Research & Development as well as President Ramaphosa’s Stimulus Package Key to Reaching SA’s NDP Targets: A Closer Look at Trade between South Africa and China by Avuyile Xabadiya & Lunga Njara

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The importance of the agricultural sector in South Africa has become an everyday talking point to a number of agricultural stakeholders, both from the public and private sector. Some of these talking points include the role the sector continues to play in ensuring household food security and maintaining the national food security status South Africa continues to enjoy. The country is ranked 44th from 113 countries with excess on important grains. Employment, and foreign earnings through field crops, horticultural products and wool are worth noting for this milestone, especially in earning large returns and thereby bringing economic stability.

There has been a number of interventions that successfully and unsuccessfully contributed to the targets set in the NDP. More recently, the undertaking by President Ramaphosa on driving economic growth through the recently adopted stimulus package supports the targets set for 2030. Notwithstanding the New Growth Path’s projections towards employment creation and the set NDP targets of one million jobs by 2030, it is important for us to assess whether the sector stands a chance of moving towards the direction of unleashing such potential by checking whether there are any realistic opportunities and trends that could lead the sector to reach those targets.

Agriculture in South Africa, like any other developing country faces many challenges, such as declining share to the economy (7.7 % in 1969, 5.3 % in 1988, 2.5 % in 2017) due to diversification resulting in shifts to other sectors. Although there are other factors such as climate change among others, which pose of threat in agricultural development, government continues to pin its hope into the sector. Perhaps, an attempt to try to figure out why government and other South African agricultural stakeholders continue to believe in the sector would be useful, particularly at the time where many are eager to see government paying more attention towards the 4th industrial revolution and diversifying its economic outlook. This new feat needs to be utilized in finding the best solutions when reallocating the factors of production throughout the agricultural value chain. The assured results should encompass productivity and high returns to create a conducive environment for growth and investment. This is the path that the stimulus package should be taking.

In addition, government decision on prioritizing the grains and horticultural subsectors shows high level of decisions that are informed by research and understanding of areas of focus for medium terms gains. For example there is no doubt the horticultural subsector in agriculture together with field crops are amongst the largest employing sectors in South Africa. This stimulus package focused on the horticultural subsector because it also enjoys an increasing international Asian market demand led by China. Certainly, without any doubt, China’s economic evolution has sparked a lot of attention from many economic role players across the globe. In that regard, China’s economic growth presented an opportunity to many growing economies including South Africa.

Since China joined the World trade Organization in 2001, it has played within the rule and traded with many countries which includes South Africa. Trade relations between the two countries have been increasing (Le Pere &Draper, 2005). China has strengthened its trade relationship with Africa through bilateral and multilateral forums (Sandrey & Edinger, 2009). Accordingly, South Africa for years has been experiencing a positive trade balance in agriculture. In 2018, the country saw a sustained increment of agricultural exports to the value of R20.89 billion resulting to a net trade of R3, 736 billion (Ntombela, 2018).

The top 5 notable export markets destinations for South Africa featured countries such as Netherlands, United Kingdom, Botswana, Namibia and Mozambique. Deciduous fruit, wine, cuttlefish and Tilapia were commodities that dominated these exports. On the other hand, China’s agricultural imports have been dramatically going up over the last decade and South Africa has become one of the crucial suppliers of citrus and wool amongst others. On the orders hand, agricultural imports were dominated by wheat, rice, chicken meat, and live cattle from China, Germany, Namibia and Brazil.

Moreover, numbers as reported by many agricultural research centers in South Africa such as Agriculture business chamber amongst others, are certainly showing that China’s demand for South African agricultural commodities will increase in the short to medium term, due to factors such as the demand for animal feed and a growing middle class and living standards of Chinese people. Furthermore, the big manufacturing industry continues to fuel an increased demand for cotton and wool (Gale et al, 2015). Gale et al, (2015) postulates that china’s high import volume is attributed to their relative scarcity of land resource. It is anticipated that the increased demand for high value products in China will continue to increase because of the stimulated consumer taste and increased purchasing power. This is evident through a rapidly increasing import of processed products such as wine, cheese, coffee and tea.

This approach by government affirms the vitality of the “new theory” which concerns itself with agricultural trade and argues that it could play one of three roles in economic growth, which are a growth-leading role, a balancing or growth-enabling role, or a growth-lagging or retarding role. It is then up to South African government to choose which role should the county’s agricultural sector play towards the future.

[i] Xabadiya and Njara[ii] are South African Agricultural Economists with experience from both the public and private sector.

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