PSG Wealth
Perspective on land issues
Perspective on land issuesDan Kriek: President Agri SA
PSG Wealth - 25 October 2018
PSG Wealth
Perspective on land issues
Outline• Who is Agri SA?
• The evolution of the agriculture value chain over the past decade
• How the industry views the quality and price of imports versus domestic agriculture
• The industry views on drought and related indicators
• The land debate
• The short to medium term outlook on investment in the agricultural sector and food price developments
PSG Wealth
Perspective on land issues
Who is Agri SA?
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• Agri SA is a federation of agricultural organisations
• Established in 1904 as the Southern African Agricultural Union
• Members include: 9 provincial organisations, 26 commodity organisations and 38 corporate members
• Through its affiliated membership, Agri SA represents a diverse grouping of individual farmers regardless of gender, colour or creed
Who is Agri SA?
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Farmers represented in each province
±28 000Farmers
--------------------------
±1 000 Farmers’ Unions
Provincial
Affiliates9
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Perspective on land issues
Animal Production
Milk Producers’ Organisation, National Wool Growers Association of South Africa, Red Meat Producers’
Organisation, South African Mohair Growers’ Association, South African Ostrich Business Chamber, South
African Pork Producers’ Organisation, Wildlife Ranching SA, Aquaculture SA
Horticulture
Banana Growers’ Association of South Africa, Canning Fruit Producers’ Association, Dried Fruit Technical
Services, South African Garlic Growers’ Association, South African Nursery Association, South African
Subtropical Growers’ Association, South African Table Grape Industry, Tomato Producers’ Organisation
Growers’, Vinpro, South African Rooibos Council, Macadamias South Africa
Agronomy
Cotton SA, Dry Bean Producers’ Organisation, Forestry South Africa Medium Growers Group, Grain SA,
South Africa Sugar Association, Tobacco Institute of Southern Africa, SA Cane Growers’ Association
26 Commodity Organisations
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PSG Wealth
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The evolution of the
agriculture value chain
over the past decade
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Perspective on land issues
Number of farming units (Commercial)
5798060938
45818
39966
35000
30000 2900027000
1993 1996 2002 2007 2014* 2016* 2017* 2018*
Nu
mb
er
Source: Stats SA
Source: Agricultural Survey 2007
* Estimate
Farming and Agribusiness Profiles
I
II
III
IVLarge commercial farms &
agribusinesses
Small commercial farms &
agribusinesses
Emerging farms and
agribusinesses
Subsistence farms
and agribusinesses
Source: Stats SA
PSG Wealth
Perspective on land issues
Land: Agriculture and food chain
Input companies
Food companies
Farmers
Traders
Retailers
Consumers
• Seeds
• Fertilizer
• Crop protection
• Animal health and nutrition
• Crop insurance
• Food ingredients
• Field crops
• Horticulture
• Animal production
• Aquaculture
• Forestry
• Game
• Crops
• Meat
• Oils/meal
• Biofuels
• Meat
• Snacks
• Beverages
• Bakery
• Dairy
• Hyper markets
• Super markets
• Small/spaza shops
• Rural
• Urban
Objective: To produce profitably while facing
• Drought
• Climate change
• Predation
• Theft
• Diseases
• Market conditions/Labour costs
• Land reform - EWC
• Farm attacks
• Ever changing consumer preferences & choice of products
Emp
loym
ent:
84
3 0
00
PSG Wealth
Perspective on land issues
Employment by industry
Agriculture; 843,000
Mining, 435,000
Manufacturing1,744,000
Utilities, 161,000
Construction; 1,476,000
Trade, 3,219,000
Transport;1,014,000
