income category, such as the US and China, also
have high rates of domestic consumption for
their own manufactured products. For example,
most of the wine produced in the US, which is
one of the largest producers of wine in the world,
is consumed locally. This is, however, not the
case in South Africa, which is ranked number
nine in the world in terms of wine production,
where a large share of the wine gets exported.
AGRICULTURE AS A CATALYST FOR GROWTH
South Africa needs a major policy shift if it
wants to effectively address the challenge of
rural poverty, and this will have to include
expansion of the domestic market.
By investing in manufacturing capacity in
these areas, or the type of manufacturing that
could create markets for goods produced by rural
communities, you allow for greater participation
of smallholder farmers in the formal economy.
Government also needs to adopt policies aimed at
providing adequate and effective support in finance.
In addition to this, substantial land distribution and
state investment in rural infrastructure are required.
On a macro-economic level, this means
shaping fiscal policy in such a way that
financing of smallholder farmers is actively
encouraged and mandated. It’s not good
enough to just offer blended financing models
to the agriculture sector; more is needed.
On a meso or intermediate level, there needs
to be aggregation of smallholder farmers in
order to enable these farmers to compete with
commercial farmers. Small farmers can be as
productive as commercial farmers if they can work
together in groups that would afford them the
same type of scale benefits as those enjoyed by
larger farmers. The state needs to play an active
role in facilitating this type of aggregation.
At a micro level, as part of the Brazil, Russia,
India, China and South Africa (BRICS) group, South
Africa can learn from the successes achieved in
other BRICS countries. One example of this is an
increased focus on local procurement, which could
be the starting point for South Africa. We also need
innovative policy research on how incentives can
be created to encourage smallholder farmers to
work together more in co-operative structures.
We also need to re consider the viability of
providing better subsidy support to farmers. From
a government perspective, officials need to realise
that subsidies and investment could be one and the
same thing, depending on the effect they have. For
example, if money spent on supporting a farmer
to purchase inputs results in an economic effect or
output that is less than the value of the initial input,
then you have subsidised the farmer. However, if
the resultant economic effect or output is greater
than the value of the initial input, then the subsidy
becomes an investment. – Siyanda Sishuba (^) ▪FW