Agricultural demand in South Africa is expected to increase as population and income levels increase. But it is not as simple as that, it is essentially about the sector adapting to the change in demand trends, production will increasingly move from a ‘production push’ principle to a ‘demand pull principle’.
Says Bertie Hamman, Senior Manager: Secondary Agriculture at Standard Bank. “Both consumers and the agricultural sector are at crucial turning points that will change the way that food is produced and consumed in the country. The one solid fact that is certain is that we will need to continuously produce more food to meet an ever growing demand. But, the type of food and the nature of its production must continuously adapt to meet consumers’ much more sophisticated needs.
Research shows that both population and economic growth are happening fastest in emerging economies. Projected economic growth, worldwide, is expected to lead to a reduction in absolute economic poverty. Globally, per capita income is projected to be multiples of todays. In theory, this means that more people will be able to afford food. In SA, social grants have played an important role in reducing the percentage of the population in absolute poverty, and increasing the demand for food subsequently agricultural production.
South Africa’s population has increased by approximately 15.5% in the past ten years along with a significant migration to the upper LSM levels. In the past five years, there has been a drop of 56% in marginalised consumers, a rise of 57% in emerging consumers, and a rise of 57% in established consumers. This has profound implications for agriculture, which will have to ensure that it can adequately cater for the more varied and a selective taste of a much larger market in the upper LSM levels than it has had to feed before.
Impact of urbanisation
As experienced in changing spending patterns in SA, this has led to increased demand for processed foods and more protein. We have seen upward trend in purchases of meat, dairy and eggs. Therefore producers should position themselves to participate in the forecasted high growth industries, and/or integrate along the value chain.
Urbanisation is having a big impact on the distribution of agricultural produce. About 62% of the population is staying in the urban areas, and that number is expected to increase. While at the same time, most of agricultural production is in the rural areas. Therefore, most of the produce will have to be moved to the urban areas timeously and efficiently. It therefore puts added pressure on the agricultural food chain and its logistics component, in terms of getting fresh food of high quality to urban centres on a daily basis. Focusing on efficiencies in the cold chain is therefore an integral part of the food value chain as the sector deals with perishable products. Logistics have to be managed efficiently such that food remains affordable.
Providing food for South Africa’s future is not going to be a straightforward exercise. The new global trend towards ecological intensification of agriculture, which focuses on using land, water, biodiversity, nutrients, and renewable energy efficiently and in ways that are regenerative, should be taken note of for agriculture to sustainably serve South Africa’s future agricultural produce demand.
Despite the mass-culling of animals due to severe drought conditions over the past few months, meat producers have been resilient with prices trending firmer. However, their biggest challenge right now is overcoming financial and cash flow hurdles as they aim to re-build their herds to normal levels, with little or no income coming in.
Paul Makube, Senior Agricultural Economist for FNB Business, says because of the recent rains in large parts of the country, production and grazing conditions are likely to improve, but more rain is needed to ensure that cattle producers have enough feed for the winter period. In addition, feeding margins are expected to come under pressure this year, due to limited feed-supply and the surge in maize and other input prices.
Cattle farmers will now avoid selling heifers (young female cows) and maintain farms in their current conditions, with the aim of producing more animals to be sold in the long term. Makube says that as meat producers start re-building their herds, there will be a shortage of supply in the medium to longer term, leading to an increase in prices.
Furthermore, meat prices could also be influenced by demand from consumers who are currently struggling to cope due to increasing interest rates, household expenses and electricity costs. The economic outlook has deteriorated and unemployment has reached a record high. This means that a further rise in meat prices will be constraint by affordability, as consumers will simply switch to more affordable protein sources such as chicken if red meat becomes too expensive.
High feed prices
Lower herd numbers will lead to farmers having less income since they depend on sales to maintain their cash flow. As a result, cattle farmers should consider a number of factors when rebuilding their herds to avoid financial setbacks. Firstly, herd rebuilding is a lengthy process and can take the farmer two to seven years to return to full production and earn a regular income, depending on the severity of the situation.
Secondly, financial planning plays a critical role during post drought herd rebuilding given that many livestock farmers may be in poor financial positions, have no income, low cash reserves due to high feed prices, production and farm expenses to account for.
