Agriculture's contribution to economic growth and development in rural Limpopo Province: a SAM multiplier analysis

Pfunzo, Ramigo (2017-03)

Thesis (MScAgric)--Stellenbosch University, 2017.

Thesis

ENGLISH SUMMARY : The agricultural sector in Limpopo contributes approximately 2.2% to the provincial GDP. Agriculture can play an important role in contributing to economic growth, through agricultural production and job creation as a result of its linkages with the rest of the economy. Consequently, it can play a significantly role in reducing poverty. This study examines the potential agricultural contribution to economic growth and development in Limpopo. It starts with a literature review of the province’s sectoral development and growth. Most importantly, it examines two stages of poverty alleviation and agricultural growth; namely production and consumption linkages. The factors that constrain agricultural economic growth and development are described in detail. For the analysis, the study used the Limpopo Social Accounting Matrix (SAM) for 2006 developed by Conningarth Economists as a database to develop a multiplier model. Because the Limpopo SAM was unbalanced, data manipulation was performed, applying manual balancing to the existing Excel data. Firstly, the results from the SAM multiplier analysis indicated that R1 million injected into the agricultural sector will lead to a notable change in output (R1.67 million) and value-added (R764 000). Some of the agricultural sub-sectors generated a large increment in output – the largest being subtropical fruit and forestry. The water- and electricity industry was ranked first for output (R2.02 million) and third for value-added (R900 000). The financial industry was ranked first for value added (R962 000) and sixth for output (R1.77 million). Secondly, the analysis estimated the impact of a 5% export demand on the rest of South Africa and the rest of the world respectively. The results indicate that vegetables is the largest export demand to the rest of South Africa. On the other hand, for the rest of the world, the demand for exported citrus fruit is the largest. GDP increases by R59.48 million for a simultaneous 5% increase in export demand for output from all agricultural industries by the rest of the world. This exceeds the increase in GDP of R47.54 million for a simultaneous 5% increase in export demand for output from all agricultural industries by the rest of South Africa. Thirdly, the analysis estimated the impact of a 5% increase in investment demand in agricultural activities. The results show that the output from the agricultural sector increases more than that of the non-agricultural sector. The largest increase in output from the agricultural sub-sectors comes from forestry. The income from Black households (R4.47 million) increases more than that of White, Coloured and Asian households (R276 000). The GDP in the economy increases with R9.30 million. Fourthly, the forward and backward linkages for the economic sectors of Limpopo were calculated. The results show that tertiary sector industries are gaining more position on the list of leading industries in Limpopo. Moreover, the investment in the tertiary sector seems important for economic development because of its linkage to other sectors. The results of the study may be used for the development strategy of the Limpopo economy. It was concluded that despite the fact that most of the people in the province live in rural areas and are assumed to engage in the agricultural sector as a source of livelihood, the agricultural sectors actually contribute less to economic growth than non-agricultural sectors in Limpopo, and this is contrary to the original hypothesis. It should be noted, to achieve significant development in Limpopo, more focus should be placed on the water and electricity (output), financial insurance (value-added) and community and personal services (income) sectors for their contribution to economic growth, due to large multipliers when compared to other sectors.

