L Xingwana: AgriSA Congress

5 October 2006

President Lourie Bosman
Deputy President Johannes Moller
Vice President Christof Cloete
Vice President Neels Ferreira
Vice President Chris du Toit
Executive Director Hans van der Merwe
Directors
Members of commodity organisations
Agribusiness representatives
Dames en here

Goeie dag,

I am indeed extremely happy to be your guest today. I must confess I count
myself lucky that I get to address an entire battalion of South Africa's top
food producers. What makes it more interesting is that though this is the first
time we meet like this since I was appointed as Minister for Agriculture and
Land Affairs, there will be many further opportunities for us to bring our
heads together for the betterment of this important sector.

Ladies and gentlemen: I do not have to remind you that after 1994, South
Africa underwent fundamental reforms aimed at creating a more open and
market-oriented economy. Although the deregulation of markets created some
uncertainty, at the same time it created opportunities for entrepreneurial
farmers and led to a more efficient allocation of resources in agriculture.

I do not have to tell you that the South African agricultural sector
contributed about 2,4% towards the Gross Domestic Product (GDP) during the
second quarter of 2006 but curiously accounts for 10% of total reported
employment. The 2,4% is a considerable decline from 12% in 1960. This in itself
is an indictment on the sector to become more competitive in an ever-changing
global environment. This improvement will, however, depend on how the sector
adapts its way of doing business under unfair conditions that are not of your
own making.

However, the decline does not spell doomsday for the sector as such. This
relatively small contribution of agriculture to the GDP is consistent with a
normal pattern of economic growth and development as growth in other sectors
such as finance, real estate and business services, manufacturing, wholesale
and retail trade will tend to overshadow that of primary industries.

Some scholars have argued, however, that agriculture's true contribution is
significantly undervalued and obscured when directly measured. When indirect
contributions of the sector in the form of employment, forward and backward
linkages with other sectors such as food, pulp and paper manufacturing and
foreign exchange earnings are considered, the sector's true importance to the
economy is revealed.

This year's latest figures of the Labour Force Survey show that agriculture
creates one of every eight (or 12%) job opportunities in South Africa and
sustains 1,5 million people. This adds up to approximately 3% of the
population. Although not the leading sector in employment-creating development,
it remains important in terms of the large number of benefiting dependants per
farm worker.

Furthermore, it has been proven that the economic growth rate of the country
as a whole is substantially negatively affected up to 50% in years when
agricultural production is adversely influenced by natural factors such as
droughts. Favourable climatic conditions on the other hand have a positive
influence on the overall economic growth rate.

As I inferred in the beginning, South Africa's agricultural sector receives
very little direct and indirect support from government compared to other
countries. According to the Organisation for Economic Co-operation and
Development's (OECD) statistics, the Producer Support Equivalent is similar to
that of other developing countries such as Brazil and China. These statistics
clearly support South Africa's objective at the multilateral levels, to
facilitate a substantial and real reduction in trade-distorting domestic
support. The target is that those countries competing with each other on world
markets should have more or less the same Producer Support Equivalent resulting
in a so-called "level playing field."

Substantial progress had been made in the World Trade Organisation
negotiations until these were suspended in July this year. The agreement on the
elimination of all forms of export subsidies is especially notable. We hope
that an Agreement on trade-distorting domestic support is possible. We also
wish for some improvement on the rules for the green box to ensure that green
box support has no, or at most, minimal trade-distorting effects or effects on
production.

As far as market access is concerned, we gave both offensive and defensive
interests. Finally, on this front we hope that the negotiations will resume
soon ensuring that the laudable objectives agreed upon at the Doha Development
Round can be achieved. South Africa is ready to resume the negotiations and we
hope that the major trade partners have the necessary political will to take
difficult political decisions to ensure a speedy resumption of the
negotiations.

Ladies and gentlemen, on another front, South Africa signed a Trade
Development and Co-operation Agreement with the European Union (EU) on 11
October 1999. The Agreement came into effect provisionally on 1 January 2000.
This Agreement gives provision for its review five years after entry to further
improve market access and to take into account international trade
developments.

The review of the Agreement is currently under way. The Agreement plays a
vital role in improving the export potential of agricultural products to the
European Union (EU). From 2004 to 2005, exports of these products to the EU
increased from R10 885 million to R10 973 million. In 2005 South African
exports of agricultural products to the EU had a 42% share of total
agricultural exports to the rest of the world.

