South Africa’s rural areas can be developed through agriculture

Among other things, I emphasised that the rural economy should not be forgotten in South Africa’s economic growth agenda, where there tends to be a strong urban bias in policy discussions. Rural areas are still a significant segment of society and the economy, though 68% of the population now lives in urban areas.

Apart from rural areas’ reliance on remittances and social transfer payments, the one outstanding characteristic of the rural economy is its dependence on a few key industries, all of which are typically resource-based, such as agriculture, mining, fishing, tourism, and forestry.

Boosting rural employment and growth

With rising unemployment and low economic activity, policymakers are searching for areas of growth and job creation. For many rural areas, agriculture and tourism are the only industries that still have the potential to generate employment.

However, for these industries to perform better, we must address the infrastructure and governance constraints that have inhibited agriculture’s growth and potential. Although the sector has more than doubled since 1994, it has not yet reached full capacity.

Professor Johann Kirsten, director of the Bureau for Economic Research, and I have detailed many growth-constraining issues in our latest joint work. These issues include the following:

• Market failures (high transaction costs, remote location)
• Government failures (inefficiencies, poor service delivery, corruption)
• Community failures (poor local institutions, vested interests of traditional leaders)
• Poor land governance (lack of secure tenure)

These limitations trap many rural communities in persistent poverty from which they cannot escape. What’s worse, rural areas have less access to public services and infrastructure than urban areas, partly due to the higher per-unit cost of infrastructure investment and service delivery in rural settings.

This extends to ‘soft’ infrastructure such as healthcare centres, and ‘hard’ infrastructure such as road and rail networks, silos, irrigation systems, water, and electricity, thus leading to low agricultural productivity and poor linkages to markets for farmers.

What is the solution?

So, what should be done differently to address these challenges so that economic activity and employment can take off in rural areas?

To an extent, these problems are well understood and were highlighted in Chapter Six of the National Development Plan and, more recently, in the Agriculture and Agro-processing Master Plan. However, progress on implementation has been slow.

The lack of implementation of agricultural government policy and infrastructure-related constraints stems from the following reasons:

• Weak coordination and misalignment of functions and priorities between different government departments and different spheres of government;
• A misallocation of budgets by national and provincial governments; and
• Poor coordination between government and the private sector, which has led to a misalignment of transformation programmes, incentives, and, in some cases, vision.

I won’t delve any further into this, but I will underscore that now is the time to act decisively to unlock the agriculture sector’s potential by removing barriers to accessing land, finance, markets, and water; and improving rural safety; and enhancing service delivery by our provincial and local governments.

This is a challenge that government and the private sector should address, and renewed focus on the Agriculture and Agro-processing Master Plan remains central.

(Watch the 11^th Annual Archbishop Thabo Makgoba Lecture below. Wandile Sihlobo speaks from 1:10:10.)