Transcript The evolution of agricultural policy in South Africa

Nick Vink
Department of Agricultural Economics
University of Stellenbosch
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Policy changes
Productivity indexes
SA/NZ (Vink and Sandrey)
Technology change (Sandrey and Vink, OECD)
Where does RSA fit in? (Anderson et al)
Conclusion
Reduction in commodity-specific subsidies
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Interest rate subsidies cut (but ‘drought aid’)
Abolition of dairy price control
Bread price subsidy
Abolition of control over price of maize meal,
bread flour, bread
Maize price formula changed
Etc.
Reduction in farmer support programmes
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Tax treatment changed (ring fencing
tightened, capital depreciation aligned)
Budgetary allocations supporting white
farmers declined by some 50 per cent
between 1987 and 1993
The basis for farmer support programmes
was taken away
Trade liberalization under the AoA
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Tariffication and agreed reductions
Unilateral reductions
GEIS
Intervention in input markets
Land
 Abolition Act 1991
 White Paper, Acts, Implementation
Labour
 Dedicated legislation, 1993
 Incorporated in mainstream after 1994
 Minimum wage, etc. 2001
Water
 Loss of riparian rights
Deregulation of agricultural marketing
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The ‘big bang’ of 1997
Productivity of:
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Labour
Capital
Land
TFP
Western
Cape
RSA
1993
9.2
18.5
2002
15.4
11.7
2007
15.2
10.8
Index of interest rates
Poly. (Index of interest rates)
8000
160.00
7000
140.00
6000
120.00
5000
100.00
4000
80.00
3000
60.00
2000
40.00
1000
20.00
0
19
75
19
77
19
79
19
81
19
83
19
85
19
87
19
89
19
91
19
93
19
95
19
97
19
99
20
01
20
03
20
05
20
07
(R '000) 2000 = 100
Real gross capital formation
Poly. (Real gross capital formation)
0.00
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
1984
1983
1982
1981
1980
2000 = 100
Real value of capital assets
Poly. (Real value of capital assets)
180000
160000
140000
120000
100000
80000
60000
Debt/GDP
Poly. (Debt/NFI)
Debt/NFI
Poly. (Debt/GDP)
Debt/Asset
Poly. (Debt/Asset)
8
0.35
7
0.3
6
0.25
0.2
4
0.15
3
0.1
2
20
06
20
04
20
02
20
00
19
98
19
96
19
94
19
92
19
90
19
88
0
19
86
0
19
84
0.05
19
82
1
19
80
Ratio
5
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
Rand
NFI/R100 investment
Poly. (NFI/R100 investment)
550
500
450
400
350
300
250
200
150
100
20
06
04
02
00
07
/0
5
/0
3
/0
1
/9
9
/9
7
/9
5
/9
3
/2
0
20
20
20
98
96
94
92
/9
1
/8
9
/8
7
/8
5
/8
3
/8
1
/7
9
/7
7
/7
5
/7
3
/7
1
Poly. (Mielies)
19
19
19
19
90
88
86
84
82
80
78
76
74
72
70
Koring
19
19
19
19
19
19
19
19
19
19
19
Ton/ha
Mielies
Poly. (Koring)
4.00
3.50
3.00
2.50
2.00
1.50
1.00
0.50
0.00
230
Indices
380
330
280
180
130
80
99/00
97/98
95/96
93/94
91/92
89/90
87/88
85/86
83/84
81/82
79/80
77/78
75/76
73/74
71/72
69/70
67/68
65/66
63/64
61/62
59/60
57/58
55/56
53/54
51/52
49/50
47/48
Years
TFP
Inputs
Output
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SA/NZ comparison
Technology adoption
Southern hemisphere comparison
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Share southern hemisphere climate
NZ has more reliable rainfall and better soils
NZ, with its smaller domestic population, is
more export-oriented
Both are Cairns Group members: world
leaders in unsubsidised agriculture
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Both underwent dramatic reforms; NZ in the
mid 1980s and SA a decade later
The evidence shows that NZ has adjusted to
‘free’ markets better than SA to date
The ‘to date’ qualification is important, as
the NZ experience shows that time lags can
be longer than expected
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Marketing reform was triggered by external
macroeconomic factors in both
NZ: economic stagnation, change in
government in 1984, subsequent drive to
liberalise
Agriculture a central part of these reforms
SA: also macroeconomic precedents, as
attempts to stabilise the economy in the
late 1970s resulted in a rapid increase in
interest rates
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Thus, both countries embarked on the
reforms at about the same time
However, the process from that time onwards
was markedly different
To understand these differences, and their
consequences, it is necessary to compare the
reforms in terms of their timing, sequencing,
breadth, and depth
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NZ: most reforms implemented within 3 years of
the 1984 elections
PSE declined to below 5% after 1988, and has
since declined to below 1%
SA: reforms for 15 years followed by the ‘big
bang’ that lasted for 12 months
NZ market reforms preceded SA by a decade
SA’s PSE remained at above 10% until 1995 after
which it declined to below 5%
Deregulation in NZ had two distinguishing
features :
 NZ: marketing reforms preceded international
trade liberalisation under the AoA
 SA: sequencing more complex as explained
above. Trade liberalisation preceded the ‘big
bang’
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However, no evidence that policy makers in
NZ or SA followed any deliberate sequence
of reforms
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SA and NZ: Virtually all of agriculture was
subject to intervention before deregulation
In both there is evidence that previously
uncontrolled industries have been the most
successful
NZ: deer and wine
SA: Poultry and vegetables
NZ also implemented labour market reforms,
which resulted in more flexible labour
markets
The biggest difference between SA and NZ
was in the depth of the reforms
SA: all statutory powers were removed, with
two exceptions:
 Sugar industry
 The powers of the NAMC that allow
statutory levies
NZ: the end result was more nuanced:
 Quota allocations into EU and USA remain in
dairy and meat, while kiwifruit operates a
single desk with monopoly export powers
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This did not result in a higher PSE, because
import controls are not necessary to maintain an
export monopoly, hence the price gap between
domestic and world prices, the key to the
measurement of PSE, is unaffected
This has both costs and benefits to different
stakeholders
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Agricultural exports’ share in production
increased from 1/5 to 1/3
Agricultural exports increased by 9.2% p.a.
