Socio-economic and farm-level impacts of GM crops in South Africa

Socio-economic and farm-level impacts of GM crops in South Africa Marnus Gouse Gates Foundation Post-Doc Research Fellow Department Agricultural Economics, Extension and Rural Development, University of Pretoria marnus.gouse@up.ac.za COP-MOP 6 Preparatory Workshop 28-29 Aug 2012, Farm Inn Hotel, Pretoria

GM crop adoption in SA - % of total crop area • Farmers have adopted GM crops in the presence of conventional alternatives • Farmers have benefitted from the GM technology (farm-level impacts) • Farmers have been able to adopt (enabling environment for sustainable adoption)

Outline • What are the potential socio-economic issues that need to be consideredin an ex ante assessment? (with some reference to the SA experience) B. Farm-level impact ofGM crops in SA: • HT soybeans • Bt cotton • Bt maize (commercial farmers) • Bt and HT maize (smallholder farmers)

A. Potential socio-economic considerations - often classified in to three groups RAEIN Africa SEIA Guideline

Identify the socio-economic issues by focussing on the four role-players • The producers / farmers • The consumers • The output industry • The input industry

The producers / farmers Different categories (large/small/subsistence, dryland/irrigation, male/female, education, resources) – all influenced in different ways Farmers’ ability to adopt and sustainably utilise and benefit from GM technologies will depend on: • Effectiveness of the input sector • Seed companies, certification, distribution, infrastructure and pricing • Complimentary services – credit, extension services, chemicals and information • Effectiveness of the output sector • Farmer ability to access local or export markets – determined by infrastructure, market information and buyer demand for the product • Price of the produced product – profitability • Severity of the infestation level and damage caused by the pest the GM crop controls

The producers / farmers…. • Farming practices • Dryland or irrigation • Use of inputs (types, quantities and cost) • Seed prices (the projected price of the seed and the additional technology fee) • Approaches to pest (problem) management • Production of other crops (intercropping and crop rotation) • Main objective of farming (production) – farming ideology • Risk (financial, production, market) • Climate (climate not only affects pests/problems but also the season’s production success level) • Direct socio-economic impacts of environmental / biodiversity impacts (cost impact of potential pollen drift or a change in pest pressure)

Consumers Consumers can be divided according to different LSMs, but in developing countries in many cases the producers are also the consumers. • Ability of supply chain to adjust if necessary • If segregation is needed due to international and / or domestic market requirements or due to the nature of the novel product – infrastructure, technical requirements, costs. • Potential change in food prices • Potential change in nutritional value • Consumer perceptions and preferences (are influenced by a range of issues, including: culture; ethics; living standard; education; ideologies regarding life, science, the environment and food; information; role of anti- and pro- advocacy groups; role of government; trust in regulators and regulation process) • Health concerns or benefits • Regulations and laws (consumer rights, labelling)

Output industry The output industry is where producers sell their produce, produced using the GM technology. These include the domestic food, feed and industrial sectors and international trade with major trade partners. The potential beneficial or negative impacts depend on: • Severity of the problem (pest) the new technology addresses (can the GM technology contribute to making sector more competitive?) • Size (importance) of the domestic and international markets for non-GM produce • Co-existence (if required, the ability to segregate throughout the supply-chain for different consumers- infrastructure and cost issues) • Price effect (will increased production have an impact on domestic prices) • Regulations and laws (consumer rights, labelling, traceability) and its impact on cost and implementation and food prices

Input industry Includes the seller of the proposed new GM product and sellers of other complimentary and competing products (seed companies, chemical companies, mechanisation, credit suppliers and national and international research institutions) Issues of interest include: • Seed industry structure and development (how will the seed reach the farmers and be available at planting time?- farmers cannot adopt if the seed is not available) • Availability of complimentary products and services (chemicals, credit and information) • Availability of competing (alternative) products and approaches (alternatives limit the potential price of the new technology) • Intellectual property rights / plant breeders’ rights and the enforcement thereof (a company will not be willing to invest in a country where its products are not protected) • Potential sharing of potential benefits (producers, seed company, consumers etc) • Public-private partnerships (might have an impact on the pricing strategy of the innovator) • Complimentary or competing research conducted by public research institutes (might be positively or adversely affected by approval of a certain GM product)