Lastly, with interest rates in an upward cycle, debt repayments may put more strain on the cash flow of the farm, especially if the farmer does not own the land in which the business operates.
“Livestock farmers that are not well diversified and have used up their capital reserves should approach their lender immediately to possibly restructure or finance the purchase of heifers, feed and repayment of current debt. Banks will always assess the situation on an individual basis since farmers implement different herd-building strategies depending on their exposure,” advises Makube.
The Minster of Rural development and Land Reform Gugile Nkwinti recently commemorated the 50th anniversary of the declaration of District Six, in Cape Town, as a white group area. By the time the bulldozers had done their work, 60 000 people had been forcibly removed from the iconic inner-city suburb and dumped in single-race ghettoes far from town. Forced removals were one of the defining characteristics of the apartheid era. No town or village was unaffected. Between 1960 and 1983, an estimated three-and-a-half million black South Africans were uprooted and discarded.
Their collective pain is defined in the ugly scar across Cape Town’s cheek called District Six. We pay tribute today to the people of District Six, for their resilience and fortitude over 50 years of struggle, and for keeping the flame of our liberation burning. Theirs was among the first land claims in the country to be prioritised by the newly installed democratic government after the passing of the Restitution of Land Rights Act in 1994.
Yet, for a number of reasons, it has proven among the most complex claims to settle:
- Difficulties have been experienced in tracing some claimants;
- Complex administrative processes are required in cases where the originally dispossessed persons are deceased;
- Some claimants who originally opted for financial compensation changed their minds, or the descendants battled to agree among themselves;
- Establishing appropriate structures for consultation and engagement with the claimants has been time consuming;
- The role of developer has passed from the District 6 Beneficiary Trust (Phases One and Two) to the Department (Phase Three), and a new Reference Group has been nominated to represent the community; and
- All regulatory planning approvals have required consultation with the Reference Group in terms of the participatory approach.
A total of 2670 District Six restitution claims were submitted to government by the closing date of the initial lodgment process at the end of 1998. Of these claimants, 1439 opted for financial compensation (receiving R39.7m in total) and 1126 claimants opted to return to the area.
The first phase of rebuilding was completed in 2004, with 24 homes handed over to elderly residents. A second phase of 115 homes was delivered in 2012. And building of the third phase of 108 homes (tendered cost: R167.1m) is presently underway.
The third phase is the agreed product of an exhaustive 18-month period of consultation, led by the Department of Rural Development and Land Reform, involving all levels of government, claimant representatives and other interested parties. We have agreement; it is time to build and heal the scar on our face and in our hearts.
* A new restitution claims lodgment window opened in July 2014, closing in June 2019. By December 2015, 1300 new claims had been submitted.
Civil society organisations will head to the Constitutional Court in Braamfontein on Tuesday 16th February 2016, to challenge the Restitution of Land Rights Amendment Act of 2014, which reopened the land restitution process for another five years.
Fifty (50) communities will hold a night vigil at the Constitutional Court to voice their disapproval of the timing of the new process which they say will disadvantage over 8257 previous claimants whose cases were lodged during the initial process but have still not been settled.
Land rights organisations, the Land Access Movement of South Africa (LAMOSA), the Association for Rural Advancement, Nkunzi Development Association, the Communal Property associations of Moddervlei, Maluleke Communal Property Association and Popela will represent these communities in court assisted by lawyers from the Legal Resources Centre and Webber Wentzel.
“Allowing claimants who had missed the initial window period to access the restitution process is to be welcomed. However, the outstanding claims (8257) that were lodged during the initial period must still be finalised. These existing claims will be affected by the new influx of restitution claims. The issue is that the Act fails to give clear guidance on how to deal with new claims that may clash or affect pending or unresolved existing claims,” the organisations said in a statement.
The Act aims to restore land back to communities which lost their land as a direct result of the 1913 Native Land Act which left many black people displaced from their properties through forced removals. But the communities say the Act is unconstitutional and vague, and also that the National Council of Provinces (NCOP) did not take reasonable steps to facilitate public participation.
New claims deadline – 30 June 2019
The communities (applicants) want the claims to be finalised as soon as possible as many of the claimants are elderly and some already passed on waiting for their land. They also want the Act to be declared invalid and that old order claims be ring-fenced pending the outcomes of challenged legislation.
