Why this is important to Wisconsin businesses: Although the country is home to one of the most vibrant and diverse agricultural sectors in Africa, and is a net exporter, production and investment in capital assets have been declining.
South Africa has one of the most vibrant and diverse agricultural sectors in Africa. The sector consists of well-developed commercial farming systems, co-ops in large estates and subsistence production in rural areas. There are approximately 32,000 commercial farmers, who produce 80% of the country’s agricultural value. According to AgriSETA, 80% of the land in South Africa is used for agriculture, but only 12% is suitable for rain-fed crop production and the rest is suitable for livestock grazing. Agriculture activities in South Africa include crop production, animal production, horticulture, aquaculture, dairy farming, game ranching and beekeeping. Every one of the nine provinces engages in at least two agriculture activities in a major way.
The country is a net exporter of agricultural products. The Economic Review of South African Agriculture reported that the total estimated value of agricultural products exported by South Africa was $6 billion USD during the 2018-2019 season. The value of exports increased by 4.6% from the previous cropping season. The country also imports agricultural products; the estimated value of imports for the 2018-19 cropping season was $4 billion USD, an increase of 0.5% from the 2017-18 cropping season.
The agriculture sector is highly mechanized, fueled by increased awareness of mechanization and increased government subsidies for farm machinery. Although some implements are produced domestically, a range of agricultural machinery and implements used for production are imported from Europe, the U.S., South America and Japan. Commercial farmers view mechanization as key to improved profits and long-term sustainability in commercial farming.
A World Bank report revealed that only 5% of South African workers are employed in agriculture, and the proportion has been decreasing. Investments in capital assets are also declining: According to the Economic Review of South African Agriculture, machinery and implements represent 15.2% of capital assets in the agriculture sector. In comparison to other African countries, South Africa has the largest tractor market share; however, tractor sales declined significantly in 2019 due to drought conditions and are expected to be slow again in the 2020 season.
The proportion of agricultural machinery and implements in total capital assets and investment in South Africa has been stable overall from 2014 to 2019. The value of total capital assets and investment gradually decreased during the five-year period, despite an increase during the 2016-17 cropping season. Gross investments in agriculture machinery and implements have also declined over the years. Uncertainty regarding land reform policies is presumed to be to blame for this disinvestment in the agriculture sector.
The contribution of agriculture to the economy is less than 10%, and this has been declining, as has been the economic contribution of agriculture across the entire African continent. In the South African context, contributing factors include trade liberalization, disinvestments in capital assets, globalization, changing consumer demands and preferences, and the shift from subsistence to commercially competent production. The COVID-19 pandemic brought new challenges to the agriculture sector, for example adversely affecting agricultural exports pursuant to border restrictions limiting access to the markets. In addition, the broader economic downturn has reduced the purchasing power of farmers.