692,000

Private households; 1,296,000

Unskilled/ semi-skilled

92%

Skilled8%

Source: Stats SA, Own calculations

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Economic importance of agriculture

• Agriculture also creates strong demand for goods and services, especially in rural areas

• Impact of agriculture on other sectors in terms of forward and backward linkages is considerable, with the impact of irrigated agriculture being relatively large

Backward linkages

• Purchases of goods such as fertilizers, chemicals and implements

Forward linkages

• Supply of raw materials to industry and the food supply chain in general

13

Approximately 70 percent of agricultural output is used as intermediary products in other

sectors

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Farm income & expenditure

0

40000

80000

120000

160000

200000

240000

280000

20

05

/06

20

06

/07

20

07

/08

20

08

/09

20

09

/10

20

10

/11

20

11

/12

20

12

/13

20

13

/14

20

14

/15

20

15

/16

20

16

/17

20

17

/18

R m

illio

n

Gross income

Expenditure on intermediate goods and services

Net farm income

Source: DAFF

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About the sector (2017/2018)

12% of the surface area can be used for crop

production of which only 22% is high potential

Expenditure on intermediate goods and

services amounted to R146 billion (6,4%

increase). Farm feeds remained the biggest

expenditure item, followed by

maintenance/repairs and labour

Net farm income increased by ± 1%

Cash flow of farmers decreased by ± 5%

The value of exports increased by 6%, from

R97,429 billion in 2016/17 to R104,577 billion

in 2017/18

Debt level increased to R166 billion. Collateral

is still available and investment is still taking

place

The primary formal sector employs approx. 843

000 people. Labour remuneration is a major cost

item, approx. R19 billion in 2017/18

The contribution to GDP, if the entire value chain of

agriculture is considered, can be approximately

between 10% & 12%. Agriculture is an important part

of our economy and in addition, ensures South

Africa’s food security.

Source: DAFF

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Provider of food

• In 2035, South African population is estimated to reach more than 66,9 million

• Population grew by 59% from 1991 to 2018

• Agricultural production increased more than the population growth over the same period

Challenges:

– Climate change/Drought

– Cost of transport/input costs

– Availability of water and quality of water

– Improving productivity

– Maintain and improve profitability

– Restrictive legislation/regulations

– Limited government support

– Cost of crime

– Insufficient service delivery

– Infrastructure constraints

6.0

7.0

8.0

9.0

10.0

11.0

12.0

Volume index of Agricultural Production in RSA

Field Crops HorticultureAnimal Production Food Production

Source: DAFF

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

*

42000

44000

46000

48000

50000

52000

54000

56000

58000

60000

‘000

Population

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Support for Agriculture

22.824.8

1453.5

950.9

55.73.8

5.949.2

12.353

18.32

17.87.5

9.917.3

9.62.4

0.81.91.72.3

-7.114.5

12.1

-20 -10 0 10 20 30 40 50 60

TurkeyPhilippines

ChinaKorea

ColombiaSwitzerland

IcelandKazakhstanCosta Rica

JapanRussia

NorwayEuropean Union

BrazilOECD

MexicoUnited States

IsraelCanada

ChileNew ZealandSouth Africa

AustraliaViet Nam

UkraineAll Countries

Emerging Economies

OECD Producer Support Estimate (PSE) for selected countries, 2017

The Producer Support Estimate (PSE) is shown as a % of gross farm receipts.

The OECD defines Agricultural support as “the annual monetary value of

gross transfers to agriculture from consumers and taxpayers arising from government policies that

support agriculture, regardless of their

objectives and economic impacts.”