Government reopened its land claims process, in 2014, allowing people, who missed an earlier deadline for lodging claims for compensation, to do so within the next five years. President Jacob Zuma signed into law the Restitution of Land Rights Amendment Act, which reopens the restitution claims process that closed at the end of 1998 and gives claimants five years – until 30 June 2019 – to lodge further claims. More than a 120 000 new submissions has since been received by December 2015.
For more information, contact Ms Constance Mogale at: 011 614 0359
With South Africa in the grip of the worst drought the country has seen for the past six decades, AFGRI has stepped in and helped farmers across its service offering, the most recent of which was a donation of R5 million worth of animal feed to livestock farmers. The momentum of drought relief aid from AFGRI is increasing, with the Grain Management division having decided not to increase storage rates for 2016.
“Again, this step is in light of knowing that our farmers value every bit of relief we are able to offer. As partners to agriculture we feel this is the right thing to do. We need to ensure our farmers thrive when the rains come,” said AFGRI CEO, Chris Venter.
“Words cannot explain the pride I feel right now, knowing that we successfully allocated the entirety of the R5 million fund we made available to feed livestock in need,” says Venter. He went onto explain that the rationale of providing this feed was because farmers were slaughtering animals rather than having to watch them die. The feed provided by AFGRI is nutritionally formulated to help keep the animal alive. “Our goal to assist farmers to keep their livestock alive until the rains and grass return,” Venter went on to say.
The enormity of the drought is evident in the fact that it took less than one week to receive enough applications to deplete the R5 million worth of animal feed to livestock farmers in need. AFGRI kept track of each consignment from the first contact with the call centre. AFGRI’s feed mills are currently producing the drought feed to distribute to the drought stricken areas in KwaZulu Natal, Free State, Northwest, Gauteng and Mpumalanga. In the region of 110 000 animals are being supported.
Furthermore, much-needed financial relief is being offered for the current season (August/September) through the company’s financial arm, Unigro Financial Services. This is by way of restructuring payment for agricultural debt through various options, including consolidating outstanding amounts into term loans for unpaid revolving credit, production and insurance accounts due during 2016, subject to the availability of security.
“For hire purchases and medium-term loan repayments payable during 2016, we will consider rescheduling the outstanding amounts over the existing period plus one year, with no interest penalties, and will also consider extension for carry-over debt due during 2016, subject to the customer’s repayment ability and the availability of security.”
“I am proud that across the diversity of our business, we have been able to offer meaningful assistance. Animal feed was originally offered at discounted prices and as the drought tightened its grip, eventually given away and now, as a gesture of further consideration, we are holding our silo rates constant. In the greater scheme of the impact of the drought conditions, it feels like this is a drop in the ocean, but we are convinced that each small gesture goes a long way,” Venter concludes.
After extensive consultations and consideration of submissions received from employers and employees both in the farming and forestry sectors, the Department of Labour has decided to adjust upwards the minimum wages for farming and forestry sectors.
To calculate minimum wage increases, the Department applied consumer price index (CPI) excluding owner’s equivalent rent which is lower than what the Department used to apply which was CPI for quintile 1 as published by Stats SA for a specific period. As at 1 March 2016, the minimum wage increases are adjusted as follows:
- Hourly rate of R14.25 (2015/16: R13.37)
- Weekly of R641.32(2015/16: 601.61)
- Monthly rate of R2778.83 (2015/16: R2606.78)
- A daily wage for a farm worker is R128.26 (2015/16: R120.32) who works nine hours per day.
According to Minister Mildred Oliphant, the Department is aware of the challenges faced by the agricultural sector with regard to certain areas affected by drought and how farmers are toiling with some tough decisions on whether or not to retain labour.
Farmers are encouraged in areas that are affected by drought to apply for ministerial variations in terms of section 50 of the Basic Conditions of Employment Act. Section 50 makes provision for the Minister to replace or exclude any basic condition of employment provided for in the Act.
“Wage adjustments are morally right so as to ensure that workers’ earnings keep pace with the rising cost of living while boosting the purchasing power which benefits the economy. The Department will expeditiously assist in processing variation applications. I further encourage farmers to solicit guidance on how to apply for variations from their relevant associations,” said Oliphant.