Finance and outher business services;
2,399,000
Community and social services;
3,692,000
Private households; 1,296,000
Unskilled/ semi-skilled
92%
Skilled8%
Source: Stats SA, Own calculations
PSG Wealth
Perspective on land issues
Economic importance of agriculture
• Agriculture also creates strong demand for goods and services, especially in rural areas
• Impact of agriculture on other sectors in terms of forward and backward linkages is considerable, with the impact of irrigated agriculture being relatively large
Backward linkages
• Purchases of goods such as fertilizers, chemicals and implements
Forward linkages
• Supply of raw materials to industry and the food supply chain in general
13
Approximately 70 percent of agricultural output is used as intermediary products in other
sectors
PSG Wealth
Perspective on land issues
Farm income & expenditure
0
40000
80000
120000
160000
200000
240000
280000
20
05
/06
20
06
/07
20
07
/08
20
08
/09
20
09
/10
20
10
/11
20
11
/12
20
12
/13
20
13
/14
20
14
/15
20
15
/16
20
16
/17
20
17
/18
R m
illio
n
Gross income
Expenditure on intermediate goods and services
Net farm income
Source: DAFF
PSG Wealth
Perspective on land issues
About the sector (2017/2018)
12% of the surface area can be used for crop
production of which only 22% is high potential
Expenditure on intermediate goods and
services amounted to R146 billion (6,4%
increase). Farm feeds remained the biggest
expenditure item, followed by
maintenance/repairs and labour
Net farm income increased by ± 1%
Cash flow of farmers decreased by ± 5%
The value of exports increased by 6%, from
R97,429 billion in 2016/17 to R104,577 billion
in 2017/18
Debt level increased to R166 billion. Collateral
is still available and investment is still taking
place
The primary formal sector employs approx. 843
000 people. Labour remuneration is a major cost
item, approx. R19 billion in 2017/18
The contribution to GDP, if the entire value chain of
agriculture is considered, can be approximately
between 10% & 12%. Agriculture is an important part
of our economy and in addition, ensures South
Africa’s food security.
Source: DAFF
PSG Wealth
Perspective on land issues
Provider of food
• In 2035, South African population is estimated to reach more than 66,9 million
• Population grew by 59% from 1991 to 2018
• Agricultural production increased more than the population growth over the same period
Challenges:
– Climate change/Drought
– Cost of transport/input costs
– Availability of water and quality of water
– Improving productivity
– Maintain and improve profitability
– Restrictive legislation/regulations
– Limited government support
– Cost of crime
– Insufficient service delivery
– Infrastructure constraints
6.0
7.0
8.0
9.0
10.0
11.0
12.0
Volume index of Agricultural Production in RSA
Field Crops HorticultureAnimal Production Food Production
Source: DAFF
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
*
42000
44000
46000
48000
50000
52000
54000
56000
58000
60000
‘000
Population
PSG Wealth
Perspective on land issues
Support for Agriculture
22.824.8
1453.5
950.9
55.73.8
5.949.2
12.353
18.32
17.87.5
9.917.3
9.62.4
0.81.91.72.3
-7.114.5
12.1
-20 -10 0 10 20 30 40 50 60
TurkeyPhilippines
ChinaKorea
ColombiaSwitzerland
IcelandKazakhstanCosta Rica
JapanRussia
NorwayEuropean Union
BrazilOECD
MexicoUnited States
IsraelCanada
ChileNew ZealandSouth Africa
AustraliaViet Nam
UkraineAll Countries
Emerging Economies
OECD Producer Support Estimate (PSE) for selected countries, 2017
The Producer Support Estimate (PSE) is shown as a % of gross farm receipts.
The OECD defines Agricultural support as “the annual monetary value of
gross transfers to agriculture from consumers and taxpayers arising from government policies that
support agriculture, regardless of their
objectives and economic impacts.”
