the impact of global and local realities on food security in...

by

HD van Schalkwyk

24 October 2013

The Impact of global and local

realities on Food Security in SA

Contents

• Introduction

• Contextualisation of food security

• The Global realities

• The situation in South Africa

• Availability of food in South Africa

• Productivity of SA agriculture

• Affordability – Food prices

• SA commodity outlook

• Important trends (Terms of trade)

• Rationale for Agriculture

• Policy

• R&D issues to consider

• Conclusion

Introduction

• South Africa is unlikely to feature at the top of the

agenda at any international dialogue on food security.

• The country is a net exporter of agricultural commodities.

• The country has a high per capita income, even for an

emerging economy.

• There are no tight foreign-exchange constraints.

• The country is not landlocked.

Food ought to be available and accessible in South

Africa at all times.

Introduction

• The confusing reality is that despite all the favourable

indicators and South Africa’s national "food-secure"

status, between 14% and 52% of the households,

depending on the source, are regarded as food insecure.

• Statistics suggest that food insecurity is most severe in

rural areas, where an estimated 85% of South Africa’s

poor reside.

• Rural agricultural development has been prioritized by

government as a way of eradicating poverty and

ensuring food security.

Introduction

Contextualisation of food security

• What is food security?

– "all people, at all times, have physical, social and

economic access to sufficient, safe and nutritious

food which meets their dietary needs and food

preferences for an active and healthy life" (FAO).

5

Ecology

Social Economy

Nutrition

Affordability

Availability

Sustainable

systems

required

Contextualisation of food security

• Cognisance must be taken of:

– Strong linkage between food security and poverty.

– Food self-sufficiency versus food security versus

sustainability of agricultural value chains.

– Global vs national vs regional vs household.

6

The global realities …..

• Population, income growth and the changing consumer base

• The uncertain international trade environment

• Changing power position in the global economy, – China

– Brazil

– India

• Climate change

• Energy availability

• The global economic problems

• Etc….

7

0

5

10

19

50

19

62

19

74

19

86

19

98

20

10

20

22

20

34

20

46

Billio

ns

World Population

U.S Census Bureau (International Data Base), 2010

4 %

2 %

0 %

30 %

6 % 1 %

5 %

34 %

9 %

9 %

http://www.cru.uea.ac.uk/cru/info/warming/

Source: Nakícenovic, Grübler and McDonald, 1998

Impact of the global realities ……

Realities

Strength of fundamentals

Affects supply and

demand

Impact on prices

Affects food security

• Increase in area dedicated for growing crops for biofuels;

• The growth of the world population;

• Economic development and income distribution in highly populated countries;

• Stronger governmental programmes;

• Migration and urbanisation;

• The impact of oil prices on agricultural inputs and the distribution cost of food;

• Exchange rate variability and in particular the devaluation of the US Dollar;

• Production shortages as a result of adverse climate and financial conditions, water and climate change impacts; and

• Investment funds operating in agricultural commodity markets.

The fundamentals (strength) …..

For example, the demand for grain for use in intensive livestock production can increase to more than 50% of total grain production.

Source: Keyzer et al., 2005.

Source: http://www.grida.no/publications/rr/food-crisis/page/3559.aspx

Change in the composition of diets and

nutritional value and availability

Food availability in developing

countries will need to increase almost

60% by 2030 and to double by

2050, equivalent to a 42% and 70%

growth in global food production,

respectively.

And this is just addressing

availability issues

Millennium Development Goals

• Goal 1: Eradicate extreme poverty and hunger by

reducing the % of people living on less than $1.25 a day

Region 1990 1999 2005 2008 2010 2015

East Asia and Pacific 56.2 35.6 16.8 14.3 12.5 5.5

Europe and Central

Asia

1.9 3.8 1.3 0.5 0.07 0.4

Latin America and the

Caribbean

12.2 11.9 8.7 6.5 5.5 4.9

Middle East and North

Africa

5.8 5.0 3.5 2.7 2.4 2.6

South Asia 53.8 45.1 39.4 36 31 23.2

South, West, East and

Central Africa

56.5 58 52.3 49.2 48.5 42.3

Total 43.1 34.1 25 22.7 20.6 15.5

Africa’s slower poverty reduction is due to

its lower economic growth elasticity of poverty than in the other the regions.