AFRIKAANSE OPSOMMING : Die landbousektor in Limpopo dra ongeveer 2.2% by tot die provinsiale BBP. Landbou kan 'n belangrike rol speel in die bydrae tot ekonomiese groei deur middel van landbouproduksie en werkskepping as gevolg van skakelings met die res van die ekonomie. Gevolglik kan dit ’n merkbare rol in die vermindering van armoede speel. Hierdie studie ondersoek die potensiele bydrae van landbou tot ekonomiese groei en ontwikkeling in Limpopo. Dit begin met 'n literatuuroorsig oor die sektorale ontwikkeling en groei van die provinsie. Die belangrikste is dat die studie twee fases van armoedeverligting en landbou -groei ondersoek, naamlik produksie- en verbruik-skakeling. Die faktore wat beperkinge op ekonomiese groei en ontwikkeling van landbou plaas, word in detail beskryf. Vir die analise word die Limpopo Sosiale Rekeninge Matriks (SAM) vir 2006, ontwikkel deur Conningarth Economists as 'n databasis gebruik om 'n vermenigvuldiger-model te ontwikkel. Omdat die Limpopo SAM ongebalanseerd is, is data-manipulasie toegepas deur middel van handgedrewe balansering van die bestaande Excel-data. Eerstens het die resultate van die SAM-vermenigvuldigeranalise aangedui dat ‘n R1 miljoen investering in die landbousektor tot 'n noemenswaardige verandering in die produksie (R1.67 miljoen) en toegevoegde waarde (R764 000) sal lei. Sommige van die sub-landbousektors genereer 'n groot toename in uitset, waarvan subtropiese vrugte en bosbou die grootste is. Water -en elektrisiteitsvoorsiening was bo-aan die ranglys ten opsigte van produksie (R2.03 miljoen), en derde ten opsigte van die waarde-toevoeging (R900 000). Die finansiele industrie was bo-aan die lys ten opsigte van waarde-toevoeging (R962 000) en sesde ten opsigte van produksie (R1.77 miljoen). Tweedens word die impak beraam van ’n 5% toename in vraag na uitvoere na die res van Suid-Afrika en die res van die wereld, onderskeidelik. Die resultate toon dat die grootste vraag na uitvoere na die res van Suid Afrika vir groente is, terwyl sitrusvrugte die grootste uitvoer-vraag na die res van die wereld is. BBP neem toe met R59.48 miljoen vir ‘n gelyktydige 5% toename in vraag na die uitset van alle landbou industriee deur die res van die wereld. Dit oorskry die toename in BBP van R47.54 miljoen vir ‘n gelyktydige 5% toename in vraag na die uitset van alle landbou industriee deur die res van Suid Afrika. Derdens het die ontleding die impak van ‘n 5% toename in vraag na investering in landbou-aktiwiteite beraam. Die resultate toon dat die uitset van die landbou-sektor groter groei toon as die van nie-landbou sektore. Die grootste toename in uitset vanuit die landbou subsektore kom vanaf bosbou. Die inkomste van swart huishoudings (R4.48 miljoen) groei meer as die van wit, gekleurde en Asiatiese huishoudings (R276 000). Die totale toename in BBP in die ekonomie beloop R9.30 miljoen. In die vierde plek is die voorwaartse en rugwaartse skakels vir die Limpopo ekonomie se sektore bereken. Die resultate toon dat die tersiere sektor se nywerhede besig is om toenemend meer posisies op die lys van voorste nywerhede in Limpopo te beklee. Van nog groter belang is die belegging in hierdie sektor vir groter ekonomiese ontwikkeling as gevolg van die skakeling met ander sektore. Hierdie resultate van die studie kan dus aangewend word vir ’n ontwikkelingstrategie vir die Limpopo ekonomie. Dit is die gevolgtrekking dat, ten spyte van die feit dat die meerderheid van die mense in die provinsie in landelike areas bly, of daar aanvaar word dat hulle in landbou betrokke is, dra die landbou-sektor in der waarheid minder by tot die ekonomie as die nie-landbou sektore, wat nie volgens die oorspronklike hipotese is nie. Ten einde beduidende ekonomiese ontwikkeling in Limpopo teweeg te bring moet daarop gelet word dat groter fokus op water, elektrisiteit, finansiele sekerheid asook die gemeenskap- en persoonlike dienssektore geplaas moet word vir hulle bydrae tot ekonomiese groei, as gevolg van groot vermenigvuldigers in vergelyking met ander sektore.

Please refer to this item in SUNScholar by using the following persistent URL: http://hdl.handle.net/10019.1/101160
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