Source: Agricultural Policy Monitoring and Evaluation, OECD (2018)

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Agricultural Debt, Farm Assets and Debt as % of Assets

23.00%

24.00%

25.00%

26.00%

27.00%

28.00%

29.00%

30.00%

31.00%

32.00%

33.00%

0

40000

80000

120000

160000

200000

240000

280000

320000

360000

400000

440000

480000

20

10

/11

20

11

/12

20

12

/13

20

13

/14

20

14

/15

20

15

/16

20

16

/17

20

17

/18

R m

illio

n

Debt as % of Assets

Total Farm Debt

Total Farm Assets

Source: DAFF

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Expenditure on intermediary goods and services, interest, labour and investment in vehicles, machinery and implements

2016/17

R million

2017/18

R million% Change

Farming services

Building and fencing materials

Fuel

Animal health & crop protection

Electricity

Insurance

Maintenance and repairs

Fertiliser

Packing material

Seed and plant

Farm feed

Total: Intermediary goods and services

Labour costs

Interest

Gross Investment: Vehicles, machinery, implements

17 879

6 020

12 552

9 082

7 028

4 790

18 643

6 850

6 532

9 826

42 514

137 216

17 835

8 828

10 261

16 867

5 525

12 164

8 568

6 306

5 365

19 575

7 056

7 120

8 933

40 178

145 999

18 908

9 591

10 890

6,0

9,0

3,2

6,0

11,5

12,0

5,0

3,0

9,0

10,0

5,8

6,4

6,0

8,6

6,1

Source: DAFF

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Drivers in Agriculture

Agriculture must keep up with the latest

technology and invest in it, otherwise it could be

detrimental to the sectorTechnology

Invest

Demand

Invest to grow and stay competitive

The demand for agricultural products

especially from South Africa’s

neighbouring countries will continue to

grow

Adaptability Only the most adaptable businesses will survive in future

Good staff to quickly adapt to a new, fast-changing

business environment, where technology is going to be

very disruptive

Good financial support

from financiers will be

required

Employees

Support

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Commodity inputsSA Canegrowers:

• The sugarcane value chain evolves to meet the needs and challenges of all role-players over time

• The industry has introduced its own mechanisms to deal with issues such as the threat of additional taxes on overloaded haulage vehicles which damage the

roads.

• The internal system set up by the industry called the Road Traffic Management System (RTMS) has proven successful in reducing overloads on vehicles

and therefore averting the proposed taxation of haulage vehicles on the roads.

• The evolution of the value chain continues to evolve and change as margins become smaller, so efficient farm management and production is required.

• The drive towards economies of scale have also occurred in Large-scale grower sector where larger growers have been leasing and buying up land to achieve

economies of scale.

• Therefore there has been decreases in grower numbers 10 years ago a 10 000 ton producer was able to be financially sustainable, but today growers need to

achieve upwards of 15 000 tons.

• Diversification has also played a major role in the sugar industry as growers have invested in other crops to reduce the risk of sugarcane only revenue.

• The Small-scale grower sector has also undergone major changes as growers have either entered into lease agreements with other small-scale growers or

companies looking to expand cane production. Since 2000 where 13% of SSG cane production came from Co-operatives and Projects, that share has increased to

59% of SSG cane production is produced by Co-operatives and projects. This is a clear indicator of SSGs coming together to improve their economies of scale

Grain SA:

• Over the last decade the agriculture value chain became much more integrated as the processors became more integrated and more diverse in terms of the

products they produce and brands they managed.

• With international markets becoming more and more accessible, competition is fierce between locally produced goods and imported goods.

• To be able to compete efficiently, South Africa will need to invest more in local infrastructure, especially rail, road and harbour infrastructure.

• Comparatively, South Africa is not faring well against their major trading partners when looking at the cost of logistics in the agricultural values chain.

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Red meat producers:

• 40 % of livestock is owned by emerging producers - they were to a larger extent integrated into the value chain.

• The beef feedlot industry has a throughput of almost 80 % of all beef in South Africa. They became more vertically integrated.

• The skins, hides and leather industry is very relevant.

Dried Fruit Technical Service:

• At farm gate level - Increase in production output, mainly due to new cultivars

• Shift to adding value on-farm in drying process

• Processing/export - Introduction of new technology, example colour scanners.