• Goal 2: Achieve universal primary education

• African countries continue to progress on primary school enrolment

• Aggregate net primary school enrolment rose from 64% in 2000 to

87% in 2010 in the 29 countries with available data

• Excluding North Africa, enrolment rose markedly, from 58% to 76%,

an annual increase of 1.5%, considerable given the continent’s high

population growth

• While low completion rates are due partly to poor quality education,

late entry into schools; gender, location and income also play a role.


• Goal 3: Promote gender equality and empower

women

• Goal 4: Reduce child mortality


• Goal 5: Improve maternal health

– Despite some progress in the maternal mortality ratio

from 1990–2010 with a 42% reduction from 745

deaths per 100,000 live births to 429 deaths, Africa

still has the world’s largest burden of maternal deaths

with 56% of the global burden in 2010.

– Africa accounts for the 10 countries with the highest

ratios.

– South Africa was named as one 10 countries in Africa

that made no progress in terms of maternal health

since 1990


• Goal 6: Combat HIV/Aids, malaria and other

diseases – Southern Africa and Central Africa remain the regions most

severely affected by HIV/AIDS, with nearly 1 in 10 adults living

with HIV

– An important aspect of reducing infections is eliminating them

among children by 2015.

– Africa has seen substantial progress in reducing prevalence,

incidence and death associated with malaria and, to a lesser

degree, tuberculosis (TB)

– But Africa’s malaria burden is still enormous.

– The continent accounted for about 81 per cent of the estimated

216 million malaria episodes in 2010 and about 91 per cent of

the 655,000 malaria deaths



• Goal 7: Ensure environmental stability – Africa is making progress on Goal 7, but achieving environmental

sustainability remains a challenge overall

– Globally, the indicator on sustainable access to water has been met,

with the 88 per cent target surpassed by a percentage point. But while

the world as a whole is on track, Africa is not

– Much of Southern, East, Central and West Africa is off track to meet the

improved sanitation facility target

• Goal 8: Develop a global partnership for

development

– Establishing a global partnership for development is

critical for realizing the MDGs.

– Specifically, providing official development assistance

to developing countries is an important source of

finance for the MDG interventions, and thus their

progress.

– However, as Europe continues to struggle with its sovereign debt

crisis and inflation rates increase, official development

assistance to developing countries has fallen.

– Greece, Ireland, Portugal and Spain accounted for the sharpest

reductions in real terms.


What is the situation

back home?

Food security in South Africa

• SA food secure at the national level

• However, results pertaining to household food

security show a different situation. – Deep levels of food insecurity exist in rural areas with 85% of rural

households unable to afford even the ‘below average dietary

energy costs’ (Jacobs, 2009).

– Hunger scale proxy show that in 2007 12.2% of children and

10.6% of adults experienced hunger (Aliber, 2009).

– Hunger scale index show that 51.6% of population experienced

hunger and 33% are at risk of hunger (Labadarios et al., 2008)

21

Distribution of household consumption expenditure by

main expenditure groups, 2005/06

22

0

2000

4000

6000

8000

10000

12000

14000

Hou

sing

, wat

er,

elec

tric

ity, g

as

and

othe

r fu

els

Tra

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rt

Foo

d an

d no

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,

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and

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s an

d

toba

cco

Oth

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uncl

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fied

expe

nses

Ran

d

Rand per household (12-month period)

Source: StatsSA, 2008

Percentage distribution of annual household

consumption expenditure by main expenditure group

and type of settlement

23

Source: StatsSA, 2008

0

5

10

15

20

25

30

Hou

sin

g,

wate

r, e

lectr

icity,

ga

s a

nd

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and

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Perc

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tag

e

Urban Rural Total

24

0

5

10

15

20

25

30

35

Lower 2 3 4 5 6 7 8 9 Upper

Income deciles Total

Perc

enta

ge

Housing, water, electricity, gas and other fuels

Transport

Food and non-alcoholic beverages

Miscellaneous goods and servicesFurnishings, household equipment and routine maintenance of the house

Clothing and footwear

Recreation and culture

Communication

Source: Stats SA, 2008.

Expenditure patterns

Source: NAMC Food Price Monitor

SA expenditure on food

25.0

27.0

29.0

31.0

33.0

35.0

37.0

Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11

The cost of a basic food basket expressed as a share of the average monthly income of the poorest 30 % of the population

29 %

36.4 %

2.0

2.2

2.4

2.6

2.8

3.0

Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11

The cost of a basic food basket expressed as a share of the average monthly income of the wealthiest 30 % of the population

2.3 %

2.9 %

Availability ….

