Agriculture & the South African economy beyond 2010

1. Agriculture & the South African economy beyond 2010 Dr Roelof Botha

2. Key themes for the future Theme 1: Rapid technological change Theme 2: Rise of emerging markets Theme 3: Latent potential of SADC Theme 4: Return to a balance of power Theme 5: The 6% Asgisa target – myth or reality?

3. The World in 2015 • Genetic links of virtually all diseases have been identified • Spread of nomadic info companies leads to global taxation • GMCs surpass “natural crops” • Biochemical storage of solar energy • Voice interface for home appliances • Use of nanotechnology • Water shortages are affecting 50% of the world’s population • Population growth decelerates • The development of a digital, virtual and universal currency • Scientists have identified ways to decelerate human ageing

4. The World Economic League 1st Division 26 High Income Countries 2nd Division 25 Emerging Market Economies 3rd Division Potential Emerging Markets 4th Division (a) Small Economies (b) No-hopers Recommended route of progress

5. Post-1980 reforms - high growth economies • Deregulation • Privatisation • Lower tax rates • Export promotion • Lower import duties • Separation of judicial & executive powers • Public/private partnerships • Reduction in corruption • Performance monitoring in the public sector • Transparency in public finances

6. Zimbabwe’s disappearing economy (and population)

7. The power of the tax equation T = t x (Economic Activity)

8. Composition of Government revenue (R billion) - 2007 Budget

9. Composition of expenditure (R billion)

10. The world’s top ten economies- 2005 US $ trillion

11. The world’s top ten economies- 2015 US $ trillion

12. Largest emerging market populations- 2002 Million

13. Constraints facing agriculture in Africa • Historic volatility of commodity prices • Under-investment by the private sector • Urbanisation • Decaying infrastructure • Inadequate research & development spending by government • Outdated farming techniques • High corporate tax rates • EU & US farming subsidies • Socio-political unrest

14. Trends in agriculture - Cameroon • EU debt relief of CFA 8 billion (HIPC initiative) • Subsidisation of cost inputs • Investment in agricultural diversification • Investment in infrastructure & water supply • Research & Extension Programme to reach 140,000 producers in 2007 • Target sectors for productivity increases: maize, beans, potatoes, cassava, groundnuts, coffee, oil palm, cocoa.

15. Trends in agriculture - Kenya • Accounts for 60% of African cut-flower exports • Benefits from the decline in the Zimbabwean horticulture sector • New investment in appropriate storage facilities • 40% of horticulture products are lost through post-harvest waste • Sugar industry recovery through new technologies, higher-yielding cane varieties and providing farmers with access to credit

16. The potential for cassava • Yields per hectare are relatively high compared with other crops & cassava also exhibits tolerance to drought and degraded soils • The potential for increased production for conversion to starch is substantial • Cassava root contains more starch, by dry weight, than most other food crops • Can be extracted with the use of simple technologies • Cassava-based starch can be used as raw material for ethanol production • A basic production plant can produce 280 litres of 96% pure ethanol from only one metric ton of cassava

17. Commodity price changes – 2004 to 2006 %

18. Bydrae van landbou tot BBP %

19. % van oppervlakte waarop gewasse voorkom %

20. Landbougrond (ha per capita) %

21. Vaste kapitaalvorming in landbou as % van totaal %

22. Bedreigings vir landbou in Suid-Afrika • Grondhervorming • Arbeidswetgewing • Gebrek aan fiskale ondersteuning • Internasionale beskermingsmaatreëls • Misdaad • Skuldvlakke • Arm buurstate • Relatief hoë rentekoerse

23. Gemiddelde jaarlikse toename in opbrengs per ha (1980 to 2005) %

24. SMME enterprises by type of economic activity - 1998 ‘000

25. Relative weighting of food products in CPI - low income groups (total 40%)

26. Strategiese rol van landbou in Suid-Afrika • Grootste enkele bron van werkskepping • Insette vir sekondêre voedselverwerking • Voedselsekuriteit • Bron van buitelandse valutaverdienste • Stabilieit met verstedeliking • Omgewingsbewaring • Bydrae tot BBP • Bydrae tot belastings

27. South Africa beyond 2010 – Scenario 1 • High levels of crime persist & brain drain continues • Instability in Zimbabwe & DR Congo continues • Uncompetitive corporate tax rate & high cost of capital • Relatively low levels of labour productivity • Political risk remains high (populism & interventionism of ANC partners) • Public service becomes increasingly inefficient • Labour market rigidity continues & high wages persist • Over-regulation continues (particularly BEE) • Economic growth does not reach the Asgisa target

28. Government dissaving as % of GDP %

29. Public debt/GDP ratio %

30. Trends in income & wealth taxes/household income ratio %

31. Real growth in household disposable income %

32. Progress with meeting basic needs • 2 million houses • 1000 new health clinics • Access to clean water for 10 million people • New sanitation facilities for 7 million people • 4.5 million new electricity connections • Free education • Redistribution of 3 million hectares of land • Primary School Nutrition Programme for 5 million children • 11 million new social grant beneficiaries

33. Value of building plans passed (Index: 2000 =100) Index

34. Wholesale and retail sales trends Index (2000 = 100) Wholesale Retail

35. JSE all share index (2000 = 100) Index

36. South Africa’s gross gold & foreign exchange assets Rb

37. Quarterly real capital formation growth %

38. Real GDP growth %

39. Real capital formation in the SA economy - pre-election scenario Rb

40. Real capital formation in the SA economy - post-election scenario Rb

41. Formal non-agricultural employment m

42. South Africa beyond 2010 – Scenario 2 • Sustained expansion of infrastructure • Peace in DR Congo, Mugabe retires & crime drops • RDP houses reach the 3 million mark • Health policy becomes more effective • Primary sectors benefit from commodity surge • Strong growth in financial, IT & business services • Fiscal policy becomes more growth-orientated • Deregulation is pursued on all fronts • New President embraces market friendly policies • Asgisa target reached & lifted to 7%