Commodity inputs

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How the industry views the

quality and price of imports

versus domestic

agriculture

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Agricultural trade balance, 2008/09-2017/18

0

10000

20000

30000

40000

50000

60000

70000

80000

90000

100000

110000

R M

illio

n

Agricultural exports

Agricultural imports

Agricultural trade balance

Source: DAFF

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South African Trade Map (2017/18)

Netherlands12%

United Kingdom

10%

China7%

Myanmar6%

United States4%

Hong Kong4%

Zambia4%

Germany3%

Japan3%

United Arab Emirates

3%Zimbabwe

3%

Russian Federation3%

Vietnam2%

Other36%

South Africa Agri export destinations

Brazil8%

Thailand7%

Argentina6%

United States minor outlying islands

5%

United Kingdom5%

China5%

Germany5%

Indonesia4%

Netherlands4%

France4%

India4%

Malaysia3%

Spain3%

Other37%

South Africa Agri import suppliers

Source: DAFF

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0

1

2

3

4

5

6

7

2018 2019

CPI inflation (SARB) CPI inflation (National treasury) Food inflation

Consumer and food price inflation outlook

Source: Compiled using estimates from the SARB and National

Treasury

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Commodity inputs

• SA Canegrowers: The world sugar market is experiencing the lowest prices in 5 years. Sugar

producing countries are disposing of their excess production at below the cost of production onto the

world market. At present there is an expected surplus of 15 mn tons on the world market. The world

sugar price well below the cost of production of SA sugar and world sugar can be imported at a

similar quality. SA sugar is one of the top 20 most cost effective producers in the world (out of

126). The current world price is not linked to cost of production but rather dumping of excess

sugar.

• Vinpro: Not directly linked, but the SA Wine Industry exports 60% of the local produce across the

world, with focus countries being the East, USA, UK and Africa. Critical to highlight the fact that the

industry needs to ‘up’ our competitiveness against countries like Chile, Argentina, NZ and

Australia, hence we are working in close collaboration with DTI/DAFF. We would like the SARB

to be aware of the trade hurdles (Trade Agreements and Non-Tariff Barriers) … posing a huge

challenge to ensure a viable industry, hence discussions around BRICS/Brexit/Agoa to be seen as very

critical, together with similar discussions on the Africa-continent … not merely focus on volume exports,

but rather on the value-creation and to ensure viable ROI’s at producer level – with all the benefits

and/or challenges going with it, should we not succeed in ‘up’ the trend.

• Dried Fruit Technical Service: SA does import small quantities of dried fruit - SA is a net exporter.

Imported quality does not generally compare favourably with domestically produced dried fruit and the

price is also not favourable. Local production is supported for the revenue it brings and the job

opportunities created.

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Commodity inputs: Grain SA

• In terms of grains most of the local produced grains are of better quality than the imported grains due to various factors. In some grains like maize one of the main reason why the local quality is better than the imported quality is due to the hardness of the maize as the conditions related to production seldom place the local crop in a situation where the maize needs to be dried off artificially. The on field drying of the maize to the desired moisture content is one of the factors that contributes to the better quality of the locally produced maize. In other international areas the maize is usually harvested with a higher moisture content and needs to be dried off artificially which has an impact on the factors such as hardness, which is an important aspect for the milling industry. Harder maize kernels will tend to produce less by-products and the milling percentage will be higher.

• The local maize prices is currently trading closer to the export parity prices as there are surpluses of maize available currently in South Africa and therefore we need to export maize. The international maize prices is low and when the prices trades at the levels which South Africa is competitive in the international markets the profitability of the local farmers are largely under pressure. A contributing factor to this is that more than 80% of South Africa’s agricultural input needs has to be imported.

• In terms of other grains such as wheat the South African quality is better than most of the origins from which South Africa imports wheat currently. This is mainly due to the high quality wheat cultivars planted locally in comparison with the international cultivars which specifically relates to quality and yields.