National Food Self-Sufficiency Index (National Food Security)

Source: DAFF

• Major grain crops

– Hectares down – but yields up – productivity up

• Potential exists to increase domestic supply

– All sub-sectors

• Area potential

– SA constrained ….

– But ….

Availability (Some comments)...

• Arable land capable of sustaining intensive to moderately well adapted cultivation amounts to about 12.6% of South Africa’s land

– Of this, only 2% (2 446 million hectares) is prime agricultural land

– A further 11% can be added

With constrained resources SA is

doing well on the production front

..?!?..

Production productivity: Maize

28

Source: Jooste, 2012

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

2 000

4 000

6 000

8 000

10 000

12 000

14 000

16 000197

0/7

1

197

2/7

3

197

4/7

5

197

6/7

7

197

8/7

9

198

0/8

1

198

2/8

3

198

4/8

5

198

6/8

7

198

8/8

9

199

0/9

1

199

2/9

3

199

4/9

5

199

6/9

7

199

8/9

9

200

0/0

1

200

2/0

3

200

4/0

5

200

6/0

7

200

8/0

9

To

n/h

a

1 0

00 h

a a

nd

1 0

00 t

on

Area planted Total production Yield Linear (Area planted)

Production productivity: Wheat

cont….

29

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

500

1 000

1 500

2 000

2 500

3 000

3 500

4 000

19

70

19

72

19

74

19

76

19

78

19

80

19

82

19

84

19

86

19

88

19

90

19

92

19

94

19

96

19

98

20

00

20

02

20

04

20

06

20

08

20

10

ton

/ha

10

00

ha

and

10

00

to

n

Area planted Total production Yield Linear (Area planted)

Source: Jooste, 2012

Production productivity: Soybeans cont….

30

0.0

0.4

0.8

1.2

1.6

2.0

2.4

100

200

300

400

500

6001

97

5/7

6

19

77

/78

19

79

/80

19

81

/82

19

83

/84

19

85

/86

19

87

/88

19

89

/90

19

91

/92

19

93

/94

19

95

/96

19

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/98

19

99

/00

20

01

/02

20

03

/04

20

05

/06

20

07

/08

20

09

/10

ton

/ha

1 0

00

ha

and

1 0

00

to

n

Area planted Total production Yield Expon. (Total production)

Source: Own calculations based on data from DAFF, 2011

Production productivity: Sunflower cont….

31

0.0

0.3

0.6

0.9

1.2

1.5

1.8

200

400

600

800

1 000

1 200

1 400197

5/7

6

197

7/7

8

197

9/8

0

198

1/8

2

198

3/8

4

198

5/8

6

198

7/8

8

198

9/9

0

199

1/9

2

199

3/9

4

199

5/9

6

199

7/9

8

199

9/0

0

200

1/0

2

200

3/0

4

200

5/0

6

200

7/0

8

ton

/ha

1 0

00 t

on

an

d 1

000 h

a

Area planted Total production Yield Linear (Yield)

Source: Own calculations based on data from DAFF, 2011

Production productivity: Beef cont….

32 Source: Own calculations based on data from DAFF, 2011

150

170

190

210

230

250

270

290

310

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

19

70

/71

197

2/7

3

197

4/7

5

197

6/7

7

197

8/7

9

198

0/8

1

198

2/8

3

198

4/8

5

198

6/8

7

198

8/8

9

199

0/9

1

199

2/9

3

199

4/9

5

19

96

/97

199

8/9

9

200

0/0

1

200

2/0

3

200

4/0

5

200

6/0

7

200

8/0

9

Kg

/un

it

Pro

du

cti

on

an

d

sla

ug

hte

rin

gs

Millio

ns

Number slaughter Total production

Kg/unit 2 per. Mov. Avg. (Total production)

0

100

200

300

400

500

600

700

47

/48

49

/50

51

/52

53

/54

55

/56

57

/58

59

/60

61

/62

63/6

4

65

/66

67

/68

69

/70

71/7

2

73

/74

75

/76

77

/78

79

/80

81

/82

83

/84

85

/86

87

/88

89

/90

91

/92

93

/94

95

/96

97

/98

99

/00

01

/02

03

/04

05

/06

07

/08

09

/10

Percentage

Year

Output

TFP

Input

Source: Liebenberg, 2011

Period Output Input TFP Labour Land Fertilizer

1947 –1971 3.43 2.66 0.77 2.79 3.36 -2.33

1971 – 1989 3.28 -0.71 3.99 4.77 3.50 3.01

1989 – 2010 1.47 1.11 0.36 4.31 1.53 1.78

2000 – 2010 3.32 0.89 2.43 7.56 3.26 0.54

1947 – 2010 2.81 1.19 1.62 4.00 2.87 0.64

South African Agriculture, Output,

Input & TFP Indices -1948 to 2010

Affordability : Food prices

The impact of high food prices at a country level includes, amongst others, the following:

• Social unrest and food riots.