Source: Agricultural Policy Monitoring and Evaluation, OECD (2018)
PSG Wealth
Perspective on land issues
Agricultural Debt, Farm Assets and Debt as % of Assets
23.00%
24.00%
25.00%
26.00%
27.00%
28.00%
29.00%
30.00%
31.00%
32.00%
33.00%
0
40000
80000
120000
160000
200000
240000
280000
320000
360000
400000
440000
480000
20
10
/11
20
11
/12
20
12
/13
20
13
/14
20
14
/15
20
15
/16
20
16
/17
20
17
/18
R m
illio
n
Debt as % of Assets
Total Farm Debt
Total Farm Assets
Source: DAFF
PSG Wealth
Perspective on land issues
Expenditure on intermediary goods and services, interest, labour and investment in vehicles, machinery and implements
2016/17
R million
2017/18
R million% Change
Farming services
Building and fencing materials
Fuel
Animal health & crop protection
Electricity
Insurance
Maintenance and repairs
Fertiliser
Packing material
Seed and plant
Farm feed
Total: Intermediary goods and services
Labour costs
Interest
Gross Investment: Vehicles, machinery, implements
17 879
6 020
12 552
9 082
7 028
4 790
18 643
6 850
6 532
9 826
42 514
137 216
17 835
8 828
10 261
16 867
5 525
12 164
8 568
6 306
5 365
19 575
7 056
7 120
8 933
40 178
145 999
18 908
9 591
10 890
6,0
9,0
3,2
6,0
11,5
12,0
5,0
3,0
9,0
10,0
5,8
6,4
6,0
8,6
6,1
Source: DAFF
PSG Wealth
Perspective on land issues
Drivers in Agriculture
Agriculture must keep up with the latest
technology and invest in it, otherwise it could be
detrimental to the sectorTechnology
Invest
Demand
Invest to grow and stay competitive
The demand for agricultural products
especially from South Africa’s
neighbouring countries will continue to
grow
Adaptability Only the most adaptable businesses will survive in future
Good staff to quickly adapt to a new, fast-changing
business environment, where technology is going to be
very disruptive
Good financial support
from financiers will be
required
Employees
Support
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Perspective on land issues
Commodity inputsSA Canegrowers:
• The sugarcane value chain evolves to meet the needs and challenges of all role-players over time
• The industry has introduced its own mechanisms to deal with issues such as the threat of additional taxes on overloaded haulage vehicles which damage the
roads.
• The internal system set up by the industry called the Road Traffic Management System (RTMS) has proven successful in reducing overloads on vehicles
and therefore averting the proposed taxation of haulage vehicles on the roads.
• The evolution of the value chain continues to evolve and change as margins become smaller, so efficient farm management and production is required.
• The drive towards economies of scale have also occurred in Large-scale grower sector where larger growers have been leasing and buying up land to achieve
economies of scale.
• Therefore there has been decreases in grower numbers 10 years ago a 10 000 ton producer was able to be financially sustainable, but today growers need to
achieve upwards of 15 000 tons.
• Diversification has also played a major role in the sugar industry as growers have invested in other crops to reduce the risk of sugarcane only revenue.
• The Small-scale grower sector has also undergone major changes as growers have either entered into lease agreements with other small-scale growers or
companies looking to expand cane production. Since 2000 where 13% of SSG cane production came from Co-operatives and Projects, that share has increased to
59% of SSG cane production is produced by Co-operatives and projects. This is a clear indicator of SSGs coming together to improve their economies of scale
Grain SA:
• Over the last decade the agriculture value chain became much more integrated as the processors became more integrated and more diverse in terms of the
products they produce and brands they managed.
• With international markets becoming more and more accessible, competition is fierce between locally produced goods and imported goods.
• To be able to compete efficiently, South Africa will need to invest more in local infrastructure, especially rail, road and harbour infrastructure.
• Comparatively, South Africa is not faring well against their major trading partners when looking at the cost of logistics in the agricultural values chain.
PSG Wealth
Perspective on land issues
Red meat producers:
• 40 % of livestock is owned by emerging producers - they were to a larger extent integrated into the value chain.
• The beef feedlot industry has a throughput of almost 80 % of all beef in South Africa. They became more vertically integrated.
• The skins, hides and leather industry is very relevant.
Dried Fruit Technical Service:
• At farm gate level - Increase in production output, mainly due to new cultivars
• Shift to adding value on-farm in drying process
• Processing/export - Introduction of new technology, example colour scanners.
