South Africa needs decisive and enabling agricultural policy

According to Andrew Makenete, CEO of Manama Hole Holdings and Calico Capital, South African agriculture is currently operating in a policy vacuum. Speaking at a Friends of UKZN Agric lunch at KwaZulu-Natal’s Royal Show recently, he expanded on the problem and offered some potential solutions.

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“When I was studying at the University of KwaZulu-Natal, some of my fellow students and I would have arguments with our one lecturer over our differing views on the way that agricultural policy in South Africa should emanate going into the 1990’s and into the country’s current circumstances. The key with policy is that it is always moving and so needs to continually be reviewed and updated, and policy-makers also need to fully understand what the policy outcomes could, or will, be. I believe that this is very important.

In the press recently there was repeated reference made to a ‘Number 1’ in association with the Gupta family landing a commercial jet at Waterkloof Air Force Base. No name was given for who this Number 1 is. Be this as it may, this issue of Number 1’s in South Africa is important because the reality is that a Number 1 gives leadership. That is the notion of a Number 1 – leadership, somebody who imparts knowledge, and if they don’t impart knowledge they at least surround themselves with people who do have knowledge and the Number 1’s then use this knowledge to drive a state or a nation or a country.

A commentator in the Business Report has stated, on a number of occasions, that South Africa today operates like a pyramid scheme dressed up as a government. He added that the administration had let go of the state rudder. When I read these comments I thought to myself, ‘Wow, that’s dangerous’. However, I then realised that this was, unfortunately, true if viewed in light of South African agriculture. Part of the reason for this is that there is no policy for our agricultural sector.

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We’re driving agriculture pretty much in a policy vacuum. And, unfortunately, vacuums don’t stay vacuums forever. All sorts of things start filling them up, leading to big problems. Being both and insider and outsider in our government allows me certain opportunities. I am sometimes able to get close to developments within government and then I’m also, unlike insiders, able to criticise aspects of what I have experienced in government.

I am able to tell politicians when I feel that they are wrong on something. An example of this is that my company was recently appointed by the Department of Rural Development and Land Reform to do a paper with Professor Herman van Schalkwyk on land ownership ceilings. This is a very interesting phenomenon where government has been considering implementing land ownership ceilings.

Now, just imagine implementing this in South Africa. Where would one even start with determining what the maximum land is that a person may own? Could the cap for owning land in KwaZulu-Natal be even remotely close to a cap on land ownership in the Free State? Could it be even remotely close to a cap for land ownership in the Western Cape? How actually could it be feasibly determined what the right cap would be? Would it be based on the actual size of the land?

Would it be based on some return on investment that one receives from the land? Would it be based on some social concern? So, the Department of Rural Development and Land Reform asked us, as economists, to put together a paper that would possibly answer these questions. So, we did all sorts of research and looked at all sorts of things in India, Egypt, Mexico, and the Philippines.

And we came up with the conclusion that this sort of thing has not worked anywhere else in the world, it’s not likely to work anytime soon, and the institutional arrangements and the ability of people to want to bribe their way into that system to stop it happening were just too great. And after all, in South Africa we haven’t even started getting our current land reform process going. So we told Minister Nkwinti that we thought that it was a bad idea and that we should park it.

Minister Nkwinti then went back to his Number 1 and reported that the consultants had produced a rubbish report and that he believed that land ownership ceilings would work. This is an illustration of what happens when you exist in a policy vacuum where, in many cases, ideology will drive issues without the hard-core and concrete policy analysis to inform that decision.

This sets the scene for, generally speaking, what is happening in South African agriculture today. Unfortunately, the reality is that we live in a state of contradictions, vast contradictions. And it then becomes academics’ responsibility to clarify and rectify what these contradictions are and to begin to give direction. What I am saying is that we are a country where today, from a political point of view, the key drivers of the economic sectors of this country are anti-free-market exponents.

And I’m not making a criticism of government here. I’m just trying to give a sense of what these contradictions are and how we have to look at them and analyse them and, as academics or as researchers, give feedback so that we can unravel them. However, we have 3 key ministers who are anti-free-market but they sit on the key drivers of the economy.

No criticism to him, but Mr Ebrahim Patel is in charge of economic planning. It’s strange. A unionist coming out of a clothing unionist background is in charge of economic planning. How does that happen? Then, on the other side, we have Dr Davies at Trade and Industry who is choking business to death with all sorts of legislation. Then in Rural Development and Land Reform we have Mr Nkwinti who is an avid believer in what we call statism, where the state must drive business.