• "Panic buying” by some net importing countries to secure adequate supplies and build domestic stocks of major cereals.

• Widening current account deficits for net importing countries.

• Threat to macroeconomic stability and overall growth, especially of low-income, net-importing countries.

• More food-insecure households and hence increased pressure on governments to expand their social welfare programmes.

FOOD PRICES – COUNTRY LEVEL

At the household level the consequences include, amongst others, the following:

• Substitution of more expensive sources of protein and other nutrient-rich foods

for low-cost high-energy foods to maintain a minimum level of productivity.

• Compromise on health care, education and other non-food household

expenditures.

• Selling off assets, e.g. livestock.

• Increased reliance on social programmes.

• Eat fewer and less nutritious meals per day.

FOOD PRICES – HOUSEHOLD LEVEL

International Prices

Source: FAO, 2013

World grain and oil seed price trends

Source: IMF, 2013

World meat price trends

Source: IMF, 2013

SA maize price trends

Source: BFAP and FAPRI, 2013

SA sorghum price trends

Source: FAPRI and BFAP, 2013

SA wheat price trends

Source: BFAP, 2013

SA beef price trends

Source: ABSA, 2013

SA beef production and consumption trends

Source: FAPRI, 2013

SA poultry price trends

Source: ABSA, 2013

SA poultry production and consumption trends

Source: FAPRI, 2013

SA mutton price trends

Source: ABSA, 2013

Important trends:

Inflation and farming profitability

49

StatsSA, 2012

SA primary agriculture, food manufacture

and retail food price inflation

80

85

90

95

100

105

110

115

120

125

130

Ja

n-0

8

Ma

r-08

Ma

y-0

8

Ju

l-0

8

Sep

-08

No

v-0

8

Ja

n-0

9

Ma

r-09

Ma

y-0

9

Ju

l-0

9

Sep

-09

No

v-0

9

Ja

n-1

0

Ma

r-10

Ma

y-1

0

Ju

l-1

0

Sep

-10

No

v-1

0

Ja

n-1

1

Ma

r-11

Ma

y-1

1

Ju

l-1

1

Sep

-11

No

v-1

1

Ind

ex

(20

08

=1

00

)

Primary agriculture inflation Food manufacturing inflation Food and non-alcoholic beverage inflation

Important cost drivers

• Administered and regulated prices (e.g. Fuel & Oil; Electricity)

• Freight costs

• Fertilizer

Year Price of

electricity

Estimated usage in

GWh

Total estimated cost

2009/10 R336,000 5485.384 R1 843 088 871

2010/11 R415,000 5567.723 R2 314 502 390

2011/12 R523,000 5651.298 R2 955 628 921

2012/13 R658,000 5736.128 R3 777 240 239

0500000

1000000150000020000002500000300000035000004000000

20

04

20

05

20

06

20

07

20

08

20

09

1.2.3.

Capital Cost

Fixed Cost0

1000000

2000000

3000000

4000000

20

04

20

05

20

06

20

07

20

08

20

09

1.2.2.2.

Capital Cost

Fixed Cost

Source: StatsSA, Dept of Labor, Dept of Energy and Eskom, 2012

Trends in regulated/administered input costs:

All stages of the supply chain

Non-food inputs that are used at almost all stages of the food value chain are

inputs such as fuel, electricity, labour and water.

All of these items fall within the category of administered and regulated prices,

and showed the following price trends between 2010 and 2011:

• The regulated minimum wages for primary agriculture increased by 4.5%.

A further wage increase of 9.3% was announced for 2012/13.

• 0.05% sulphur diesel increased by 25.3% in Gauteng and by 25.1% at the

coast.

• Electricity prices increased by 25.8%. In 2009, the total cost of electricity for

the primary agricultural and forestry sectors amounted to approximately R1.8

billion. If the planned electricity costs over the next three years are taken into

account, the cost of electricity is estimated to increase to nearly R3 billion if

electricity usage by the primary agricultural and forestry sector remains at

more or less current levels. A further increase for 2012?