Commodity inputs
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How the industry views the
quality and price of imports
versus domestic
agriculture
PSG Wealth
Perspective on land issues
Agricultural trade balance, 2008/09-2017/18
0
10000
20000
30000
40000
50000
60000
70000
80000
90000
100000
110000
R M
illio
n
Agricultural exports
Agricultural imports
Agricultural trade balance
Source: DAFF
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Perspective on land issues
South African Trade Map (2017/18)
Netherlands12%
United Kingdom
10%
China7%
Myanmar6%
United States4%
Hong Kong4%
Zambia4%
Germany3%
Japan3%
United Arab Emirates
3%Zimbabwe
3%
Russian Federation3%
Vietnam2%
Other36%
South Africa Agri export destinations
Brazil8%
Thailand7%
Argentina6%
United States minor outlying islands
5%
United Kingdom5%
China5%
Germany5%
Indonesia4%
Netherlands4%
France4%
India4%
Malaysia3%
Spain3%
Other37%
South Africa Agri import suppliers
Source: DAFF
PSG Wealth
Perspective on land issues
0
1
2
3
4
5
6
7
2018 2019
CPI inflation (SARB) CPI inflation (National treasury) Food inflation
Consumer and food price inflation outlook
Source: Compiled using estimates from the SARB and National
Treasury
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Perspective on land issues
Commodity inputs
• SA Canegrowers: The world sugar market is experiencing the lowest prices in 5 years. Sugar
producing countries are disposing of their excess production at below the cost of production onto the
world market. At present there is an expected surplus of 15 mn tons on the world market. The world
sugar price well below the cost of production of SA sugar and world sugar can be imported at a
similar quality. SA sugar is one of the top 20 most cost effective producers in the world (out of
126). The current world price is not linked to cost of production but rather dumping of excess
sugar.
• Vinpro: Not directly linked, but the SA Wine Industry exports 60% of the local produce across the
world, with focus countries being the East, USA, UK and Africa. Critical to highlight the fact that the
industry needs to ‘up’ our competitiveness against countries like Chile, Argentina, NZ and
Australia, hence we are working in close collaboration with DTI/DAFF. We would like the SARB
to be aware of the trade hurdles (Trade Agreements and Non-Tariff Barriers) … posing a huge
challenge to ensure a viable industry, hence discussions around BRICS/Brexit/Agoa to be seen as very
critical, together with similar discussions on the Africa-continent … not merely focus on volume exports,
but rather on the value-creation and to ensure viable ROI’s at producer level – with all the benefits
and/or challenges going with it, should we not succeed in ‘up’ the trend.
• Dried Fruit Technical Service: SA does import small quantities of dried fruit - SA is a net exporter.
Imported quality does not generally compare favourably with domestically produced dried fruit and the
price is also not favourable. Local production is supported for the revenue it brings and the job
opportunities created.
PSG Wealth
Perspective on land issues
Commodity inputs: Grain SA
• In terms of grains most of the local produced grains are of better quality than the imported grains due to various factors. In some grains like maize one of the main reason why the local quality is better than the imported quality is due to the hardness of the maize as the conditions related to production seldom place the local crop in a situation where the maize needs to be dried off artificially. The on field drying of the maize to the desired moisture content is one of the factors that contributes to the better quality of the locally produced maize. In other international areas the maize is usually harvested with a higher moisture content and needs to be dried off artificially which has an impact on the factors such as hardness, which is an important aspect for the milling industry. Harder maize kernels will tend to produce less by-products and the milling percentage will be higher.
• The local maize prices is currently trading closer to the export parity prices as there are surpluses of maize available currently in South Africa and therefore we need to export maize. The international maize prices is low and when the prices trades at the levels which South Africa is competitive in the international markets the profitability of the local farmers are largely under pressure. A contributing factor to this is that more than 80% of South Africa’s agricultural input needs has to be imported.
• In terms of other grains such as wheat the South African quality is better than most of the origins from which South Africa imports wheat currently. This is mainly due to the high quality wheat cultivars planted locally in comparison with the international cultivars which specifically relates to quality and yields.
• The international wheat prices is very low and the countries from which South Africa import wheat also has relatively large subsidies in place making the South African competitiveness in the international market very difficult. The local market prices are mainly derived from the international prices since South Africa is importing on average around 50% of the local wheat demand per year. There are already a variable formula import tariff in place for wheat imports in order to protect the local producers.
