By Wandile Sihlobo
South Africa does not have a shortage of farming skills. The country is amongst the world’s leading nations in producing several horticultural commodities and a continent’s leader growing some field crops such as maise and soybeans. The integration of black farmers into the commercial agricultural sector doesn’t need outside knowledge but cooperation amongst South Africans.
Why do I mention solely black farmers and not all farmers broadly? For the simple reason that while South Africa is amongst the world’s leading producers and exporters of agricultural products, black farmers only make up between 5% and 10% of the overall production, according to data from the National Agricultural Marketing Council. This small share contribution of back farmers prompted my previous article about the need for commercialisation of black farmers in South Africa.
The commercialisation of black farmers per se is not a novel idea; there have been attempts to support black farmers through various government farmer development programmes. Disappointingly, these have not yielded much success. Hence, we have a tiny share contribution of black farmers in commercial agricultural output. I won’t endeavour to dwell on the programmes and failures as many have written elsewhere about this.
This essay focuses on areas that need urgent attention if we are to truly realise transforma- tion in the sector through commercialisation of black farmers. I highlight examples of the transformation projects that have reached some level of success, with black farmers graduating to produce at commercial level.
These are programmes that need careful study to replicate them elsewhere in the country and various agricultural commodities. These include the public-private partnership, led by The Co-op in the Eastern Cape, also the National Woolgrowers Association within the province.
The Amadlelo Agri and Sundays River Citrus are also amongst the agribusiness with ad- mirable development programmes that need careful study to pick up what has worked and replicate in other regions in the country). In the Free State, the Sernick Group and VKB, amongst other agribusiness have special farmer development programmes aimed at commercialising black farmers. The results thus far are impressive.
At the most superficial level, the interrelated threads that mark these programmes are:
- The effective collaboration amongst the communities, government, and agribusinesses ensure a shared vision on projects and training programmes.
- Financing typically comes in the form of Blended Finance, where government de-risk the projects by providing a share of its funding. Previous funding has been through Jobs Fund by the National Treasury and various pro- grammes that the government has made available in the recent past.
- “Backing the right jockey”. Such an approach is vital in selecting who gets to participate in the farmer development programme. Not all South Africans should be in farming. An important step is by starting to support individ- uals that are already involved in agriculture in one way or another, but at a relatively small scale because of various constraints. These are dedicated farmers, with a willingness to learn from the agribusinesses and mentors provided to the programmes. Where possible, such indi- viduals also invest their capital and have a long-term vision.
- Land availability. The programmes above are typically on Land Reform farms (farms that government has leased to black farmers as part of land reform programmes) and some on communal land. While there has been some success while operating in these unsecured land arrangements, the goal, as I have empha- sised in previous writings, is for government to provide long term tradable leases or land rights to black farmers in these areas.
- The benefits are in unlocking capital but also to incentivise farmers to take care of the land. People that commented in my previous essay about the need for commercialisation of black farmers pointed to this as a stumbling block, rightly so. But, as fellow South Africans will know, resolving the issue of land tenure has been on the table since the dawn of democracy in 1994. Disappointingly, with limited success. But should also be aware of the complexities of dealing with communal land as I outlined in an essay co-authored with Mzukisi Qobo and Theo Boshoff in 2018. In brief, merely allocating tradable land rights might still not solve the lack of communal land investment.
- Moreover, there are also cultural issues that come to play when dealing with traditional African societies as the former homelands of South Africa. That said, some communal areas have excellent demarcation. It may be possible for the government to extend “land rights” in farming areas (emasimini), not in areas where residents reside per se, might be feasible. Broadly, an important aspect and some of the areas mentioned above are the infrastructures to enable linkage of the farming areas to mar- kets. For former homelands, especially areas, where there is still an abundance of under-utilised land in the Eastern Cape, KwaZulu-Natal and Limpopo, infrastructure is a constraint. Fortunately, we do have an avenue to address this, through the infrastructure programmes that the country is focusing on as part of the economic recovery plan. Roads and dams are what’s needed. The private sector can lead other infrastructures such as silos and packhouses.
I have taken a rather simplistic view and left out some crucial pre-requisites for integrating black farmers into the commercial sector — growing the pie through commercialisation of black farmers – as this essay intends to contribute to a discussion not to lay out prescriptions.
Still, I think the crucial aspect, in addition to what I’ve already highlighted, we should be thinking about the most is “finance”. The Land Bank, which many in the previous years used to point people to is currently facing liquidity constraints.
The Blended Finance instruments of the government might also not be sufficient to make meaningful success. Therefore, South Africans should think of other efficient ways of financing this group of farmers. To be clear, I am not referring here to smallholder farmers, that government will continue to support. The focus is on the commercial black farmers at a relatively large scale. We cannot improve the share of black farmers in South Africa’s agricultural sector by focusing on smallholder farmers. We have been focusing on smallholder farmers since 1994, and the commercial output figures have, disappointingly, remained roughly unchanged; the output of between 5% and 10% as I outlined at the outset of this essay.
Policymakers should have this “commercialisation approach” in mind when thinking about distributing land and broader agricultural development programmes. Similarly, the traditional leaders should aspire to have commercial farming on their regions to improve economic activity and help create employment (large scale horticulture creates sustainable jobs).
This essay is an invitation to folks in the finance industry not to shy away from the agricultural sector; instead, look at it as a place for new long-term investment. We need patient capital. Importantly, we need those in finance to help us think of better and efficient ways of financing the South African agricultural sector, especially black farmers’ commercialisation.
By focusing on bringing under-utilised land of the Eastern Cape, KwaZulu-Natal and Limpopo into full production, we can “grow the South African agricultural pie” through bringing black farmers into commercial scale.
In sum, commercialisation of black farmers is not merely an attempt to take from white farmers to black farmers, rather inclusive growth approach, with a bias towards assisting aspiring commercial black farmers at the onset.
Wandile Sihlobo is the Chief Economist of the Agricultural Business Chamber of South Africa (Agbiz). This essay first appeared on South Africa’s Business Day, January 4, 2021