It’s quite interesting that if the state drives, or is supposed to drive, business is there capacity in the state to do this? The reality in South Africa is that everywhere where the state has tried to drive business we’ve seen outcomes that people don’t want to see. This is what is happening in almost every single project that the state has tried to run. Currently, this is where we are.

Now, we could all be miserable about what is happening but this won’t solve the problem. We now, as economists and as agriculturists in our sector, have to drive that process. So, what would begin to happen? If we look on the one side we see a National Development Plan crafted by Trevor Manuel and Cyril Ramaphosa. As agriculturists we look at this plan and say that there are a number of things that look good in it. This plan is the beginning of a building block.

But, you know, as it currently stands the National Development Plan is like a sitting duck. Many people have their guns out and they are aiming them at the NDP and they’re trying to shoot it down. It then becomes imperative on us agriculturists to ask how we can create the necessary vehicles that can be plugged into the NDP with the policy and with the vigour that analyses each and every step of the NDP. Then we can plug any holes so that the NDP can become a much stronger document.

The current problem with the NDP is that one of the key contributors to it is supposed to be the Department of Agriculture, Forestry and Fisheries. However, DAFF’s inputs have been almost non-existent in the NDP. But how is it that the Department of Rural Development and Land Reform essentially drives the policy regime of DAFF? Is it the cart before the horse, or what? So we need to deal with these contradictions.

We need to help DAFF to find itself and its feet. If that department does not find its feet we are all going to flounder. It’s critical. We then also have to help bridge the gap between DAFF and the Department of Rural Development and Land Reform otherwise we’re going to also come short there.

The reality of what is happening is that because there is a policy vacuum, despite the ideals of the NDP, we are seeing things happening in reverse. Without my going into detail about it we all know that land reform has simply gone astray. The crisis in labour is exactly the same. All of these things are directly as a result of these vacuums that we are seeing. So, how can we solve them? Let’s go back.

We have said that South African agriculture is under siege. It’s not a case anymore of white farmers fearing that they’re going to be under siege as a result of black people leading the country. The reality now is that all stakeholders in South Africa’s agricultural sector are under siege, whether it be a white commercial farmer or an emerging commercial farmer or even an aspiring commercial farmer.

Our current agricultural sector does not look like something that a person would want to enter or participate in. Potential entrants only see the many rules and regulations that are anti-growth in the agricultural sector. This is a challenge. It’s not a white challenge, it’s an agricultural challenge. But what this means is that everyone in the agricultural sector is in the same boat. Nobody is alone in this.

How do we move forward? We don’t move forward by seeing the total decimation of agriculture, and by seeing transformation from existing commercial farms to mega-farms. The latest statistics show that in places like Mpumalanga and Limpopo provinces there is the emergence of mega-farms. The days of midscale farms in South Africa are disappearing. The big guys are taking out all the small and middle guys. So we now are moving to where we have big guys and then the land reform guys. The big guys are progressing and the land reform guys are not.

How do we arrest this situation? In the space of commercial agriculture we had an assignment again for the AgriBEE Equity Fund where we had to try and understand why agriBEE is not quite working and what the issues facing commercial farmers are. PricewaterhouseCoopers was actually doing the study and we were doing the oversight. 207 data were used. The data pack used showed that there were 39 000 farmers in South Africa. When they went out to do the 10% sampling they needed to find about 3 900 farmers.

When they got to asking for farmers in Mpumalanga, Free State, North West and Limpopo, they couldn’t find these farmers. This simply tells us that the farmers are no longer there. They’re either in the DRC, or in Congo, or in Mozambique, or they’re possibly now living on the beach. Clearly South Africa has lost, between 2007 and 2013, easily 4 000 – 5 000 farmers who have left the commercial farming sector.

Now, we may sit here and ask ourselves what agricultural policy is saying while this is going on because there is clearly a significant movement and shift in this sector. But our policies say that everything is hunky-dory. Once again this shows that we are living with contradictions.

Whether he is speculating or not I don’t know, but Ernst Janovsky of ABSA, in his research, says that this country is going to have 15 000 commercial farmers by 2020. Is there anybody trying to understand what that impact will be on South Africa? It’s going to have a massive impact. Now, in light of these 15 000 farmers who are moving towards mega-farms we still have a massive state programme that says that we are going to put black farmers on the land.