• In general, looking at the other grains and oilseeds such as soybeans, sunflower seeds, sorghum and groundnuts the international trade with these commodities are relatively small in relation to maize and wheat. The quality of most of the South African produced grains and oilseeds are better than the qualities in the international markets, although that is mainly regional as there are good qualities in some international countries, but the trade between South Africa and these countries are fairly low.
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Beef Price Trends
The following conclusions can be made:
• The A-grade beef prices are well below import parity
prices internationally - so the S A beef industry is
internationally very competitive.
• SA was for the first time in 2016 a net exporter of beef.
• Due to SA's unique grading system, and well developed
feedlot system, SA's beef is of a very high quality.
• Most beef imports are low quality beef and offal for the
manufacturing industry.
• Imports from Botswana Namibia are of fair quality.
Lamb and Mutton Price Trends
The following conclusions can be made:
• Import parity of domestic lamb and New
Zealand Lamb are on the same level - thus we
are internationally competitive.
• Most imports of mutton is from Australia, which
is a low quality product.
• Imports from Namibia is of the same quality as
in South Africa
Re
d M
ea
t P
rod
uce
rs
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Perspective on land issues
The industry views on
drought and related
indicators
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Drought
In recent years, droughts have become a more
prevalent challenge to agriculture in South Africa.
Within this context, it is important to note
Agriculture’s importance for food security, economic
development and employment:
• Agriculture is 3.2 times better at reducing poverty
than non-agriculture
• 1% in GDP due to agriculture, increases income
of the poorest by more than 6%
• Agriculture has substantial multiplier effects such
as job creation potential though extensive
linkages with the rest of the economy
• Agriculture has the potential to create economic
opportunities in rural and peri-urban areas
Source: Barclays. (2016). Agricultural workstream
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Perspective on land issues
Drought channels of economic impactAgricultural
output/
Production
expectations
Sales of
inputs to
the
agricultural
sector
Export
volumes
Agricultural
investment
Farm
incomes
(livestock
losses
and crop
failures)
Commodity
prices/
Food
prices
Household
consumption
Economic
growth Fiscal
pressure
Inflation
On-farm
employment
Imports of
agricultural
products
• Droughts can have a direct impact by reducing agricultural output
• Farm incomes, export volumes, on farm employment, sales of inputs to agricultural as well as household spending are expected to fall during times of drought
• Conversely, inflation and fiscal pressure are expected to increase during times of drought
• Considering these potential channels of impact, a targeted approach to disaster management is needed
Source: Agri SA research
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Perspective on land issues
Economic impact of the drought on the Western Cape agricultural sector
Source: Pienaar, L. & Boonzaaier, J., (2018), Drought policy brief: Western Cape Agriculture. Available online:
http://www.bfap.co.za/documents/research%20reports/DroughtPolicyBrief_2018.pdf
*Figs; Pomegranates **Potatoes, Onions, Butternut, Pumpkin, Carrots, Cabbage ***Wheat, Canola, Barley
PSG Wealth
Perspective on land issues
Agri SA: drought mitigation
1. Drought report for the NAMC:
will present context and
possible solutions
2. NAMC and industry to
collaborate and drive the
process
1. Establishing a disaster fund to whichgovernment and the farming community(and/or general public contribute to on a50:50 basis). Incentivising private sectorcontributions through tax incentivescould be considered. Management ofsuch a fund to be decided
2. Leveraging Public-Private Partnerships (PPPs)
3. Promoting a multiperil agricultural insurance system
4. Establishing infrastructure to support disaster relief initiatives
Current industry
collaboration: Agri SA,
NAMC, NDMC, BFAP,
AGBIZ, AFASA:
Agri SA’s proposed
approach to Smart Disaster
Aid (SDA) incorporates four
key components:
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Perspective on land issues
Agri SA approach
Disaster Fund
A centralised fund, funded in partnership:
• Government funding
• Farmer contributions
• Contributions from the public
PPPs
• Partnerships to promote water saving measures and programmes
• Collaboration to develop drought resistant cultivars
• Collaboration: state farms can be utilized to produce high quality fodder
• Collaborative support for financing and infrastructure
Multiperil agricultural insurance
• Subsidies for insurance premiums
• Assistance with excess amounts not covered
• Cover for major droughts that have an impact on irrigated production
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Agri SA approach
Supportive infrastructure
• Develop and establish supportive infrastructure that can support disaster relief programs
• Develop an efficient mobilisation process
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Commodity inputs
SA Canegrowers:
• The speed at which government declares a drought could be increased in order to ensure that relief funding is made available at
a faster rate.
