Agriculture is a fundamentally important part of the South African economy. Although it contributes less than 3% to the country’s GDP it accounts for almost 10% of the country’s formal sector employment.
“There are signs that world leaders are beginning to understand that agricultural development is a prerequisite for the development of a country’s economy.” – Prof Patrick Wall, University of Dublin
The contribution of the agricultural sector to South Africa’s Gross Domestic Product (GDP) has decreased from 9.1% in 1965, to around 3% in 1994 and less than 2% in 2012.
The significance of agriculture is enhanced by its large linkages with other sectors. This means that growth in agriculture leads to growth in other areas of the economy. Physical output in the agricultural industry increased from around 18 million metric tons in 1975 to 28 million tons in 2006. This absolute increase in volume, though not visible as a direct contribution to GDP, has played a significant role in the development of the country’s manufacturing sector. Approximately 70% agricultural outputs are used as intermediate products by the food, beverage and textile sector.
Agriculture is also a major earner of foreign exchange. South Africa is still a net exporter of primary agricultural products, exporting agricultural, fisheries and forestry products to the value of more than R60 billion in 2012. The country is, however, increasingly an importer of processed agricultural products, with specifically the import of processed meat and fish products increasing significantly and the overall gap between imports and exports continuing to decrease.
South Africa also has potential for the meaningful expansion of agricultural production if the potentially arable soil in communal land in high rainfall areas in the Eastern Cape, Kwazulu-Natal and Mpumalanga can be brought into full production. This can significantly enhance the contribution of the agricultural sector to job-creating growth.
As it is one of very few sectors that can employ large numbers of unskilled labour, the National Development Plan marks agriculture as a key job creator, proposing that it can create close to one million jobs by 20304. Whilst agriculture has historically been a major employer, that role is diminishing. Calculations by the South African Institute of Race Relations show that the agricultural sector has shed 331 000 jobs over the past 12 years, with the number of farm workers declining from 969 000 in 2000 to 638 000 in 2012. Agriculture will thus lose its capacity for job creation if the growth of the sector is not supported.
Agriculture has a number of features that make it a unique catalyst for development and poverty reduction. These features include its role in stimulating economic activity, supporting livelihoods and providing environmental services. GDP growth originating from the agricultural sector is at least twice as effective in reducing poverty as growth originating from other sectors of the economy.
Making agriculture more effective in supporting growth, creating jobs and reducing poverty requires a favourable socio-economic climate, adequate governance, sound macro-economic fundamentals and supportive policies.