• The international wheat prices is very low and the countries from which South Africa import wheat also has relatively large subsidies in place making the South African competitiveness in the international market very difficult. The local market prices are mainly derived from the international prices since South Africa is importing on average around 50% of the local wheat demand per year. There are already a variable formula import tariff in place for wheat imports in order to protect the local producers.

• In general, looking at the other grains and oilseeds such as soybeans, sunflower seeds, sorghum and groundnuts the international trade with these commodities are relatively small in relation to maize and wheat. The quality of most of the South African produced grains and oilseeds are better than the qualities in the international markets, although that is mainly regional as there are good qualities in some international countries, but the trade between South Africa and these countries are fairly low.

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Beef Price Trends

The following conclusions can be made:

• The A-grade beef prices are well below import parity

prices internationally - so the S A beef industry is

internationally very competitive.

• SA was for the first time in 2016 a net exporter of beef.

• Due to SA's unique grading system, and well developed

feedlot system, SA's beef is of a very high quality.

• Most beef imports are low quality beef and offal for the

manufacturing industry.

• Imports from Botswana Namibia are of fair quality.

Lamb and Mutton Price Trends

The following conclusions can be made:

• Import parity of domestic lamb and New

Zealand Lamb are on the same level - thus we

are internationally competitive.

• Most imports of mutton is from Australia, which

is a low quality product.

• Imports from Namibia is of the same quality as

in South Africa

Re

d M

ea

t P

rod

uce

rs

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The industry views on

drought and related

indicators

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Drought

In recent years, droughts have become a more

prevalent challenge to agriculture in South Africa.

Within this context, it is important to note

Agriculture’s importance for food security, economic

development and employment:

• Agriculture is 3.2 times better at reducing poverty

than non-agriculture

• 1% in GDP due to agriculture, increases income

of the poorest by more than 6%

• Agriculture has substantial multiplier effects such

as job creation potential though extensive

linkages with the rest of the economy

• Agriculture has the potential to create economic

opportunities in rural and peri-urban areas

Source: Barclays. (2016). Agricultural workstream

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Drought channels of economic impactAgricultural

output/

Production

expectations

Sales of

inputs to

the

agricultural

sector

Export

volumes

Agricultural

investment

Farm

incomes

(livestock

losses

and crop

failures)

Commodity

prices/

Food

prices

Household

consumption

Economic

growth Fiscal

pressure

Inflation

On-farm

employment

Imports of

agricultural

products

• Droughts can have a direct impact by reducing agricultural output

• Farm incomes, export volumes, on farm employment, sales of inputs to agricultural as well as household spending are expected to fall during times of drought

• Conversely, inflation and fiscal pressure are expected to increase during times of drought

• Considering these potential channels of impact, a targeted approach to disaster management is needed

Source: Agri SA research

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Economic impact of the drought on the Western Cape agricultural sector

Source: Pienaar, L. & Boonzaaier, J., (2018), Drought policy brief: Western Cape Agriculture. Available online:

http://www.bfap.co.za/documents/research%20reports/DroughtPolicyBrief_2018.pdf

*Figs; Pomegranates **Potatoes, Onions, Butternut, Pumpkin, Carrots, Cabbage ***Wheat, Canola, Barley

http://www.bfap.co.za/documents/research reports/DroughtPolicyBrief_2018.pdf

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Agri SA: drought mitigation

1. Drought report for the NAMC:

will present context and

possible solutions

2. NAMC and industry to

collaborate and drive the

process

1. Establishing a disaster fund to whichgovernment and the farming community(and/or general public contribute to on a50:50 basis). Incentivising private sectorcontributions through tax incentivescould be considered. Management ofsuch a fund to be decided

2. Leveraging Public-Private Partnerships (PPPs)

3. Promoting a multiperil agricultural insurance system

4. Establishing infrastructure to support disaster relief initiatives

Current industry

collaboration: Agri SA,

NAMC, NDMC, BFAP,

AGBIZ, AFASA:

Agri SA’s proposed

approach to Smart Disaster

Aid (SDA) incorporates four

key components:

