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JEREMY MAGGS: Agriculture continues to be a cornerstone of South Africa’s economy. Yet, how much do local farmers benefit from global agricultural subsidies? While many countries implement subsidies to safeguard their farmers and food supply chains, the effects on South African farmers competing in a highly competitive global market can be intricate.
To discuss these dynamics and their effects on local agriculture, I am pleased to welcome Wandile Sihlobo, agricultural economist and chief economist at the Agricultural Business Chamber. Wandile, it’s great to have you here. Could you start by explaining why this conversation is gaining traction in our country again?
WANDILE SIHLOBO: Absolutely, Jeremy. The initial step for South Africa is to comprehend our role in global agriculture. We are a prominent player, ranked as the 32nd largest agricultural exporter and the only African country among the top 40.
When we examine South Africa independently, it’s evident that we export nearly half of our production value. With opportunities to expand new cultivation areas and the productivity improvements occurring on many farms, we must pursue every option to enhance export markets for our products.
However, as you noted, we are navigating this situation while the world is increasingly shifting toward protectionist policies that restrict trade and introduce various protective measures…
At the same time, these countries are funneling investments into their agricultural sectors, creating a more advantageous production cost environment for their farmers compared to ours.
This pressing discussion is primarily spurred by recent trends, particularly within the EU. For example, just this past week, France was in the news, and for much of the previous year, there was significant focus on the EU and India, which underscores these developments.
Listen/read: Agri insights: Challenges, wins, and outlook for SA farming
JEREMY MAGGS: Which countries are the largest subsidizers of their agricultural industries? You mentioned the EU—can you correlate its policies with their impact on South Africa’s market competitiveness? What should we be vigilant about?
WANDILE SIHLOBO: Certainly, the principal players in global agriculture that provide subsidies include the US and the EU. For instance, the EU has the Common Agricultural Policy, which delivers substantial support to their agricultural producers.
In contrast, South Africa does not offer any significant subsidies.
The closest form of aid would be measures like the diesel rebate; however, these do not match the capital support that existed before 1994 when substantial agricultural subsidies were available from the former government.
While I wouldn’t advocate for subsidies in South Africa due to our fiscal limitations, the direct repercussions for our country manifest in various forms.
The effects …
Firstly, we are competing in international markets against nations that provide significant producer support, which has long been a vital topic of discussion at the WTO [World Trade Organization].
Secondly, developed countries, especially those in the EU, receive ample support, resulting in numerous farmer groups advocating for even greater assistance from their governments. They are concerned about competition from emerging markets in South America and countries like ours.
These connections demonstrate how global policies can influence South Africa.
Read: South African agriculture needs to crack the Chinese market
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JEREMY MAGGS: Wandile, in terms of protecting our agricultural sector and boosting competitiveness amid the protectionist backdrop you’ve described, could it be time for South Africa to revisit the subsidy discussion, particularly for the more vulnerable sectors?
WANDILE SIHLOBO: Jeremy, the fundamental issue is that South Africa simply cannot afford subsidies. Instead, I think our near- to medium-term strategy should concentrate on expanding our export markets. Our immediate challenge involves the risk of potential market closures or restrictions.
We need to vigilantly cultivate our relationship with the EU and ensure we maintain our place in that market, despite current challenges, as it accounts for South Africa’s second-largest agricultural export destination.
Almost 30% of our agricultural exports go there.
Additionally, we should strengthen our connections within BRICS [Brazil, Russia, India, China, South Africa], the Far East, and the Middle East, exploring opportunities to diversify our export markets to lessen competition in traditional arenas.
However, I would approach the idea of directly subsidizing South African farmers with caution due to the limitations and inefficiencies these policies have historically caused.
JEREMY MAGGS: Wandile, you’ve raised an important question. How can we improve South Africa’s export prospects? What steps should we take?
WANDILE SIHLOBO: In South Africa, there are two critical measures that need to be implemented, Jeremy. First, in the absence of subsidies, the government must ensure that the operational environment for farmers is optimized. This includes effectively managing animal health concerns, ensuring municipal operations are efficient, and enhancing infrastructure—such as ports and roads—to reduce transaction costs.
By streamlining business operations in this framework, we will significantly bolster our agricultural sector. Secondly, concerning export markets, the Department of Agriculture, under Minister [John] Steenhuisen, along with the DTIC under Minister Parks Tau and the Dirco [Department of International Relations and Cooperation] led by Minister Ronald Lamola, should amplify efforts to engage with specific countries like China, India, and Saudi Arabia, advocating for improved market access and the elimination of tariffs on various products. Addressing phytosanitary barriers—particularly those in China for certain goods—should also be prioritized.
Ultimately, enhancing export opportunities and improving logistics support is key for the agricultural sector in South Africa.
Read: A rare South African export success is threatened by crumbling ports
JEREMY MAGGS: That’s the challenge. To wrap up, we are significantly lagging in resolving logistical issues, especially in ports and rail.
WANDILE SIHLOBO: Indeed, ports and rail present substantial hurdles, yet we must continue our efforts. Given that the agricultural sector exports over half of its production and expects increased yields, with over two million hectares of land still underutilized for agriculture, we must tackle logistical challenges to promote agricultural growth and job creation.
This is a discussion that policymakers and our country’s leadership need to engage in deeply.
JEREMY MAGGS: Thank you very much. Wandile Sihlobo, agricultural economist and chief economist at the Agricultural Business Chamber, I appreciate your insights.
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