Nene: Slightest policy distortion impacts fragile agriculture

Cape Town - The fragile nature of agriculture means the slightest distortion in policy and the manner it is executed will have big consequences, former minister of finance Nhlanhla Nene said at the African Agri Investment Indaba in Cape Town.

"I have many previous lives," said Nene.

He is currently the resident adviser at the Thebe Investment Corporation and a non-executive board member of Allan Gray. He also owns a farm in KwaZulu Natal.

He pointed out that the National Development Plan (NDP) has identified agri-processing as a potential driver of growth, also for small and medium enterprises (SMEs).

The NDP did, however, identify a number of obstacles in the agricultural sector, including a lack of access to infrastructure and a lack of access to consumer markets. A recent study at the University of Johannesburg found the ability to participate in the sector depends on how the overall value chain is governed, especially by leading firms.

"To succeed new entrants must understand the entire value chain. The exchange rate also requires support to ride out shocks and building a relationship with retailers is also important to have access to growth," said Nene.

"Increasing efficiency in agriculture often pushed many people off the land in the past. The study found that the achievement of inclusive growth also depends on an inclusive and diverse rural non-farming economy. We must, therefore, see how different pathways of agriculture affect the non-farming sectors."

Another important issue for Nene is reaching scale in agriculture.

"It seems in SA large scale, mainly white, farmers can get access to international markets. They provide limited local employment. This is also the case in Malawi. By contrast Zimbabwe's small tobacco farmers seem to be able to sell to China and gain local benefit," said Nene.

"The study concludes that exporting agricultural products is not the only way the agriculture sector can tap into local economies."

READ: SA agriculture key player in Africa - minister

Nene emphasised that if agriculture is to play the role NDP envisages for it, there is much more that needs to be done. This includes improving access to new entrants and enabling them to gain access to markets.

Loyiso Mkwana of the Gauteng Department of Agriculture and Rural Development said many African governments have put agriculture back at the top of the agenda.

"In Gauteng, we are making significant investments to support agriculture. There is a new vision for Africa where agriculture reaches its full potential to make the continent hunger free," said Mkwana.

"The NDP sees the potential of true commercial farming and agri-processing, but we have not yet fully realised this potential. We at the Gauteng provincial government are trying to reach that potential and ensure new entrants can gain access."

The provincial government has identified nine commodities it is focusing on, including leather, herbs and essential oils.

He emphasised that reaching the potential of agri-processing cannot happen without transformation.

"We want to provide smaller farmers with technical skills and to enable them to tap into markets. We want to migrate smaller farmers from the informal sector to integration with the mainstream commercial economy to open the value chain for them," said Mkwana.

"The industry is still dominated by large roleplayers along the value adding chains. So we must create partnerships to make it more equitable. All plans can only come to fruition if we partner with private sector."

He said the Gauteng provincial government wants to address the macro economic challenges in the province's agriculture sector and create a modern, transformed sector.

"We are open for business and we invite you to come see for yourselves opportunities we have," he told delegates.