• The drought in KZN was devastating and the growers are still feeling the effects of it.
• Industry led initiatives are desperately needed to ensure that growers can mitigate drought risks and fund their own recovery
rather than relying completely on government for funding.
Grain SA:
• Drought and drought conditions, coupled with extreme heat is a big factor of concern for the South African grain production as most
of the local grains is produced under dryland conditions (90% dry land hectares vs 10% irrigation hectares).
• The last three years one of the biggest concerns in the summer rainfall areas was the fact that the rain came late in the season and
the plantings took place very late for most of the crops. Despite the late plantings the crops are however looking promising, but
the risk associated with the production is bigger with the late planting dates.
• As highlighted above the risk of drought conditions could be detrimental for the grain production and due to the uncertainty of the
weather conditions and crop production there are certainly a need for certain types of government supported crop insurance
schemes.
• The factors remain a concerns as this is very uncertain circumstances and it is very difficult to forecast this accurately, increasing the
risk for local grain producers. Drought conditions can have a severe impact on the local commodity prices especially on the
summer grains. In terms of the winter grains the impact of the drought conditions do not have such a large impact on the prices of
commodities such as wheat as large portions of the local needs are already imported and the prices trades most of the time at the
import parity prices.
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SA Grape production
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Commodity inputs
Red Meat Producers
• After the countrywide drought of 2016 we are in a herd building phase.
• Although 2017 and 2018 were very good rainy seasons except for the northern and western provinces it will still take another 3 years of normal rainy seasons to conclude the herd building phase.
• The red meat industry on producer level has an annual turnover of R78 billion -the herd building phase is a big opportunity in terms of financing by credit providers also due to the fact that red meat prices has increased by almost 30 % in the last 2 years.
Dried Fruit Technical Service
• Drought has had a significant impact, in particular the Western-Cape.
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Perspective on land issues
The land debate
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Perspective on land issues
Context: Expropriation without compensation
• The first question that arises, and this is seemingly the question that the Constitutional Review Committee will pose to South Africans, is :”Is section 25 of the Constitution an impediment to land reform?”
• Constitution: finely a balanced property clause is, measures it provides for have not been implemented to their full extent, neither has section 25 been before the courts in sufficient cases for the judiciary to really interpret it and bring clarity;
• Agri SA fully supports the findings by the High Level Panel on Key Legislation in this respect. We believe their diagnosis of the problems besetting land reform, are spot on.
• We need to jointly create a vision for our rural areas going into the future and concretise the steps to achieve that dream. The NDP should be the basis for that.
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Perspective on land issues
Context: Expropriation without compensation
• ANC decision on 20 December
• Expropriation without compensation• Impact on economy
• Food security
• Currently• Evaluate section 25 of the Constitution
• Expropriation without compensation: not yet any specific plan or mechanisms proposed
• High Level Panel on Key Legislation • Biggest challenge standing in the way of land reform is not the property rights clause,
but the implementation of land reform policies, procedures and extended entrenched corruption in the system
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Perspective on land issues
Impact Scenario
• Not yet any specific plan or mechanisms proposed
• The figure illustrates the potential negative impacts in a worst case scenario
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Perspective on land issues
• In conjunction with the impacts illustrated above, expropriation could impact the following economic and social drivers:
Agricultural production
South African Economy: GDP growth & welfare stagnate - poverty levels rise
Financial system
Contribution to GDP,
government tax
revenue & food
security
Food
security:
net exporter
Employment
Forward and
backward
linkages to other
sectors
Supply
inputs to
downstream
& purchase
from
upstream
Expropriation destabilises the economy: creates a barrier & breaks down the economic system
Interlinked
economy
Capital flight, depreciation of the rand, hyperinflation, net importer of food etc.
