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ORGANISATION DE COOPÉRATION ET DE DEVELOPMENT ÉCONOMIQUES
ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT
Review of Agricultural policies in
South Africa
Václav Vojtech
Directorate for Food, Agriculture, and Fisheries
Pretoria, 19 April 2006
Directorate for Food, Agriculture, and Fisheries
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Overall situation
• Largest African economy, highest GDP per
capita
• Highly unequal income distribution
• Dual economy, high contrasts in infrastructure
developments
• High levels of unemployment and poverty
• Large low skilled population and HIV/AIDS
are major constraints to growth
Directorate for Food, Agriculture, and Fisheries
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Important policy reforms
• Highly regulated economy …
• … was partly liberalised in the 1980s and early
1990s
• Economic reforms completed after 1994
• Reforms also addressed social injustices,
inequity and poverty (Black empowerment,
Land reform)
• Decentralisation of state administration
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Macroeconomic reforms
• Price and market liberalisation
• Tight monetary and fiscal policies provided
stability
• Increase in real interest rates and floating
exchange rate
• The economy is more open to world markets
but is still vulnerable to outside shocks
• Reforms did not succeed to bring the high
level of unemployment down
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Agricultural situation
• Primary agriculture is 4% of GDP and 10% of
reported official employment
• Potentially arable land and water resources
are limited and unevenly geographically
distributed
• Highly dualistic nature of farming
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Development of agricultural production
(Index 1990=100)
160
140
120
100
80
19
90
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
60
Agriculture
Directorate for Food, Agriculture, and Fisheries
Field crops
Horticulture
Livestock
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South Africa agro-food trade
• 30% of production exported
• … mainly wine, fruits and vegetables, sugar,
and maize
• Europe main destination for exports, followed
by Africa and Asia
• Imports distributed more evenly
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South African agricultural exports and
imports
(million USD, constant 2000 prices)
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
4 000
3 500
3 000
2 500
2 000
1 500
1 000
500
0
Agricultural exports
Directorate for Food, Agriculture, and Fisheries
Agricultural imports
Agricultural trade balance
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Reform of agricultural policies
• First reforms in the 1980s and early 1990s
• From self-sufficiency to a more open economy
• Deregulation of the marketing of agricultural
production
• Foreign trade deregulation
• Reduction of support to agriculture
• Shift in budgetary support from commercial
farming to the development of small scale
farming
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Effect of Policy reforms
• Difficult period of adjustment
• South African agricultural industry less
dependent on state support
• More internationally competitive
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0
Land reform policies
• Redress past injustices, more equitable
distribution of land, alleviate poverty in rural
areas, efficient farming sector
• Three main elements of Land reform (land
restitution, land redistribution and land tenure
reform)
• Development of programmes supporting land
redistribution
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1
Trends in producer support
• 1990s: decline in market price support,
budgetary payments
• 2000s: increasing budgetary support,
variations in market price support
• Rising expenditure on general services
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2
Support to agriculture
• Low relative to OECD member countries;
similar to Brazil, China, Russia and Australia
• MPS major component due to border
measures
• High variation across commodities – high
support for sugar (above average support also
for milk and sheep meat).
• Relative cost to economy: half of OECD
average
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3
PSE by country, 2000-03 average
(% of gross farm receipts)
60%
50%
40%
30%
20%
10%
Ja
pa
n
EU
N
ew
Ze
al
an
d
Br
az
Au
il
So stra
lia
ut
h
Af
ric
a
C
hi
na
R
U
us
ni
sia
te
d
St
at
es
C
an
ad
a
M
ex
ic
o
O
EC
D
0%
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South Africa
Composition of PSE, 1994-2003
million USD
2 000
20%
1 600
16%
1 200
12%
800
8%
400
4%
0
0%
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
Market Price Support
Directorate for Food, Agriculture, and Fisheries
Budgetary Support
% PSE (right scale)
1
5
South Africa
PSE by commodity, 2001-03 average
(% of gross farm receipts)
Eggs
Poultry
Apples
Oranges
Grapes
average %PSE
5%
Groundnuts
Beef
Sunflower
Pigmeat
Wheat
Maize
Milk
Sheepmeat
Sugar cane
%
-5
0
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10
15
20
1
6
25
Composition of TSE in South Africa
100%
General Services Support Estimate
80%
60%
40%
Producer Support Estimate
20%
0%
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
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Market access barriers to SA
agricultural exports
• South Africa is a large exporter of wine, fruits
and sugar.
• Trade in wine and fresh fruits is strongly
oriented to the EU market, with varying levels
of protection
• The preferences don’t exclude SA from
seasonal elevation of tariff barriers
• The sugar sector is one of the most protected
and distorted in the OECD area.
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Welfare impacts of trade and
agricultural domestic policy reforms
• SA benefits from global liberalisation
• … one third of total welfare gains are from
agricultural liberalisation
• ... most of which comes from liberalisation of
OECD agricultural policies
• There is evidence of redistribution both
between racial groups and provinces
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Policy challenges and recommendations
• Achieving higher and sustained economic
growth is crucial for improvement in rural
areas
• Increased farm competitiveness is essential to
respond effectively to more open markets
• Development of rural and social infrastructure
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Policy challenges and recommendations
(cont.)
• Income diversification are key to addressing
rural poverty
• Policies to increase participation in the rural
economy
• Land reform is facing implementation
challenges
• Development of a viable small scale
commercial agriculture
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