between 1997 and 2007: wine, citrus and
table grapes grew by 17.8%, 16% and 12.9%
Some evidence of innovation, but the jury is
still out on the results of the reforms
Different patterns of technological growth
can be observed by and within regions over
time
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Innovation continues apace, but how much of
it can be ascribed to the reforms?
Field crops
Prices declined to world market levels
Farmers shifted to low-till, etc. production
Reduced inputs such as fertilisers,
insecticides, herbicides, tractors, other
machinery, and fuel
Thus process rather than product innovation
Industry average yields more than doubled
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Fruit sector
Increase in output and exports, driven by:
(1) the addition of new export-oriented
production regions (Orange river: pre-reform)
(2) introduction of new production
technology
(3) introduction of better control over the
cold chain
Export growth OK, but limited
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Wine
Marketing reforms resulted in:
(1) Many new entries in the industry (2
cellars/month for >10 years!)
(2) Inward FDI, accompanied by overseas
marketing and the burgeoning tourism sector
(3) Large scale replanting of vineyards
Agric. land
GDP per capita
Agric. share of
per capita
exports
Southern Hemisphere temperate-zone countries
Argentina
Australia
Chile
New Zealand
South Africa
4.3
28.6
1.2
5.4
2.8
0.9
4.2
0.9
3.1
0.6
5.4
2.8
3.9
6.7
1.3
Other BRICS
Brazil
China
India
Russia
Western Europe
United States
Canada
Japan
WORLD
0.4
0.5
0.5
0.2
0.2
0.1
1.9
0.5
Northern Hemisphere temperate-zone countries
0.5
1.8
2.7
0.1
1.0
World = 1.0
4.5
6.6
4.5
6.1
1.0
0.5
0.6
1.4
0.5
1.1
1.1
1.4
0.1
1.0
GDP share
1950-54
1960-64
1970-74
1990-94
2000-04
Employment
1960-64
1980-84
2000-04
Export share
1950-51
1960-64
1970-74
1980-84
1990-94
2000-04
Argentina
Australia
Chile
New Zealand
South Africa
11
6
7
22
16
9
3
3
7
9
4
14
12
10
9
7
4
3
19
13
9
10
6
4
29
20
15
14
11
9
36
17
9
93
79
73
60
48
86
78
51
40
31
25
9
9
28
36
34
83
70
58
50
44
351
9
8
8
Agricultural exports as % of primary production
Argentina Australia Chile New
South
Zealand Africa1
1960s
42
46
1
40
11
1970s
34
44
8
45
15
1980s
37
55
34
61
11
1990s
36
56
41
66
9
2001/04
36
55
67
64
11
1
These percentages for South Africa are close to the share of just unprocessed agricultural
exports, according to official data from SA Customs and Excise. If processed food is added,
those shares roughly double but are still much less than those for the other four countries
shown.
Argentina
Australia
Chile
New Zealand
South Africa
a
Agriculture
Non-agriculture
Agriculture
Non-agriculture
a
b
Simple average applied (bound) tariff:
10(33)
1 (3)
6(26)
2 (6)
13(32)
4(11)
6(25)
3(10)
Share of MFN applied tariffs <6%
14
99
100
29
85
100
9(41)
8(16)
b
83
67
The WTO-bound tariff is shown in parentheses.
Less than or equal to 5 percent, except for Chile where it refers to 6 percent
56
64
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
Index
Output index
140
120
100
80
Argentina
Australia
60
Chile
New Zealand
South Africa
40
20
0
Agricultural exports
25000000
20000000
15000000
US$ 000
Argentina
Australia
Chile
10000000
New Zealand
South Africa
5000000
2005
2003
2001
1999
1997
1995
1993
1991
1989
1987
1985
1983
1981
1979
1977
1975
1973
1971
1969
1967
1965
1963
1961
0
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NRA calculations show that South African
agriculture is relatively unprotected – similar
to Australia, Chile and New Zealand
(Argentina still taxes agriculture)
But output and export growth has been
slowest in South Africa
Why: poor resources or investor confidence?
Or do we just have to wait longer to reap the
benefits (or pay the price!)