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Agri SA approach

Disaster Fund

A centralised fund, funded in partnership:

• Government funding

• Farmer contributions

• Contributions from the public

PPPs

• Partnerships to promote water saving measures and programmes

• Collaboration to develop drought resistant cultivars

• Collaboration: state farms can be utilized to produce high quality fodder

• Collaborative support for financing and infrastructure

Multiperil agricultural insurance

• Subsidies for insurance premiums

• Assistance with excess amounts not covered

• Cover for major droughts that have an impact on irrigated production

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Agri SA approach

Supportive infrastructure

• Develop and establish supportive infrastructure that can support disaster relief programs

• Develop an efficient mobilisation process

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Commodity inputs

SA Canegrowers:

• The speed at which government declares a drought could be increased in order to ensure that relief funding is made available at

a faster rate.

• The drought in KZN was devastating and the growers are still feeling the effects of it.

• Industry led initiatives are desperately needed to ensure that growers can mitigate drought risks and fund their own recovery

rather than relying completely on government for funding.

Grain SA:

• Drought and drought conditions, coupled with extreme heat is a big factor of concern for the South African grain production as most

of the local grains is produced under dryland conditions (90% dry land hectares vs 10% irrigation hectares).

• The last three years one of the biggest concerns in the summer rainfall areas was the fact that the rain came late in the season and

the plantings took place very late for most of the crops. Despite the late plantings the crops are however looking promising, but

the risk associated with the production is bigger with the late planting dates.

• As highlighted above the risk of drought conditions could be detrimental for the grain production and due to the uncertainty of the

weather conditions and crop production there are certainly a need for certain types of government supported crop insurance

schemes.

• The factors remain a concerns as this is very uncertain circumstances and it is very difficult to forecast this accurately, increasing the

risk for local grain producers. Drought conditions can have a severe impact on the local commodity prices especially on the

summer grains. In terms of the winter grains the impact of the drought conditions do not have such a large impact on the prices of

commodities such as wheat as large portions of the local needs are already imported and the prices trades most of the time at the

import parity prices.

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SA Grape production

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Commodity inputs

Red Meat Producers

• After the countrywide drought of 2016 we are in a herd building phase.

• Although 2017 and 2018 were very good rainy seasons except for the northern and western provinces it will still take another 3 years of normal rainy seasons to conclude the herd building phase.

• The red meat industry on producer level has an annual turnover of R78 billion -the herd building phase is a big opportunity in terms of financing by credit providers also due to the fact that red meat prices has increased by almost 30 % in the last 2 years.

Dried Fruit Technical Service

• Drought has had a significant impact, in particular the Western-Cape.

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The land debate

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Context: Expropriation without compensation

• The first question that arises, and this is seemingly the question that the Constitutional Review Committee will pose to South Africans, is :”Is section 25 of the Constitution an impediment to land reform?”

• Constitution: finely a balanced property clause is, measures it provides for have not been implemented to their full extent, neither has section 25 been before the courts in sufficient cases for the judiciary to really interpret it and bring clarity;

• Agri SA fully supports the findings by the High Level Panel on Key Legislation in this respect. We believe their diagnosis of the problems besetting land reform, are spot on.

• We need to jointly create a vision for our rural areas going into the future and concretise the steps to achieve that dream. The NDP should be the basis for that.

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Context: Expropriation without compensation

• ANC decision on 20 December

• Expropriation without compensation• Impact on economy

• Food security

• Currently• Evaluate section 25 of the Constitution

• Expropriation without compensation: not yet any specific plan or mechanisms proposed

• High Level Panel on Key Legislation • Biggest challenge standing in the way of land reform is not the property rights clause,

but the implementation of land reform policies, procedures and extended entrenched corruption in the system

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Impact Scenario

• Not yet any specific plan or mechanisms proposed

• The figure illustrates the potential negative impacts in a worst case scenario

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• In conjunction with the impacts illustrated above, expropriation could impact the following economic and social drivers:

Agricultural production

South African Economy: GDP growth & welfare stagnate - poverty levels rise

Financial system

Contribution to GDP,

government tax

revenue & food

security

Food

security:

net exporter

Employment

Forward and

backward

linkages to other

sectors

Supply

inputs to

downstream

& purchase

from

upstream

Expropriation destabilises the economy: creates a barrier & breaks down the economic system

Interlinked

economy

Capital flight, depreciation of the rand, hyperinflation, net importer of food etc.

