South Africa’s agricultural policy has undergone major changes over the past 10 years — but drought relief has received little attention.
With drought again an issue, the Department of Agriculture and Land Affairs and the Treasury will come under increasing pressure to bail out farmers and protect the Land Bank from exposure.
Currently, there is little state intervention in agriculture. There are no drought relief schemes, as under the Nationalist government, and farmers receive only ad hoc assistance. Limpopo is helping livestock farmers buy fodder, but relief has been limited and slow-moving.
And relief measures are more likely to target poor than commercial farmers. That farmers are expected to plan for drought, rather than wait for the government to bail them out when drought occurs, is a healthy trend.
One measure mooted post-1994 was a drought insurance scheme, to which both farmers and the government would contribute. Currently, farmers can insure themselves against hail, flood and fire, but not drought.
The policy never saw the light of day, presumably because of bickering over who would pay. The government argued that farmers should plan for drought and that major droughts should be dealt with as part of disaster management, not by the agriculture department.
Drought is part of South African agriculture, occurring in roughly 10-year wet and dry cycles over the past century. Some climatologists argue that with global warming these cycles may become more extreme, but there is no clear evidence for this yet.
After the wet cycle of 1992 to 2002, we can expect more dry than wet years for the next decade and, at least, a couple of serious droughts.
From 1930 to 1990, the Nationalist government responded to dry cycles with drought relief, paying farmers for fodder, livestock and even crop losses. But price-fixing and input subsidies encouraged distortions, with farmers planting in more drought-vulnerable areas and irrigating where water shortages were apparent.
The post-1994 policy reviews aimed to remove distortions by scrapping subsidies in agricultural production, allowing open markets to dictate prices. Agricultural boards were closed.
Today, only the price of sugar is controlled — by the Department of Trade and Industry. The only real subsidies are for land reform, helping historically disadvantaged farmers to acquire land. These do little to distort agriculture and make it more drought-vulnerable.
Open markets have created their own distortion. The weak rand, for example, has driven up the price of maize and other grains, encouraging farmers to plant in more drought-vulnerable areas. Export fruit and vegetables were planted in response to the weakening rand, perhaps resulting in overuse of some irrigation water. Hence we see the rapid emptying of irrigation dams and huge development costs becoming unsustainable debt.
Marginal farmers, without access to markets or effective extension services, are most affected by drought. Cattle increase on communal grazing in wetter years, but die when drought hits. This “boom and bust” cycle has been repeated many times, yet the government has not developed an effective intervention. Better provision of information on long-term weather patterns and encouraging markets for farmers to sell livestock ahead of drought could assist.
Rural farmers and households producing food for subsistence and markets are also vulnerable. Government intervention usually takes the form of food aid and providing seed to replant crops in the next season. These interventions occur regularly in Lesotho, Mozambique and elsewhere in the region, and might be planned for severe drought in South Africa.
Sometimes interventions take the form of food for work or environmental programmes, so that surplus rural labour is used to improve the farm infrastructure and environmental management. Erosion prevention, building access roads, constructing small dams and fire control are all examples of rural programmes in response to drought.
For commercial farmers, the drought is likely to result in better prices as supply drops, a spin-off already visible in the grain price. While this may compensate some farmers, many will face mounting debt and some, in high-cost operations like irrigation farming, will be forced out of business.
Any agricultural downturn reduces rural employment, and more food-insecure and impoverished families may require food aid. Government interventions could include debt rescheduling, new loans for re-establishing crops and public works.
The effect on vulnerable rural families and the economy will be significant. We are likely to have a grain deficit this year; sugar and some irrigation crops will incur substantial re-establishment costs.
The government and industry stakeholders should develop a joint strategy. Leaving a sector like agriculture to its own devices, without a defined government role, raises the spectre of food shortages experienced in neighbouring countries. The market approach has strengthened agriculture overall and it would be a pity if drought reopened the door to more control.
It may be time to restart discussions on drought planning, including whether water-resource planning can be improved, the banks’ role in debt management and programmes to help vulnerable communities. A national drought insurance scheme could again be considered. It is too bad drought manage-ment is only discussed when skies are cloudless.
David Cooper is an independent consultant who has advised the government on agricultural policy