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Directorate for Food, Agriculture, and Fisheries 1
ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT
ORGANISATION DE COOPÉRATION ET DE DEVELOPMENT ÉCONOMIQUES
Review of Agricultural policies in South Africa
Václav Vojtech
Directorate for Food, Agriculture, and Fisheries
Pretoria, 19 April 2006
Directorate for Food, Agriculture, and Fisheries2
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 Fisheries3
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
Directorate for Food, Agriculture, and Fisheries4
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
Directorate for Food, Agriculture, and Fisheries5
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
Directorate for Food, Agriculture, and Fisheries6
Development of agricultural production(Index 1990=100)
60
80
100
120
140
160
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
Agriculture Field crops Horticulture Livestock
Directorate for Food, Agriculture, and Fisheries7
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
Directorate for Food, Agriculture, and Fisheries8
South African agricultural exports and imports
(million USD, constant 2000 prices)
0
500
1 000
1 500
2 000
2 500
3 000
3 500
4 000
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
Agricultural exports Agricultural imports Agricultural trade balance
Directorate for Food, Agriculture, and Fisheries9
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
Directorate for Food, Agriculture, and Fisheries10
Effect of Policy reforms
• Difficult period of adjustment • South African agricultural industry less
dependent on state support • More internationally competitive
Directorate for Food, Agriculture, and Fisheries11
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
Directorate for Food, Agriculture, and Fisheries12
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
Directorate for Food, Agriculture, and Fisheries13
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
Directorate for Food, Agriculture, and Fisheries14
PSE by country, 2000-03 average(% of gross farm receipts)
0%
10%
20%
30%
40%
50%
60%
New Z
ealan
dBra
zil
Austra
lia
South
Afri
ca
China
Russia
United
Sta
tes
Canad
a
Mex
ico
OECD EU
Japa
n
Directorate for Food, Agriculture, and Fisheries15
South AfricaComposition of PSE, 1994-2003
0
400
800
1 200
1 600
2 000
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
million USD
0%
4%
8%
12%
16%
20%
Market Price Support Budgetary Support % PSE (right scale)
Directorate for Food, Agriculture, and Fisheries16
South Africa PSE by commodity, 2001-03 average
(% of gross farm receipts)
-5 0 5 10 15 20 25
Sugar cane
Sheepmeat
Milk
Maize
Wheat
Pigmeat
Sunflower
Beef
Groundnuts
Grapes
Oranges
Apples
Poultry
Eggs
%
average %PSE5%
Directorate for Food, Agriculture, and Fisheries17
Composition of TSE in South Africa
0%
20%
40%
60%
80%
100%
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
Producer Support Estimate
General Services Support Estimate
Directorate for Food, Agriculture, and Fisheries18
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.
Directorate for Food, Agriculture, and Fisheries19
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
Directorate for Food, Agriculture, and Fisheries20
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
Directorate for Food, Agriculture, and Fisheries21
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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