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Solutions

• Agri SA believes that the solutions are already catered for in the framework provided for in the Constitution, the NDP, Operation Phakisa and various private sector plans including the Agri SA holistic plan for land reform and rural development

• For successful farmer establishment, the following elements should be present:

✓ Land

✓ Equity

✓ Beneficiary selection

✓ Value chain participation

✓ Post settlement support

✓ Partnerships

• It is important that we reach consensus on who owns what and how much land has been transferred to date – not only through government programmes, but also through the market

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What are Agri SA and its affiliates doing?

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Land audit

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Strategy emanating from land audit

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What do we want to achieve?1. Establish the factual basis of land distribution as a point of departure

2. Sustainable agrarian reform

3. Economic growth and job creation

Alignment of the strategy must be in line with:1. Constitution and the rule of law

2. Property right protection and conversion

3. NDP goals – Chapter 6

4. Operation Phakisa (agricultural development component)

Strategy emanating from land audit

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Proposed solutions

• Retain section 25 as is

• Test expropriation powers. Finalise Expropriation Bill

• Implement High level Panel recommendations:

• Government should test its expropriation powers

• Well-situated state-owned land needs to be made available for housing for the poor

• Land Framework law

• Land Records Act

• Create an office for an Ombudsman for land reform

• Address communal land issue –enable capitalisation of land

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Agrarian reform to 2025• Implement Chapter 6 of the NDP – utilise the financing

models that have been developed

• Promote partnership models for joint-farming operations between black and white farmers

• Stimulate and support efforts of commodity organisationsto assist smallholders in enhancing their productivity and income generating capacity (NWGA and Grain SA projects as examples)

• Commercial farmers to get even more involved with social upliftment of farm workers and rural communities

• Transfer 4000 state farms to beneficiaries: title deeds

• State Land privatized:

• DPW

• DRLD

• Create Agricultural Development Agency (ADA)

• Social accord on land and rural development?

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Agricultural Development Agency (ADA)

Agricultural

Development

Agency

Emerging / Commercial

Farmers

Leveraged

finance

Private sector funding

Government funding

supportLand

Capital

investments

Operational

expenditure“Agriculture or public

contribution” ??

Economic development and transformation

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The short to medium term

outlook on investment in

the agricultural sector and

food price developments

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NDP: Agriculture and agro-processing:

Agro-industrial cluster

• Agriculture still one of the most labour intensive goods producing sectors

• Substantial employment linkages

• Relative (to other regions) ➔small share of rural population engaged in agriculture

• Optimistic scenario ➔ 1 million direct and indirect jobs

Key proposals

• Substantial investment in irrigation infrastructure

• Investment in market linkages for small scale farmers

• Preferential procurement for new agricultural entrants

• Policy to increase intake of fruit and vegetables

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NDP: Agriculture

• 1 million new jobs by 2030

• Expansion of irrigation by 500 000 hectares

• Convert some under-used communal land

• Select and support commercial agricultural sub-sectors and regions with the highest potential

• Job creation up and downstream

• Creative combinations between opportunities

• Develop strategies that give new entrants access to product value chains

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NDP: Expand commercial agriculture

• 350 000 jobs

• Rehabilitated citrus orchards – 7000 additional jobs

• 4 700 ha of table grapes in Orange River Region

• Subtropical fruit

• ➔ revival of banana industry

• ➔ Avo’s ➔ 30 000 jobs

• Vegetables: 25% Below potential

• Small-scale labour intensive agriculture (macadamias, cherries, berries, etc. – 80 000 jobs)

• Large, non-labour intensive industries – Grain, oilseeds ➔ increase mainly for animal feed.

