If we allow the current surplus to decline into a shortfall, the cost to the average South African will be considerable. This situation will result in greater amounts having to be spent on imported agricultural produce.
An ABSA survey of the agricultural sector highlights the fact that South Africa sells its agricultural produce internationally. These sales are in markets where the levels of agricultural subsidization are substantially higher than in South Africa. This in turn has meant that domestic price increases in agriculture have to be limited in order to remain internationally competitive. South Africans have benefited at the expense of the farming community.
The ACDP, in principle, is not in favour of the large-scale granting of subsidies agricultural or otherwise, but wisdom has to be employed in ensuring that the necessary growth be stimulated in the agricultural sector.
The ACDP will endeavour to encourage the necessary growth in output by employing the necessary medium to long-term incentives.
The impact of agriculture on other economic sectors
Of further importance to the economy is the linkage effect of the agricultural sector with other sectors.
The secondary importance of agricultural activity must not be disregarded.
According to the ABSA survey, agricultural purchases and sales expressed as a percentage of gross agricultural income is extremely insightful. It shows that industries benefit most from agricultural spending (47.9% of gross income).
The second single largest benefit flowing from the agricultural sector goes to labour, with wages making up no less than 20.2% of gross agricultural income spending, according to records provided by the Central Statistics Services. It is clear from the above that a large part of the industrial sector is dependent on agriculture.
About 25% of our total industrial production sources basic raw material inputs from the agricultural sector.
More than 60% of total gross agricultural production is delivered to the manufacturing sector for further processing.
As a provider of employment, the contribution of the agricultural sector is very significant. An estimated 850 000 workers are permanently employed in agriculture. Still, the need for greater levels of mechanization in order to achieve optimal production and the rising cost of labour are the main reasons for job opportunities declining in South Africa.
Cost increases in agriculture
The ACDP is concerned with the price and cost increases in agriculture, as this translates directly into higher living costs for all South Africans.
In searching for the complex factors that helps one to derive a reason for this increase, the following is to be noted:
The total outstanding agricultural debt rose from R2 004m to Rl9 396m over the past 20 years – an average increase of 12% per year.
The distribution of the debt burden is also important. In 1994 the ratio of debt to assets was estimated at 0 for 27% of farmers – 27% of farmers had no debt. For 20% of farming enterprises the ratio was below 10%; for 23% of farmers it stood at between 10% and 30%; for some 15% it was between 30% and 50%, with a further 15% worse than 50%.
It therefore appears that farmers are now paying the price of having benefited from subsidies for so long.
In retrospect, it is unfair that they are being penalized by having to take loans at commercial rates when the levels have been artificially maintained through loans by institutions like the Land Bank for so long.
Currently more than a third of all financing of agricultural activity is done through commercial banks charging commercial rates.
The ACDP feels that markets should not be contrived artificially through subsidy schemes and the like but we understand the plight of the farmers – some 15 % of them have debts in excess of 50 % of their asset base.
Agriculture faces other serious problems, like natural conditions, unstable weather conditions remain a problem.
In addition, there are aspects such as safety on farms with large numbers of farmers living under threat as a result of the ineffectiveness of the government to act strictly and effectively.
The ACDP maintains that only an objective and impartial body such as a commission consisting of a single member of each political party represented in Parliament, to investigate the links between farm murders and political affiliations, will be able to address this escalating problem.
We should not tolerate the murder of innocent farmers to force them off the land no matter how the cause is justified.
The ACDP will encourage stronger links between the agricultural, mining and minerals and trade industries.
The ACDP also believes that subsistence farming should be researched and developed as a means of families being able to provide for themselves.
As returns on agricultural activities are limited we will facilitate research into agri-industry and promote its development.
We further maintain that market trends must be accurately read and communicated so as to ensure that production will closely meet demand.