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JEREMY MAGGS: Agriculture is crucial to South Africa’s economy. But how much do South African farmers actually gain from global agricultural subsidies? While many countries utilize subsidies to safeguard their farmers and food supply chains, the impact on South African farmers—who face fierce competition in the global market—can be complex.
To clarify these dynamics and their effects on local agriculture, I’m joined by Wandile Sihlobo, agricultural economist and chief economist at the Agricultural Business Chamber. Wandile, it’s great to have you with us. Can you start by explaining why this debate has re-emerged in our nation?
WANDILE SIHLOBO: Certainly, Jeremy. The first step for South Africa is to comprehend our position in the global agricultural arena. We are a significant player, ranking as the 32nd largest agricultural exporter and the only African country among the top 40.
When considering South Africa on its own, we discover that we export nearly half of our production in monetary terms. With the potential for new areas to be cultivated and the productivity improvements we’re witnessing on various farms, it’s critical that we explore all possible avenues to open export markets for our products.
However, to your point, this is occurring at a time when the global landscape is increasingly turning towards protectionist measures, limiting trade and instituting various protective policies…
Concurrently, these countries are channeling funds into their agricultural sectors, providing their farmers with a more advantageous cost environment for production compared to our own.
This stimulating dialogue is largely provoked by recent trends, especially in the EU. For example, just earlier this week, France made headlines, and throughout much of last year, the emphasis was on developments concerning the EU and India.
Listen/read: Agri insights: Challenges, wins, and outlook for SA farming
JEREMY MAGGS: So, which nations are the foremost subsidizers of their agricultural sectors? You mentioned the EU; can you directly link policy to how it affects South Africa’s market competitiveness? What should we be worried about?
WANDILE SIHLOBO: Absolutely, the leading global players employing subsidies are the US and the EU. For instance, the EU has the Common Agricultural Policy that provides extensive support to their agricultural producers.
In contrast, South Africa lacks substantial subsidies.
The closest form of aid we have is the diesel rebate, but these do not compare to the capital support experienced before 1994, when the former government provided agricultural subsidies.
I wouldn’t endorse subsidies in South Africa due to our fiscal challenges, which render them impractical. However, the direct ramifications for South Africa manifest in numerous ways.
The impact …
First, we are competing in international markets against nations that offer considerable producer support, an essential topic of ongoing discussion at the WTO [World Trade Organization].
Second, developed countries, especially within the EU, receive substantial backing, leading various farmer groups to call for even more government assistance. They have concerns about competition from emerging markets and regions like South America and even countries like ours.
These relationships illustrate how global policies can affect South Africa.
Read: South African agriculture needs to crack the Chinese market
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JEREMY MAGGS: Wandile, regarding the safeguarding of our agricultural sector and boosting competitiveness amidst the protectionist backdrop you’ve presented, should South Africa reconsider the subsidy debate, particularly for more vulnerable sectors of our community?
WANDILE SIHLOBO: Jeremy, the fundamental issue is that South Africa simply does not have the capacity for subsidies. Instead, I believe our near- to medium-term strategy should focus on expanding our export markets. Our immediate challenge lies in the risk of potential closures or restrictions in lucrative markets.
We must diligently maintain our relationship with the EU and ensure we uphold that market, despite the existing challenges, as it is South Africa’s second-largest agricultural export market.
Nearly 30% of our agricultural exports go there.
Additionally, we should enhance our relations within BRICS [Brazil, Russia, India, China, South Africa], the Far East, and the Middle East, seeking to diversify our export markets to confront competition in traditional arenas.
Nonetheless, promoting direct subsidies for South African farmers is something I would cautiously avoid due to the limitations and inefficiencies these policies have historically caused.
JEREMY MAGGS: Wandile, you posed an important question. How can we boost South Africa’s export potential? What actions should we take?
WANDILE SIHLOBO: In South Africa, two vital actions are essential, Jeremy. Firstly, given the absence of subsidies, the government must ensure that the operational environment for farmers is as efficient as possible. This involves effectively managing animal health issues, ensuring municipalities operate smoothly, and improving infrastructure like ports and roads to reduce transaction costs.
If we can enhance business operations in this regard, it would greatly benefit our agricultural sector. Secondly, in terms of export markets, the Department of Agriculture, led by Minister [John] Steenhuisen, alongside the DTIC under Minister Parks Tau, and Dirco [Department of International Relations and Cooperation] overseen by Minister Ronald Lamola, should intensify their efforts to connect with specific nations such as China, India, and Saudi Arabia, advocating for increased market access and the elimination of tariffs on various products. Additionally, tackling phytosanitary barriers—such as those present in China for particular goods—should be a priority.
Ultimately, opening up export markets and enhancing logistics support are essential for the agricultural sector in South Africa.
Read: A rare South African export success is threatened by crumbling ports
JEREMY MAGGS: That certainly is a challenge. To conclude, we are significantly lagging in addressing logistical issues, especially in ports and rail.
WANDILE SIHLOBO: Indeed, ports and rail present considerable challenges, but we must persevere. For a sector that exports over half of its production and anticipates greater yields, with more than two million hectares of land still underutilized for agriculture, addressing logistics is essential for supporting agricultural growth and job creation.
This is a conversation that policymakers and our country’s leadership need to deeply engage in.
JEREMY MAGGS: Thank you very much. Wandile Sihlobo, agricultural economist and chief economist at the Agricultural Business Chamber, I value your insights.
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