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Where should we focus?

Update on NDP Employment & Investment 2030 Matrix

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Value of Capital Assets (2017/18)

Land and fixedimprovements R264,2 billion

Implements, motor vehicles,tractors R74,1 billion

Livestock R149,6 billion

Total R488,0 billion

Source: DAFF

Commercial banks

Land Bank

Agricultural co-operatives

Private persons

Other debt

Other financial institutions

Agricultural Credit Act

Who Farmers owe money to

Farming debt in 2017/18 – R166 billion

R51,62 million

R975,36 million

R1.78 billion

R3.22 billion

R11,71 billion

R47,71 billion

R100,57 billion

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Investment in Agriculture

-4000

-2000

0

2000

4000

6000

8000

100002

00

9/1

0

20

10

/11

20

11

/12

20

12

/13

20

13

/14

20

14

/15

20

15

/16

20

16

/17

20

17

/18

R m

illi

on

Fixed Improvements Machinery & Implements Change in livestock inventory

Source: DAFF

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Commodity inputsSA Canegrowers

• The current financial position of the sugar industry is dire and does not allow for any investment as industry players are not recovering their

cost of production.

• The only real solution is an increase in revenue in order to ensure that the return on investment is met. This can only be achieved if an

appropriate tariff is granted so that producers of sugar cane and sugar are able to cover their costs of production adequately.

• If no increase in tariff protection is granted, the sugar industry will face destruction, mill closures and great losses in jobs. The price of

sugar is currently linked to import parity.

Grain SA

• Policy certainty in South Africa will drive investment in the short to medium term.

• The short to medium term outlook in terms of grain prices is that the prices may remain fairly low.

• The maize production for the previous season that reached a new record resulted in large carry over stock to the new season.

• The new season’s maize crop is also looking favourable with the CEC that estimates the crop to be over 12 million tons for the season. South

Africa will yet again have large exportable surpluses of maize available and the prices are likely to remain at the export parity price levels for the

remainder of the season.

• Therefore, the biggest factors which will likely have an impact on the maize prices in the short to medium term is the international

prices and the exchange rate.

• Since South Africa is a net importer of wheat the local wheat prices is mainly driven by the international wheat prices. According to the

current international wheat fundamental information the international prices is likely to remain at the fairly low levels in the short to

medium term and therefore the likelihood of sharp price increases in the local market is also fairly small. Because such a large portion of our

inputs are imported, the value of the rand, together with Brent Crude oil prices might play a significant role in production costs for grain producers.

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Commodity inputs

Vinpro

• Also part of the larger SA perspective, with the typical uncertainty that any Investor would like to understand, prior

investing in a country – e.g. the Moody and other similar reports that take into account a number of key political,

economical and other indicators.

Red Meat Producers

• Red meat demand is growing and producer prices will increase on a higher percentage than inflation.

• Exports of specifically beef, is very promising - 42 countries currently. We need to get into the DOLLAR and YENcountries.

• Local and African demand for red meat is very high.

• If the expropriation debate ends on the high road scenarios, and property rights are granted to emerging producer's, it could be a opportunity to provide production funding.

Dried Fruit Technical Service

• Current uncertainty with regard to property rights, impact delay new investments/developments;

• Positive international outlook for dried fruits export;

• No short- to medium term expansion on processing capacity;

• 83% of product exported, industry earning foreign currency;

• Industry labour intensive, new developments could stimulate job creation.

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Source: Agri SA

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Contact details:

Dan Kriek

Agri SA President

T I +27 (0) 12 643 3400

C I +27 (0) 82 944 0566

E I [email protected]

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Disclaimer

Everything has been done to ensure the accuracy of this information, however, AGRI SA takes no responsibility for any loss or damage incurred due to the usage of this information.

psg wealth · 10/25/2018 · the value of exports increased by 6%, from r97,429 billion in 2016/17...

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