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Perspective on land issues
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Solutions
• Agri SA believes that the solutions are already catered for in the framework provided for in the Constitution, the NDP, Operation Phakisa and various private sector plans including the Agri SA holistic plan for land reform and rural development
• For successful farmer establishment, the following elements should be present:
✓ Land
✓ Equity
✓ Beneficiary selection
✓ Value chain participation
✓ Post settlement support
✓ Partnerships
• It is important that we reach consensus on who owns what and how much land has been transferred to date – not only through government programmes, but also through the market
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What are Agri SA and its affiliates doing?
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What are Agri SA and its affiliates doing?
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Land audit
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Strategy emanating from land audit
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Perspective on land issues
What do we want to achieve?1. Establish the factual basis of land distribution as a point of departure
2. Sustainable agrarian reform
3. Economic growth and job creation
Alignment of the strategy must be in line with:1. Constitution and the rule of law
2. Property right protection and conversion
3. NDP goals – Chapter 6
4. Operation Phakisa (agricultural development component)
Strategy emanating from land audit
PSG Wealth
Perspective on land issues
Proposed solutions
• Retain section 25 as is
• Test expropriation powers. Finalise Expropriation Bill
• Implement High level Panel recommendations:
• Government should test its expropriation powers
• Well-situated state-owned land needs to be made available for housing for the poor
• Land Framework law
• Land Records Act
• Create an office for an Ombudsman for land reform
• Address communal land issue –enable capitalisation of land
PSG Wealth
Perspective on land issues
Agrarian reform to 2025• Implement Chapter 6 of the NDP – utilise the financing
models that have been developed
• Promote partnership models for joint-farming operations between black and white farmers
• Stimulate and support efforts of commodity organisationsto assist smallholders in enhancing their productivity and income generating capacity (NWGA and Grain SA projects as examples)
• Commercial farmers to get even more involved with social upliftment of farm workers and rural communities
• Transfer 4000 state farms to beneficiaries: title deeds
• State Land privatized:
• DPW
• DRLD
• Create Agricultural Development Agency (ADA)
• Social accord on land and rural development?
PSG Wealth
Perspective on land issues
Agricultural Development Agency (ADA)
Agricultural
Development
Agency
Emerging / Commercial
Farmers
Leveraged
finance
Private sector funding
Government funding
supportLand
Capital
investments
Operational
expenditure“Agriculture or public
contribution” ??
Economic development and transformation
PSG Wealth
Perspective on land issues
The short to medium term
outlook on investment in
the agricultural sector and
food price developments
PSG Wealth
Perspective on land issues
NDP: Agriculture and agro-processing:
Agro-industrial cluster
• Agriculture still one of the most labour intensive goods producing sectors
• Substantial employment linkages
• Relative (to other regions) ➔small share of rural population engaged in agriculture
• Optimistic scenario ➔ 1 million direct and indirect jobs
Key proposals
• Substantial investment in irrigation infrastructure
• Investment in market linkages for small scale farmers
• Preferential procurement for new agricultural entrants
• Policy to increase intake of fruit and vegetables
PSG Wealth
Perspective on land issues
NDP: Agriculture
• 1 million new jobs by 2030
• Expansion of irrigation by 500 000 hectares
• Convert some under-used communal land
• Select and support commercial agricultural sub-sectors and regions with the highest potential
• Job creation up and downstream
• Creative combinations between opportunities
• Develop strategies that give new entrants access to product value chains
PSG Wealth
Perspective on land issues
NDP: Expand commercial agriculture
• 350 000 jobs
• Rehabilitated citrus orchards – 7000 additional jobs
• 4 700 ha of table grapes in Orange River Region
• Subtropical fruit
• ➔ revival of banana industry
• ➔ Avo’s ➔ 30 000 jobs
• Vegetables: 25% Below potential
• Small-scale labour intensive agriculture (macadamias, cherries, berries, etc. – 80 000 jobs)
• Large, non-labour intensive industries – Grain, oilseeds ➔ increase mainly for animal feed.
PSG Wealth
Perspective on land issues
Where should we focus?
Update on NDP Employment & Investment 2030 Matrix
PSG Wealth
Perspective on land issues
Value of Capital Assets (2017/18)
Land and fixedimprovements R264,2 billion
Implements, motor vehicles,tractors R74,1 billion
Livestock R149,6 billion
Total R488,0 billion
Source: DAFF
Commercial banks
Land Bank
Agricultural co-operatives
Private persons
Other debt
Other financial institutions
Agricultural Credit Act
Who Farmers owe money to
Farming debt in 2017/18 – R166 billion
R51,62 million
R975,36 million
R1.78 billion
R3.22 billion
R11,71 billion
R47,71 billion
R100,57 billion
PSG Wealth
Perspective on land issues
Investment in Agriculture
-4000
-2000
0
2000
4000
6000
8000
100002
00
9/1
0
20
10
/11
20
11
/12
20
12
/13
20
13
/14
20
14
/15
20
15
/16
20
16
/17
20
17
/18
R m
illi
on
Fixed Improvements Machinery & Implements Change in livestock inventory
Source: DAFF
PSG Wealth
Perspective on land issues
Commodity inputsSA Canegrowers
• The current financial position of the sugar industry is dire and does not allow for any investment as industry players are not recovering their
cost of production.
• The only real solution is an increase in revenue in order to ensure that the return on investment is met. This can only be achieved if an
appropriate tariff is granted so that producers of sugar cane and sugar are able to cover their costs of production adequately.
• If no increase in tariff protection is granted, the sugar industry will face destruction, mill closures and great losses in jobs. The price of
sugar is currently linked to import parity.
Grain SA
• Policy certainty in South Africa will drive investment in the short to medium term.
• The short to medium term outlook in terms of grain prices is that the prices may remain fairly low.
• The maize production for the previous season that reached a new record resulted in large carry over stock to the new season.
• The new season’s maize crop is also looking favourable with the CEC that estimates the crop to be over 12 million tons for the season. South
Africa will yet again have large exportable surpluses of maize available and the prices are likely to remain at the export parity price levels for the
remainder of the season.
• Therefore, the biggest factors which will likely have an impact on the maize prices in the short to medium term is the international
prices and the exchange rate.
• Since South Africa is a net importer of wheat the local wheat prices is mainly driven by the international wheat prices. According to the
current international wheat fundamental information the international prices is likely to remain at the fairly low levels in the short to
medium term and therefore the likelihood of sharp price increases in the local market is also fairly small. Because such a large portion of our
inputs are imported, the value of the rand, together with Brent Crude oil prices might play a significant role in production costs for grain producers.
PSG Wealth
Perspective on land issues
Commodity inputs
Vinpro
• Also part of the larger SA perspective, with the typical uncertainty that any Investor would like to understand, prior
investing in a country – e.g. the Moody and other similar reports that take into account a number of key political,
economical and other indicators.
Red Meat Producers
• Red meat demand is growing and producer prices will increase on a higher percentage than inflation.
• Exports of specifically beef, is very promising - 42 countries currently. We need to get into the DOLLAR and YENcountries.
• Local and African demand for red meat is very high.
• If the expropriation debate ends on the high road scenarios, and property rights are granted to emerging producer's, it could be a opportunity to provide production funding.
Dried Fruit Technical Service
• Current uncertainty with regard to property rights, impact delay new investments/developments;
• Positive international outlook for dried fruits export;
• No short- to medium term expansion on processing capacity;
• 83% of product exported, industry earning foreign currency;
• Industry labour intensive, new developments could stimulate job creation.
PSG Wealth
Perspective on land issues
Source: Agri SA
PSG Wealth
Perspective on land issues
Contact details:
Dan Kriek
Agri SA President
T I +27 (0) 12 643 3400
C I +27 (0) 82 944 0566
PSG Wealth
Perspective on land issues
Disclaimer
Everything has been done to ensure the accuracy of this information, however, AGRI SA takes no responsibility for any loss or damage incurred due to the usage of this information.