Making SA agriculture a better world competitor

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The results sport teams achieve depend on their own abilities, the abilities of the opposition and in many cases on the referee and his interpretation of the rules of the game. The same is true of the international trade arena – a country’s inherent advantages are important, but so are those of other countries producing the same type of product. The rules of the game and the referee, in this case international trade agreements, protocols and customs, play a major role.

How does SA perform internationally?
South Africa’s agricultural exports increased in nominal terms from R8,1 billion in 1994 to R25,8 billion in 2006, while our agricultural imports increased from R4,9 billion to R20,5 billion. In real, inflation-adjusted terms, exports grew by an average 4,3% while imports grew by 7,0% per year. Our agricultural imports and exports in 2006 are shown in Figure 1. The Americas, Asian and Pacific countries and the European Union are the sources of 91% of our imports. Our exports in 2006 consisted mainly of grain (20%), oilseeds and oils (15%), meat (11%) and processed products (11%). We also exported fruit and vegetables, wine and beverages, processed products, sugar and confectionery. Australia (meat), New Zealand (dairy) and South American countries (grain, meat and dairy products) are the main exporters to South Africa. They are also our opposition in the rest of the world.

How competitive are we?
If we want to achieve the 6% growth envisaged by the president, we will have to increase our exports and reduce our dependence on imported agricultural products. There are four interrelated determinants of competitive advantage: factor conditions, demand conditions, related and support industries and firm structure and rivalry. There are also two external determinants, the role of government and the role of chance. In general SA agriculture has enough natural resources, although the availability of water may soon become a limiting factor especially in areas of high demand.

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The availability of farmland may also become a problem especially if 30% of agricultural land is transferred to emerging farmers who will not be able to produce at the same level as their commercial counterparts. South Africa is favourably situated with a growing market locally and also in the Southern African Development Community (SADC) and the rest of Africa, though exports to SADC (17% in 2006) could grow much quicker. South African farmers do not see each other as competitors, mainly because of historic dependence on a cost-plus pricing system that no longer exists. More competition between producers will increase competitiveness. Government’s role is crucial in developing a globally competitive agriculture.

Unfortunately, we still lag far behind in agricultural research and development. One division of the Brazilian ministry of agriculture employs more than 12 000 researchers, compared with just over 100 in the entire South African Agricultural Research Council.

Without progressive agricultural research and development and a fully functional regulatory environment, we will not be internationally competitive. Thus we have the necessary resources and skills base to compete successfully in the international arena. But political action, shortsighted profiteering and official incompetence may yet destroy our competitiveness. Joint action, not joint talks, between government, farmers and agribusiness, is urgently needed. Dr Koos Coetzee is an agricultural economist at the Milk Producers’ Organisation. All opinions expressed in this column are his own and do not reflect MPO policy.