Investing In Agricultural Sector Can Boost SA Jobs, Writes Benedict Mongalo

Agriculture plays an important role in economic development and can also contribute to food security. 

The sector employs a significant number of people which provides well-documented employment multiplier effects, it is also a significant generator of foreign currency revenue. 

The National Development Plan (NDP) identified the sector as important, with the potential of creating a significant amount of jobs whilst contributing to the inclusive rural economy. 

To achieve the NDP Vision 2030 for the sector, necessary interventions include expanding irrigated agriculture. 

According to the NDP, 1.5 million hectares under irrigation (which produce virtually all South Africa’s horticultural harvest and some field crops) can be expanded by at least 500 000 hectares through the better use of existing water resources and developing new schemes.

There is also a need to convert some underutilised land in communal areas and land reform projects into commercial production; support of commercial agriculture sectors specifically in regions that have the highest potential for growth and employment; and support job creation in the upstream and downstream industries. 

Creating jobs in agriculture will need credible programmes, sound implementation, significant resources and stronger institutions supporting the sector.

The Novare South Africa Impact Fund aligns with the NDP domestically and the United Nations Sustainable Development Goals (SDG) globally. 

Any investment made by the fund will contribute towards the achievement of either one or more of the SDG’s. 

To further unlock the potential of the agriculture sector, an agricultural social compact developed by the government, agribusiness, labour, and other stakeholders in the form of the Agriculture and Agro-Processing Master Plan (AAMP) was launched earlier this year.  

The aim of the master plan is to bring notable changes to the sector by 2030 by promoting inclusive growth, competitiveness, transformation, employment, and food security. 

The AAMP also aims to reduce carbon emissions and have sustainable agriculture and agro-processing sectors.

Some of the negotiated and agreed outcomes in the master plan include unlocking R7 billion in agricultural financing for farmers and SMMEs through the blended finance scheme, agro-processing fund, statutory levies, state grants, industry trust and supplier development programme,

Digital farming 

This funding could also help speedily usher the agricultural and agro-processing sectors into the Fourth Industrial Revolution (4IR) by integrating digital farming into the mix.

Digital farming is the integration of a technology-enabled approach to farming management that observes, measures, and analyses the needs of individual fields and crops. 

The benefits of the use of technology in farming include increased agriculture productivity, lower production cost, inhibits soil degradation, lessens chemical application in crop production and promotes effective and efficient use of water resources. It also uplifts the socio-economic status of farmers and reduces environmental and ecological impacts.

Agricultural sector performance in the past 5 to 10 years

The performance of the agricultural sector over the past five years to 10 years has shown its attractiveness for investment in the sector.

According to the 2020 Economic Review of the South Africa Agriculture sector from the Department of Agriculture, Land Reform and Rural Development, South Africa’s primary agricultural sector grew by an average of 5,9% per year since 2010, while the country’s economic growth was 7,2% on average per year during the same period. 

The contribution of agriculture to the Gross Domestic Product (GDP) increased from 2,2% in 2010 to 2,4% in 2021. 

Despite its relatively small share of the total GDP, primary agriculture is an important sector in the South African economy and remains a significant provider of employment with approximately a share of 5% of the total labour force distribution per sector. 

Mitigating Climate Change risks

South Africa’s climate is subtropical to the Mediterranean, which consequently allows for a wide range of farming opportunities across the vast arable land. 

The general adverse and erratic weather conditions negatively impact agriculture production. 

The combination of higher temperatures, seasonal variations, and lower precipitation has led to water scarcity, land degradation, and greater exposure to pests.

At the 27th Conference of the Parties to the United Nations Framework Convention on Climate Change, (Cop 27) in Egypt, the World Bank Group’s country Climate and Development report on South Africa indicated that South Africa’s agricultural sector was one of the sectors that would assist South Africa to reach its net zero emissions by 2050.  

Proposals made include reducing the risk of water stress for farmers. 

Other remedies included the acceleration of security of land tenure among smallholders and emerging farmers by improving land transfer mechanisms and the consideration of carbon credits for generating revenue for farmers and promoting cooperation between the public and private sectors.

Agricultural sector’s outlook

Despite challenges, agriculture has been amongst the best-performing sectors in the country’s economy since the outbreak of the Covid-19 pandemic in 2020.

Some of the broader sector challenges include biosecurity issues, land tenure issues inter alia continued policy uncertainty around the expropriation of land. 

The geopolitical issues such as the Russia and Ukraine conflict also impacted negatively on South Africa’s agriculture due to rising input costs. 

Despite the highlighted challenges, the agricultural sector managed to record a growth rate of 0.8%, which reflects the resilience and agility of South African farmers, agro-processors, and service providers in the sectors. 

However broadly food and agriculture as a sector is defensive in nature and accordingly provides a hedge against adverse economic conditions. 

*The writer of this article, Benedict Mongalo, is the Managing Director, NOVARE Impact Investment Partners. The views expressed by Benedict Mongalo are not necessarily those of The Bulrushes