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Transformation in the Agricultural sector

By July 26, 2016September 26th, 2019No Comments

February 28, 2013 marked the end of the sixty day public commentary period for the draft Agri-BEE Codes of Good Practice. This AgriBEE codes were gazetted shortly after President Zuma launched the 5-Step plan for Land Reform in October 2012. The President’s announcement served as a firm indication of plans to speed up land reform, which has been a thorn in the side of post-1994 South Africa Governments. In brief, the 5 step plan would;

  1. entail identifying land readily available from land already in the market (ie land where the farmer was under severe financial pressure, or land held by an absentee landlord willing to exit, or and land in a deceased estate);
  2. enable the state would buy the land at 50% of its market value.
  3. commercial farmers, in exchange, would be protected from losing their land and gain black economic empowerment status;
  4. a “stepped-up programme” of financing should also be created. This would involve the Treasury, the Land Bank, and established white farmers, and to
  5. increasing investment in agricultural research and development.

The agricultural sector is a key economic driver and determines the viability of many communities throughout South Africa, especially in rural areas. The sector’s labour issues took centre stage at the end of 2012, as bitter farm strikes almost crippled the Western Cape. These served as a microcosm of the challenges which continue to plague agriculture; those of majority white land ownership interfacing with black poverty and long standing battles over equality and access.

Israel Noko, CEO of NPI Governance Consulting explains that the overarching purpose of the draft codes is to facilitate meaningful and sustainable transformation in the agricultural Sector by implementing initiatives to include Black South Africans at all levels of agricultural activity and Enterprises. One of the key things that has been identified is the promotion of equitable access and participation of Black people in the entire agricultural value chain.

Noko acknowledges that one of the key differentiators of this sector is that because it is so closely tied to the land, “It is the site of family, traditional and cultural heritage and history. It should be anticipated that some industry players may be resentful of the requirements. However, the current situation is that despite the historical baggage, transformation cannot be ignored because of the centrality of agriculture in the economy.”

According to Noko, the Government has to be strategic on how it handles this process, given the backdrop of Zimbabwe’s land grabs and how politically inflammatory that process was. Additionally, “South Africa has recently suffered deep public relations disasters such as Marikana, which have resulted in lowered investor confidence, evidenced by international credit rating agencies such as Moodys reducing South Africa’s rating. Transformation of this sector needs to be diplomatically managed so as not to stir up any crisis.”

De-racialising land and Enterprise ownership continues to be a challenge that broadly affects the post-independence landscape of Africa, and South Africa is no different. The target set by government for Land Reform is 30% of commercial agricultural land by 2014. Farming enterprises are encouraged to participate directly in this initiative by complying with the ‘Land Ownership’ element of the Scorecard.

The draft Codes place emphasis on unlocking the full entrepreneurial skills and potential of Black people in the sector; the fact is that South Africa’s agricultural sector is located within a global market, and therefore commercial viability of black owned enterprises has to be given due attention in order to reap long term benefits. Noko underlines that, “Government has to be unambiguous when orienting new entrants on the seriousness of the Agricultural sector’s transformation agenda. South Africa has to avoid a situation where assets such as farms are placed under black control without the subsequent revenue generation. It is imperative that this sector be productive.” As such, Skills Development is a core element of the scorecard, fetching 20 points. To benefit from this, an enterprise should identify gaps in workers’ training needs and allow workers to receive skills and in- service training.

The world’s food system is undergoing an unprecedented transformation: not just from the significant impacts of global environmental change, but also from the rapid expansion of transnational agribusiness. International studies have shown that supporting farmer-driven investments in agricultural water management, expanding the use of smallholder water management techniques could increase yields up to 300% in some cases, and add tens of billions of Rands to household revenues across South Africa and sub-Saharan Africa. Noko stresses that the need to more productive Black farmers has come at a critical stage in securing that enough food reaches the growing South African consumer.

The draft Codes further articulate the goal of facilitating structural changes in agricultural support systems and developing initiatives to assist Black South Africans in owning, establishing, participating in and running agricultural Enterprises. Noko highlights that “Agricultural enterprises by definition are extremely complex to run, given the variables such as weather and climate, changing markets and supply chain issues. First time black enterprise owners require assistance in creating systems and processes to ensure their success.”

The goals of improving living and working conditions and promoting decent living and working conditions for farm workers, as well as improving protection and standards of land rights and tenure security for labour tenants, farm workers and other vulnerable farm dwellers and addressing the inherently paternalistic nature of relationships associated with insecure tenure by promoting more permanent forms of tenure with the emphasis being on the transfer of ownership of land are also outlined in the draft Codes.

Noko draws attention to the fact that The National Development plan (NDP) has highlighted Agriculture as a key area of potential growth. Therefore, empowering rural and local communities to have access to agricultural economic activities, land, agricultural infrastructure, ownership and skills, amplify the NDP’s assertion that rural economies will be activated through the stimulation of small- scale agriculture. According to the NDP, current output does not match Africa’s agricultural potential. From being a net food exporter in the early 1960s, the continent is now a net importer.

An AgriBEE Charter Council has been established and will report to the BEE Advisory Council and the DTI Minister. The AgriBEE Sector Code will be amended accordingly through the Minister of Agriculture, Forestry and Fisheries. Although stringent targets for BEE compliance are established in the draft code, much will be in the hands of the sector itself to create initiatives and mechanisms for achieving these targets. The draft Code is detailed and provides “some” scope for flexibility, yet guidance and clarification will be needed from the Council and verification agencies verifying enterprises under the Code to ensure that the detail of what is expected from all stakeholders is fleshed out and clearly understood.

Noko asserts that the success of transformation requires a mind shift, “Black individuals who wish to be participants in this transformation will have to be proactive and strategic. It’s well known that the Agriculture sector is resource intensive in terms of labour, equipment, land and other essentials like irrigation, seeds, fertiliser. Sector players have to ensure that their supply is consistent, that they meet global quality standard and have operations which are scalable. Additionally, Direct Funding Institutions such as the NEF, IDC and DBSA are keys sources of long and short term investment.” Furthermore, what also remains to be seen is whether European sunsidies will threaten South African competitiveness and production.