The Terms of Trade for Primary Agric:

Input cost trends

From 2010 to 2010/11

• The farming requisite price index increased by 6.3%

• Machinery and implements 6.7%;

• Fertiliser 11%;

• Animal feed prices 6.2%

• Fuel prices 3.4%.

• The terms of trade at primary agricultural level declined further in the first six months of 2011.

Source: DAFF and own calculations, 2011

0.80

0.85

0.90

0.95

1.00

1.05

1.10

1.15

1.20

1.25

1.30

1.35

1.40

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

10/1

1

2005 =

1

Terms of trade

The rationale for agriculture

The negatives

– Decline contribution to GDP

– Labour shedding

– Slow on transformation

– Ineffective land reform

– Exacerbating urbanization

– Declining former homelands

– Environmental sensitivities

– Welfare trap

The positives

– Labour absorption capacity

– Influences human settlement

patterns

– Africa expansion potential

– Little recourse in rural areas

– Can address homeland

questions

– Must assist in land reform

– Regional growth

Policy

• Deregulation and liberalisation were distinctive

features of the agricultural sector of South Africa

during the 1980 - 90s.

• Most important policy initiatives taken

subsequently include:

– Focus on emerging farmers,

– Land reform,

– Institutional restructuring in the public sector,

– Promulgation of new legislation,

– Trade and labour market policy reform.

Policy

• These reforms were intended to:

– Correct the injustices of the past,

– Direct the agricultural sector towards a less capital-

intensive growth path,

– Enhance the sector’s international competitiveness.

And ultimately increase food security for all!

Policy

• An estimated 90% of land reform projects

have failed on an estimated 5.9 million ha.

• Expand irrigation potential through increasing

irrigation efficiency and better water loss

control.

• A further expansion potential of ±3 million ha

of arable land.

• Some of this includes high potential land in

former homelands.

Source: BFAP, 2012

Policy

• Policy changes created a number of pressures on farm profits.

• Farmers adapted to these changes by;

– decreasing their level of input use,

– by increasing output from a constant level of input use,

– or by a combination of these approaches.

• Forced farmers to increase productivity (efficiency) and

resulted in the marginal farmers to exit or differentiate

• This coupled with international competition makes small-

scale farming very difficult

• This makes agricultural R&D crucial

Policy

• Technological development will change the world we

know.

• Political environment in South Africa will continue to be

"messy” bringing with it major challenges

and…potentially lots of opportunities.

• Socio-economic issues in South Africa will continue to

dominate the local political agenda.

• Business in South Africa including agriculture will

continue to have to adapt to new world developments

(trends) while, in many cases, having to deal with a very

different local environment.

• The ability of agriculture to provide the basic

needs for the poor, enables this sector to address

poverty.

• Agriculture is regarded as the most important

sector to ensure food security in SA.

• However, SA’s investment in Agric R&D is

considerably less than in other developing nations.

Policy

Conclusion

• To ensure food security in South Africa, agriculture needs to be

expanded in an efficient and sustainable manner.

• Some opportunities in the agricultural sector include, amongst others,

are:

• Expanding irrigation agriculture, bearing in mind the ever looming water

crisis.

• Bring under-utilized land back into commercial production over time.

• Identify the sectors and regions that have the highest potential for growth

and development and invest time and money in these sectors.

• Support employment development in the up- and downstream industries.

• Find creative combinations between these opportunities.

Conclusion

What about centralized institution(s) with a specific responsibility in a

set (information and research?) agenda?

Combine funds and capacity (secondments?)

Combine decision making and governance.

Set priorities.

Develop a strong voice based on research and facts.

Make use of existing strengths.

Role of current information/research institutions and universities?

Role of practical training – agricultural colleges

Regional and/or national?

More institutions with specific niches?

Cooperation can be more than lip service – We need to start

somewhere

• Food security is multi-dimensional.

• South Africa is not isolated.

• Gearing for food security is not only at national level (National

policy must link to provincial and local government spheres).

IMPLEMENTATION WITHIN THE AMBIT OF

SUSTAINABILITY

• Issues to address

– R&D in the food sector

– Legislation (from Competition Commission to others)

– Green paper (land size)

– Infrastructure

– PPP programmes

– Implementation of policies and strategies

– Competitiveness of agriculture

– Agricultural development

Conclusion

Contact details:

Prof Herman van Schalkwyk

Tel: (018) 299-2601

E-mail: [email protected]

Acknowledgements:

to others for assistance in preparing this presentation:

• André Jooste (NAMC)

• Johnny van der Merwe (NWU)

Thank you

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