The role of the agricultural sector in the South African economy

Greyling, Jan C. (2012-12)

Thesis (MScAgric)--Stellenbosch University, 2012.

Thesis

ENGLISH ABSTRACT: The importance of the agricultural sector in the South African economy is often stressed by farmers and agricultural industry organisations. The reality, however, is that the sector has constituted less than 3% of the economy since 2005 (DAS, 2012). It is therefore important that the current role of the agricultural sector in the South African economy is investigated. This has been the subject of a number of studies. The most comprehensive study to date was undertaken by Brand (1969) within the well-known framework of Johnston and Mellor (1961). A number of less comprehensive studies have followed. This is the second comprehensive analysis of the role of the agricultural sector in the South African economy. This study reapplies Brand’s (1969) framework to the data currently available. The results are contrasted with those obtained by Brand (1969) and other authors, in order to establish whether, and if so how, the role of the sector has changed in the last 50 years. The results obtained are then incorporated into policy suggestions. The findings of this thesis are, firstly, that the agricultural sector has been unable to meet the demand for the main food items consumed domestically since 2000. This, however, did not result in the predicted rapid increase in food and general inflation. Secondly, agricultural exports have not played a growth-leading, but rather a balancing role in economic development, because the sector maintained a positive trade balance during the full period of analysis. Thirdly, the sector has released labour to the rest of the economy since 1962, thereby fulfilling what is seen as a requirement by the economic development literature. Fourthly, the sector has probably made a net transfer of capital to the rest of the economy since the mid-2000s. Lastly, the agricultural sector plus the sectors with which it has the strongest linkages represented around 7% of the economy in 2010. This study concurs with Brand’s (1969) main conclusion that the South African agricultural sector does not play a growth-leading or initiating role in the economy, but rather a growth-permissive role. This is due to the sector’s relatively small quantitative significance in the economy, which limits the growth impact of agricultural exports, capital transfers from the sector and linkages with the rest of the economy. The sector plays a growth-enabling role, however, by supplying food to consumers at the lowest possible price - either by producing it domestically, or by affording food imports with the exchange earned through the export of agricultural produce. In addition, the sector has an important role in providing employment, especially in rural areas. It is recommended that the current agricultural marketing and international trade policy framework, which is conducive to international trade and limits market distortions, is retained. The sector has the potential, given the adoption of the required policy, to create employment by virtue of its relatively high labour intensity and the existence of some complementarities between capital and labour in the sector. Also, the competiveness of the sector should be increased by means of an investment in infrastructure.

AFRIKAANSE OPSOMMING: Die belangrikheid van die landbousektor in die Suid-Afrikaanse ekonomie word dikwels deur boere en bedryfsorganisasies benadruk. Die realiteit is egter dat die sektor sedert 2005 minder as 3% van die ekonomie uitmaak (DAS, 2012). In die lig hiervan is dit belangrik dat die huidige rol van die landbousektor in die Suid-Afrikaanse ekonomie ondersoek word. Dít was al die tema van verskeie studies, waarvan die mees omvattende tot op hede deur Brand (1969) binne die bekende raamwerk van Johnston en Mellor (1961) aangepak is. Verskeie minder omvattende studies het sedertdien gevolg. Hierdie tesis is dan die tweede omvattende analise van die rol van die landbousektor in die Suid-Afrikaanse ekonomie. Brand (1969) se raamwerk word op die huidige data toegepas. Die resultate word dan met dié van Brand (1969) en ander navorsers vergelyk om vas te stel of, en indien wel hoe, die rol van die sektor verander het oor die afgelope 50 jaar. Hierna word die resultate in beleidsvoorstelle geïnkorporeer. Daar word eerstens bevind dat die landbousektor sedert 2000 nie in staat is om in die binnelande vraag na die hoof-voedselsoorte wat plaaslik verbruik word, te voorsien nie. Dit het egter nie tot die voorspelde sterk toename in voedsel- en algemene inflasie gelei nie. Tweedens het landbou-uitvoere nie ’n leidende rol in ekonomiese groei gespeel nie, maar eerder ’n balanserende rol vervul aangesien die sektor gedurende die volle periode van analise ’n positiewe handelsbalans gehandhaaf het. Derdens het die sektor arbeid aan die res van die ekonomie beskikbaar gestel, soos vereis in die ekonomiese ontwikkelings literatuur. Vierdens het die sektor waarskynlik sedert die middel-2000’s ’n netto-bydrae kapitaal aan die res van die ekonomie gemaak. Laastens het die sektor, tesame met die sektore waarmee dit die sterkste skakels het, in 2010 sowat 7% van die ekonomie uitgemaak. Hierdie studie stem met Brand (1969) se hoofbevinding saam, naamlik dat die Suid-Afrikaanse landbousektor nie ’n groei-inisiërende rol in ekonomiese groei speel nie, maar eerder ’n groei-vergunnende een. Dít is ’n gevolg van die sektor se klein kwantitatiewe omvang in die ekonomie, wat die impak wat landbou-uitvoere, kapitaaloordragte en die sektor se skakels met die res van die ekonomie op makro-ekonomiese groei het, beperk. Die sektor stel egter ekonomiese groei in staat deur voedsel teen die laagste moontlike prys aan verbruikers te verskaf - óf deur dit plaaslik te produseer, óf deur die invoer daarvan te bekostig met die buitelandse valuta wat deur middel van landbou-uitvoere verdien word. Verder het die sektor ook ’n belangrike rol as werkverskaffer, veral in plattelandse gebiede. Daar word voorgestel dat die huidige landboubemarkings- en internasionale handelsbeleid, wat internasionale handel bevorder en markverwringing beperk, behou word. Gegewe dat die vereiste beleid ingestel word, het die sektor die potensiaal om werk te skep weens die betreklik hoë arbiedsintensiteit, en die moontlikheid om arbeid en kapitaal in sommige gevalle op ’n komplementêre wyse aan te wend, wat in die sektor bestaan. Die mededingendheid van die sektor moet ook verskerp word deur middel van staatsinvestering in infrastruktuur.

Please refer to this item in SUNScholar by using the following persistent URL: http://hdl.handle.net/10019.1/71713
This item appears in the following collections: