Address by the Gauteng MEC for Economic Development, Environment, Agriculture and Rural Development Lebogang Maile on the Occasion of the Agricultural Economics Association of South Africa (AEASA) conference, 14 September 2016, Misty Hills Country Hotel
Programme Director
Honoured Guests
Members of the Media
Ladies and Gentlemen
It is a great privilege and honour to be addressing you on the opening day of this conference. The global macroeconomic environment underpinning the outlook for agricultural markets has been characterised by considerable volatility for several years. The impact of the financial crisis remains evident in many countries as high debt levels continue to hamper consumer spending and growth. The World Bank has revised its 2016 global growth forecast down to 2.4 percent due to sluggish growth in advanced economies, stubbornly low commodity prices, weak global trade, and diminishing capital flows.
Honoured Guests
As a member of the BRICS countries, South Africa is widely recognised as the gateway to the African continent, linking the BRICS economies to more than a billion consumers. Like most emerging economies, South Africa has started to evolve from a primary economy (one based on direct exploitation of natural resources such as farming and mining) to a tertiary one (based on the provision of services such as finance, retail, media, tourism etc.) In spite of this agriculture remains an important sector in our economy, providing the country with a means to meet two basic needs: food and employment.
Aside from the drive to transform the sector, South Africa’s rapid urbanisation over the past twenty plus years has placed a huge burden on agriculture, which has driven food inflation and the knock-on effects up the supply chain. In recent years although the relative size of the agricultural sector has been declining, the value added by agriculture has shown an upward trend. This can be linked to investments by government and other financial institutions and also the development strategies that government implemented out of a realisation of the importance of the agricultural sector within a modern economy.
Programme Director
From a Gauteng City Region (GCR) perspective our goal is to develop a new, modern, innovation-driven agricultural sector as part of our Transformation, Modernisation and Re-industrialisation programme, which will contribute to the New Growth Path’s (NGPs) objective of the sector creating 1 million jobs by 2030. The NGP also posits that, “jobs will be created by addressing high input costs and up scaling processing and export marketing. “ In line with this, we want to position GCR as a hub for food manufacturing and processing, as Gauteng currently houses over half of the companies in South Africa’s food processing sector and we also have a competitive advantage in: processing, packaging and distribution. Agriculture has strong backward and forward linkages and we see an opportunity to transform the sector within value chains through these forward and backward linkages.
Agro-processing contributes 7.8% towards the total manufacturing activity in Gauteng, which relates very closely to the primary agriculture sector in Gauteng. The agro-processing sector comprises of a highly diverse group of sub-sectors and industries. The major sub-sectors include: food processing, beverages, aquaculture, horticulture & medicinal, aromatics and flavourants. The agro-processing sector has particularly strong linkages both up and downstream. Up-stream, the sector links to agriculture across a wide variety of farming models and products. Down-stream, the sector’s products are marketed across both wholesale and retail chains, as well as through a diverse array of restaurants, pubs, shebeens and fast food franchises. Moreover, the food processing sector is now the largest manufacturing sector in employment terms with some 300,000 employees at a national level. Gauteng makes up the biggest contribution to this figure at 91 000 as of 2015 followed by the Western Cape. This is not surprising since GCR is home to some of the biggest agro-processing firms, as stated earlier.
Programme Director
Within GCRR we are looking at building new nodes of economic development in the Western and Southern Corridors by promoting agro-processing as well as green and blue economy projects. One of the exciting areas we are looking into in this regard is developing the province’s horticulture, aquaculture and floriculture industries, where there is immense potential for growth and job creation. We are actively promoting small scale farming and urban food production in corridors with potential such as Sedibeng and the West Rand. We have also established partnerships with the private sector to boost and transform the agro-processing sector within the province. Examples are partnerships we have with the likes of Pick n Pay, Woolworths, and Spar to open up new markets for smallholder farms within the value chain as well as our partnership with Heineken breweries.
One of the challenges we have faced within the sector, has been the drought, which has affected Southern Africa as a whole, hampered food production and resulted in food price hikes. The effect of the drought is now clearly visible in most retail prices for food. In the case of super maize meal, prices for June 2016 were approximately 41 % higher compared to June 2015 for a 5kg bag. High maize prices have had a knock-on effect on the maize meal price, a staple food for many South Africans. It is expected that this trajectory will persist until the harvest period of May 2017. Looking ahead, there is a high probability of above-normal rainfall early in summer as an El Nino pattern continues to weaken and transitions into La Nina, which would lead to a good 2016/2017 crop, Should weather forecasts remain on course, we can expect agricultural production to bounce back by mid-2017 resulting in significant moderation in food prices, particularly grain.
As GCRs government we are working with farmers to implement our Twenty Year Food Security Plan in order to mitigate against potential future droughts and we also instigated a wide range of interim measures to help our farmers (emerging and subsistence farmers as a core focus) stay afloat through this drought period.
Honoured Guests
Our plans to build a modern, transformed agricultural sector also include but are not limited to the following measures:
· Refurbishing, upgrading and modernising the Sedibeng Vereeniging fresh produce market in the Southern Corridor to create greater access to markets for smallholder farmers.
· Farmer support through research into climate smart agriculture, provision of productive inputs, extension services and training. In line with this we have established research partnerships with the University of Pretoria, Natural Agricultural Marketing Council, Agricultural Research Council, Africa Bio and Wits University which will help us to be on the cutting edge of innovation and drive us towards building a sustainable, modern agriculture sector.
· We are driving the agenda of giving smallholder farmers greater participation within our procurement programme as well as using private sector partnerships to give them a greater percentage share in the agriculture value chain of our economy.
· We are providing farmers with support through: mentorship, farm infrastructure, production and mechanisation inputs as well as capacity building.
· We are establishing Agri-parks.
· Mainstreaming climate change into our developmental agenda as GCR
· Developing green technologies and processes (a high growth area of great focus for us).
Honoured Guests
We are at an opportune moment to build a modern agriculture economy that will contributing significantly to our goal of creating jobs and improving people’s lives, helping us fight poverty and inequality within GCR and contributing significantly towards South Africa’s food security. We hope that the deliberations and interaction within this conference will help take us a step further in that direction and are excited to see the outputs that will come out of here. I thank you.