The main objective of doing an ex ante SEIA • As part of biosafety regulation (under the CPB Article 26.1) – to identify potential negative socio-economic impacts resulting from a (likely) potential biodiversity impact • Under national objectives any socio-economic considerations can be included but decision has to be in line with international obligations (WTO). • So, (in my view) the main objective would be to: • Identify the potential positive and negative impacts (limiting conditions) • Develop enabling strategies to maximise positives and mitigating strategies to limit / manage / prevent negatives

B. Farm-level impacts of GM crops in SA

Introduction and adoption of GM crops in South Africa • In 1997 SA became the first country in Africa to produce a GM crop – Bt cotton • Bt maize was released in 1998 (yellow was planted) and in 2001 SA became the first country in the world where a GM subsistence crop is produced (Bt white maize) • In 2001 HT soybeans and cotton • HT maize in 2003 • Stacked (Bt+HT) and Bt II followed

Adoption HT soybeans: Production and % of total SA soybean area

Adoption GM cotton: Percentage of total SA cotton area Currently GM cotton covers more than 95% of total cotton area

Adoption GM maize: Percentage of total SA maize area

Farm-level impacts of HT soybeans • Introduction of HT soybean had little if any impact on yield • Farmers benefited mainly through saving on weed control chemicals, fuel, machinery and labour. • Soybean farmers increased production due to the ease of weed control management with HT. • Due to expansion, increased employment opportunities also in the soybean processing sector (crushers, oil-cake, animal feed). Brookes and Barfoot (2012), estimated the farm income gain, due to adoption of HT soy beans in South Africa as $7.2 million (for the period 2001 to 2010).

Farm-level impacts of Bt cotton Yield: All peer reviewed studies found yield increases (more effective bollworm control) with Bt cotton: • Large-scale farmers 14 – 19 % (Gouse et al., 2003) • Smallholder farmers on Makhathini Flats: • Studies by UP and Reading found yield increases of: • 16%, 40%, 63% and 56% for 1998 to 2000 • Yield increases high because farmers were unable to control bollworms effectively. • Shankar and Thirtle (2005) showed average insecticide application on Flats is less that 50% of the optimal. Labour: • Saving in insecticide application labour (spraying and water fetching) but higher yield also means more harvest labour

Farm-level impacts of Bt cotton Insecticide application: • Farmers saved on 3 / 4 / 5 pyrethroid sprays • In most seasons however the saving on insecticide chemicals not large enough to offset additional techno fee for seed Seed cost: • Bt seed is substantially more expensive due to technology fee: • In 2008/09 seed cost = R430.50 / 25kg • Additional technology fee for Bt = R785

Farm-level impacts of Bt cotton All studies showed that: • Higher yields + saving on insecticides + pest control labour saving - techno fee - more harvesting labour = Increased gross margin and neutral impact on labour Brookes and Barfoot (2012) estimate an increased farm income of $27.1 million over the period 1998 – 2010. But increased farm income did not lead to increased employment opportunities, rural development or economic growth: Why? The technology was introduced into a struggling industry. • Drop / stagnation in the world cotton price and cheap imports. • Higher comparative prices for competing crops like maize, soybeans and sunflower seed

Farm-level impacts of Bt maize (commercial farmers) • Average yield increase of 11 % in Mpumalanga, Northern Cape and North West for the 1999/00 and 2000/01 seasons (Gouse et al, 2005). • Minimal saving on insecticides, as farmers use less insecticides to control stem borers on maize. • Bt seed is about 25-30% more expensive than conventional varieties • Despite higher seed prices farmers enjoyed increased income with Bt over conventional varieties. Based on these findings Brookes and Barfoot (2012) estimated that the aggregate farm income of Bt maize adopters in South Africa increased by $769 million between 2000 and 2010 • That is a productivity increase induced injection into the economy of R5.92 billion over 11 years. = At least a couple of million Rand tax income and a number of jobs?