So we’re going to have something like 500 000 black farmers and 15 000 commercial white farmers. The numbers don’t work. So, what we are saying is that, from a policy perspective, we need to go back to government and say no, no, no, the reality is like this and this is the shape of that reality. Fortunately, we are slowly turning the button. The state has spent billions on infrastructure.

There are hundreds of infrastructure projects that the state has funded over the past 20 years, and even before that. The state has spent huge amounts of money on buying land. Fortunately, more recently the state has begun to take the view that it should now stop buying assets, that it should stop creating the likes of irrigation schemes. The state is now reviewing its focus as to how it can instead revive the projects that it has already invested in and to start getting returns on investment from them.

From a principle point of view it is critically important that agriculturists can contribute towards this. But the key is that it is not just about the government deciding what is good for the people out there. It must be for us agriculturists who are assisting the state and the assisted communities to agree what it is that these communities want out of those assets that are sitting in their localities.

It mustn’t be an issue of a government official or a consultant arriving at a community and giving orders on what can and can’t be produced there and to what extent. It has to be that the official or consultant gets into the community, despite it costing money and time, to properly understand what it is that the community wants out of its project. Then they must slowly rebuild the project together so that it becomes a success and the community can feed and help itself.

So, state expenditure is going to be driven by rural development and it is growing rapidly. Let us not allow it to go to waste. This spending means that the so-called disinvestment from agriculture has been turned around. Government has stated that South Africa has a food security problem at household, not national, level. Government’s plan to remedy this is to put 1 million hectares under agricultural production in South Africa.

How do they plan on supporting 1 million hectares of agriculture? Where they are planning on developing this 1 million hectares there is little, or no, relevant infrastructure. Also, if they, for example, use this land for maize it’s going to result in an additional 4 million tons of maize on the South African market. The market would collapse.

So, we have told government that before it even embarks on this strategy – and it is a good strategy, government has the money for it, and it will contribute to rural development – it needs to show us a strategy for the necessary infrastructure development, a strategy for markets, a strategy for the relevant institutions, and a strategy for the financing of it all.

It cannot simply be a blank cheque from government. The blank cheque syndrome is a killer. It is the biggest disease that we have currently in South Africa. Giving people free money is the most costly thing that you can do because the free money doesn’t end. So, we said to government that if it has the needed cash then it must create this 1 million hectares in such a way that it empowers the people to take responsibility for the projects themselves as soon as possible. The people must take responsibility and accountability for their own development as soon as possible.

As agriculturists, what do we see as our lasting plan for South Africa in 2020 and beyond? South Africa has a lot of institutions that are not working. These need to be rebuilt. Let’s not create new institutions. We have institutions like the Land Bank, and the National Agricultural Marketing Council, and the Agricultural Research Council, and Onderstepoort Biological Products, all the institutions are there. Priority number 1 is to rebuild all of these institutions.

Secondly, let’s inform how the markets should work in a new dynamic. This means that the current market situation, especially as it pertains to the way that we are currently developing our various commodity markets, seems to be dysfunctional because it is dominated by either monopolists or oligopolists and doesn’t allow for broader participation. So, we have to very urgently address market reforms.

Thirdly are financial reforms. We in agriculture have just missed the biggest drive in the world. In South Africa we have the cheapest capital that we have ever seen. Where else will you find 5%? Whilst this cheap capital exists we need to ask
ourselves how we can make use of it to benefit our agricultural sector. Lastly, the government has agreed, and we need to support it, that there are going to be 5 key agricultural value chains that it wants to support. Within our academic institutions, within our consulting world, within wherever we agriculturists are, let’s help these 5 key value chains – sugar, forestry, grains, livestock and horticulture crops. These must be our priority areas.

We also need to recreate an agricultural indaba in South Africa that critically addresses the way labour works in our sector, the way markets work in our sector, and the way finance works in our sector. Our universities can make a meaningful impact with this. Let us put realism back into the debate. Let us use our policy framework as a guide to inform the process. And let us take responsibility and accountability for what we want as an outcome.

On a personal level, I’d like to point out that I’m very proud to be in the agricultural sector. It’s an amazing sector and we can all make an amazing contribution. There’s a lot more going for this sector than there was previously. I think there’s hope, there’s opportunity, but for damn sure there’s a helluva lot of work and if we don’t all put our shoulders behind the wheel we won’t succeed. The government wants to spend money but unless we help them spend it they’re going to make a mess. Let’s take this as all of our responsibility.”

Andrew Makenete: email – [email protected]