Although South Africa has a resilient and robust agricultural system, Covid-19 has exposed some fault lines and vulnerabilities in certain value chains that need to be addressed, industry role-players say.
Financial services provider Nedbank on June 4 hosted an agriculture webinar with experts Bureau for Food and Agricultural Policy (BFAP) MD Professor Ferdi Meyer and Agricultural Business Chamber (Agbiz) CEO Dr John Purchase to share insights on the agricultural sector amid Covid-19.
Meyer says the pandemic has three layers of economic impact – a rise in short-term supply disruptions globally, the panic that translates to low business and consumer confidence, and lockdown regulations leading to limited trade for tobacco and wine, for example.
He adds that the agriculture industry has responded to the pandemic – for reasons including food security – by imposing export bans. For example, Vietnam has implemented an export ban on rice, which has had an impact on the price for this commodity, while Russia implemented a suspension on its grain exports.
Further, Canada and Brazil shut down some poultry meat plants over food security fears, and the US and Canada temporarily suspended operations at meat abattoirs over Covid-19 outbreaks in the workplace.
Meyer notes that, overall, South African agriculture has experienced higher prices for agricultural products in rand terms, but meat prices, especially in dollar terms, declined over the Covid-19 period.
Many African countries’ food affordability has come under pressure, owing to the weakening of their local currencies.
Meyer further states that South Africa’s real agricultural gross domestic product (GDP) will likely grow by 6% this year, contrary to the declines across the majority of industries during this time. The sector is poised to further grow by 1.2% in 2021.
He says the growth is led by grains, oil seeds and horticulture, with a healthy 15.9-million-tonne maize crop being harvested this year and record citrus plantations.
However, despite the higher export parity price benefits and food security as a result of good harvests, bottlenecks and container shortage issues at ports impacts on effective exports to international markets.
This while the meat and livestock sector is under immense pressure owing to quick-service restaurants having been closed during the Level 5 lockdown in South Africa, with restrictions still remaining through levels 4 and 3. There has also been lower consumer spend on this luxury product.
Meyer explains that some commodities such as table grapes already had their export peak period in January and February, and remain unaffected now to a large extent.
However, commodities such as citrus, avocados and macadamia nuts are struggling to reach intended European and Asian markets, owing to port and shipping bottlenecks and delays.
Other commodities such as sugar and sheep and wool have been experiencing challenges owing to disease, urbanisation, droughts, higher prices and dampened consumer spend.
Meyer says the agricultural industry must now keep a close eye on consumers and adapt to changing consumption and spending patterns, both locally and abroad.
The industry remains plagued by long-standing issues despite the impacts of Covid-19, Purchase notes, adding that this includes a lack of support for smallholder farms, vast amounts of underutilised land, policy uncertainty around land reform, trade optimisation and infrastructure challenges related to transport, water and electricity.
Purchase says agriculture globally has experienced major disruptions in supply and demand value chains, coupled with changing consumer patterns on food spend, while various countries have implemented protectionist policies.
He mentions that logistics have been a challenge at ports in India, Nigeria, Kenya and South Africa, while the US, Belgium and Canada have had to deal with food waste owing to the closure of restaurants.
“Covid-19 has caused a shake-up in globalisation; we do see some ‘reset’ in terms of globalisation for electronic equipment and motor vehicles, but not as much in agriculture.
“Particularly, the South African government was placing emphasis on localisation long before Covid-19 hit. I believe we will see more protectionist policies coming in and import substitution in many countries, including South Africa.”
South Africa recorded a massive trade deficit of R35-billion in April, despite a drop in imports, while exports fell by 55%, to the value of R65-billion.
Purchase says that with an imminent decline in per capita growth in most African countries, spend on food in the region will come under pressure, to which we will need to adapt – since Africa, and specifically the Southern African Development Community countries, comprise nearly half of South Africa’s export market.
Purchase explains that Covid-19 has also again highlighted the importance of the informal market to ensure food security in rural areas.
He points out that 60% of bread moves through the informal trade and distribution sector, while 40% of fresh produce goes through the informal market, especially through quick-service restaurants.
To this end, Agbiz is engaging with the Gauteng provincial government about small and medium-sized enterprise development for food supply chain security in the informal market.
Government has embarked on a Masterplan Initiative which is essentially a partnership model between government, business and labour in a National Economic Development and Labour Council-approach of social dialogue to establish an environment conducive for investment and inclusive economic growth in various sectors.
The agriculture and agroprocessing master plan is in the process of being drafted, with the private sector’s key issues raised being infrastructure – transport, water and electricity, and trade optimisation; land reform and climate change strategies; and support for non-commercial and emerging farmers.
Purchase says that addressing these concerns can help create at least 30 000 jobs a year and bring in billions of additional value to GDP. Currently, agricultural value chain output amounts to R1.9-trillion, with primary agriculture accounting for R248-billion and 7% of employment in South Africa.
He adds that there remains great uncertainty around Covid-19’s eventual impact on local and global markets, and therefore on the demand side of South Africa’s agricultural value chains, but we need to stay in touch with development and be prepared to adapt.