Farm-level impacts of Bt and HT maize (smallholder farmers) Monsanto introduced Bt maize in 2001 through workshops in 9 areas (4 provinces) and farmers received small bags of Bt and conventional seed for free. 2002/03 – limited seed available. Only in 2 areas were a substantial number of farmers able to procure and buy Bt seed (Hlabisa and Simdlangentsha) Our research: Focus on farmers in Hlabisa district in KwaZulu-Natal for 8 seasons 2001/02 – 2007/08 and 2009/10. Hlabisa is only area in SA where smallholders have continuously planted GM maize. Based on GM adoption, this area is not representative of SA smallholders. Should rather be seen as case study Please see Gouse (2012) forthcoming in AgbioForum for detailed discussion

Who where the early adopters? First Bt adopters – larger households with less off-farm income = poorer households for whom maize production and agriculture are more important First HT adopters – smaller households with more off-farm income = slightly more affluent households with less labour and weeding time 3-4 years after Bt’s introduction, the differences between adopters and non-adopters are less obvious – Bt has become a more “conventional” technology

Yield comparison Hlabisa farmers (kg grain / kg seed planted)

Impact on yield Based on six years of Bt maize production by smallholder farmers in Hlabisa, it can be concluded at the 90% confidence level that Bt maize yielded 12% more grain on average than conventional maize with a distribution of -0.004 and 24.7 percent. The yield comparisons for HT maize varied too substantially to calculate an average figure for the four seasons Food security impact: Based on 2002/03 findings for pooled data for Simdlangetsha and Hlabisa in northern KZN, a farmer who planted 10kg of Bt seed on average harvested 16% or 110kg of grain more than a conventional maize planting farmer. If we use the rule-of-thumb of: A household of 7 people needs 14 x 80kg bags of maize meal per year:Then a 110 kg yield increase means 35 more days of food security

Labour use impact • Bt maize’s labour impact is minimal as few farmers actually use insecticides to control borers • HT adopting farmers who plant by hand and hoe, according to PWP (minimum/zero tillage) have a substantial labour saving benefit (>50%). No / little manual weeding required • This means farmers who want to produce more maize can do so with same amount of labour, and farmers who do not wish to produce more maize can have more time for other activities. • Based on seed sales in Hlabisa, farmers prefer the labour saving benefit of HT above the stalk borer insurance of Bt • Would a labour saving technology be beneficial in other African countries ? – for farmers yes but what about the landless poor who sell their weeding labour?

Profitability impact Seed types with highest net farm income Net farm income = value of production – all expenditures HT more profitable due to saving on labour

Comments and conclusions • South African farmers have adopted GM cotton, soybeans and maize because: • They see substantial benefits • Adoption is supported through an enabling environment (GMO regulation and functioning input and output markets) • The job creation, rural development and economic growth impacts of : • GM cotton have been limited as the technology was introduced into a struggling sector. Though the technology increased productivity, it was not enough to make South African competitive in the world cotton market. • GM soybeans have been substantial as the technology was introduced into a growing industry. Farmers were able to react to price signals and expand production resulting in job creation and economic development – more crushing plants, less oil cake imports • The additional farm income benefit of Bt maize has been substantial due to mainly the yield increase and the size of the South African maize sector

Comments and conclusions • Smallholder and subsistence farmers prefer the labour benefit of HT above the pest control insurance of BT. Some farmers are able to expand maize production and others use time for other activities. • However, there is a fine line between the value of the benefits of the new technologies and the additional cost of the GM seedand accompanying inputs (herbicide). • In a functioning market, if the seed or the accompanying inputs become too expensive farmers will revert back to conventional seed and conventional farming practises.

Thank you marnus.gouse@up.ac.za

Socio-economic and farm-level impacts of GM crops in South Africa