The rural economy depends on resource-based industries such as agriculture, mining, fishing, tourism and forestry. Photo: File
On 6 August, I had an opportunity to deliver the 11th Annual Archbishop Thabo Makgoba Lecture at the University of Limpopo. The theme was on the role of agriculture in improving rural development.
Among other things, I emphasised that the rural economy should not be forgotten in South Africa’s economic growth agenda, where there tends to be a strong urban bias in policy discussions. The rural areas are still a significant segment of society and the economy, though 68% of the population now lives in urban areas.
Apart from the rural areas’ reliance on remittances and social transfer payments, the one outstanding characteristic of the rural economy is its dependence on a few key industries, all of which are typically resource-based, such as agriculture, mining, fishing, tourism and forestry.
With rising unemployment and low economic activity, policymakers are searching for areas of growth and job creation. For many rural areas, agriculture and tourism are the only industries that still have the potential to generate livelihoods and employment.
But, for these industries to perform better, we must address the various infrastructure and governance constraints that have limited the development and growth of agriculture to its potential levels. Indeed, the sector has more than doubled since 1994, but it is not yet at capacity.
We have detailed many growth-constraining issues in our latest joint work with Professor Johann Kirsten, The Uncomfortable Truth about South Africa’s Agriculture.
These include:
- Market failures (high transaction costs, remote location);
- Government failures (inefficiencies, poor service delivery and corruption);
- Community failures (poor local institutions, vested interests of traditional leaders); and
- Poor land governance (lack of secure tenure).
These constraints cause many rural communities to be caught in a poverty trap from which they cannot escape. What’s worse, rural areas have less access to public services and infrastructure than urban areas due, partly, to the higher per-unit cost of infrastructure investment and service delivery in rural areas.
This extends to “soft” infrastructure such as healthcare centres as well as “hard” infrastructure such as road networks, rail, silos, irrigation systems, water and electricity. This leads to low agricultural productivity and poor linkages to markets for farmers.
What should be done differently to address these problems so that economic activity and employment can take off in rural areas?
To an extent, these problems are well understood and were highlighted in Chapter Six of the National Development Plan, and most recently in the Agriculture and Agro-processing Master Plan. Where we seem to be slow is on implementation.
The lack of implementation of agricultural government policy and infrastructure-related constraints comes down to the following reasons:
- Weak coordination and misalignment of functions and priorities between different government departments and different spheres of government.
- A misallocation of the budget by the national and provincial governments; and
- Poor coordination between the government and the private sector has led to a misalignment of transformation programmes, incentives and in some cases, vision.
I won’t delve into further details, especially as my book, A Country of Two Agricultures, carries some detailed answers. I will underscore that now is the time to act decisively to unlock the potential of the sector by removing constraints to accessing land, finance, markets and water, and improving safety in our rural areas, as well as service delivery by our provincial and local governments.
This is a challenge that the government and the private sector should address, and refocusing on the Agriculture and Agro-processing Master Plan remains central.
Wandile Sihlobo is the chief economist of the Agricultural Business Chamber of South Africa. You can watch the lecture here. I speak at 1:10:10 minutes.