On the regional front, Southern African Customs Union (SACU) member states
signed a free trade agreement with the European Free Trade Association (EFTA)
this year. The agreement is in the process of being ratified by SACU countries.
It is envisaged that it will come into effect on 1 January 2007. The main
agreement covers processed agricultural products. Furthermore, within this Free
Trade Agreement, bilateral agreements on basic agricultural products signed
with individual EFTA countries are included.

In contrast to the SA-EU Trade Development and Co-operation Agreement
(TDCA), South African exports of agricultural products to EFTA declined from
R345 million to R342 million from 2004 to 2005. It is envisaged that SACU
countries will be able to export more agricultural products to EFTA once the
agreement comes into effect. All these agreements offer our farmers
opportunities, which if taken advantage of, would maximise profits and make
South African agriculture profitable and competitive.

Furthermore, South Africa together with Botswana, Lesotho, Namibia and
Swaziland as members of SACU signed a Preferential Trade Agreement with
Mercosur, which comprises Brazil, Argentina, Paraguay and Uruguay in December
2004. This is a massive market of 231 million people. The agreement encompasses
preferential access to approximately 1 000 tariff lines on both sides.
Presently parties are engaged in a bid to improve the extent of market access
granted at the time of signing. The next round of negotiations with a view to
conclude the agreement will be held at the end of this year.

Ladies and gentlemen, bilateral agricultural trade between South Africa and
Mercosur was estimated at R4,2 billion in 2005. South African agricultural
product exports to Mercosur totalled R76 million. Most of these exports are
sugar, confectionery, under-naturated ethyl alcohol and wine. On the other
hand, South African agricultural imports from Mercosur have grown at 24% per
year on average since 2000, while exports increased by 9% over the same
period.

The SACU United States of America (USA/US) Free Trade Agreement negotiations
have encountered some difficulty and the process may now be slower than
previously anticipated. This might, however, be offset by negotiating a Trade
and Investment Co-operation Agreement. We hope that this agreement will serve
as a building block of an eventual Free Trade Agreement. It will also provide a
better understanding of issues such as customs co-operation and trade
facilitation, technical barriers to trade and intellectual property rights.

Currently South Africa enjoys quota and duty-free benefits for certain
products under the Generalised System of Preferences and the Africa and Growth
Opportunity Act. As you all know, these are special unilateral programmes by
the US to developing and least developed countries. The US is currently
reviewing the Generalised System of Preferences status of 12 countries,
including South Africa, with the view to limiting, suspending or withdrawing
the benefits that these countries enjoy under this programme. Despite all
these, bilateral agricultural trade between South Africa and the US was
estimated at $426 million in 2005. Our exports to the US were valued at $250
million in 2005. This has grown at an average of annual rate of 9% since 2003.
Our main exports to the US are wine, edible fruit, nuts, citrus fruit, sugar
and sugar confectionery.

We are in the process of exploring a possibility of negotiating a
preferential trade agreement between SACU and India. In preparation for this
eventuality, the Department of Agriculture has already completed an economic
impact assessment study, trade analysis and consultations with sector partners
towards an offensive position.

In 2005 SACU exported products to the value of R126 million to India. This
has increased at an average annual rate of 43% since 2000, from R21 million.
The most important export product was sugar with a total value of R61 million.
Wool, mohair apples, pears and cotton were also exported. SACU, on the other
hand, mainly imports rice from India and in 2005 this had a value of R698
million.

In 2005, China imported cotton, wool, tobacco and sugar from SACU. These
imports had a total value of R300 million. In the same period, SACU imported
raw materials for the meat processing industry, dried legumes and fruit juice.
These had a value of R320 million. Sanitary and Phytosanitary protocols and
agreements have been agreed between China and South Africa.

Ladies and gentlemen, while this array of agreements presents our farmers
with opportunities, I am also wondering how many of you have seriously taken
advantage of these. For you to survive you will need to start thinking out of
the box so to speak; it is time you think big, think global. Reading the Ronnie
Morris article in the Sunday Independent, was somewhat disheartening for me.
The thrust of the article was based on the findings by PricewaterhouseCoopers
benchmarking survey of the 2005 harvest of producer cellars in the local wine
industry.

According to this survey, fragmented marketing strategies by the South
African wine producer cellars and the strong rand, which caused a drop in wine
prices last year, left the local industry vulnerable to effects of surpluses in
the international market. These surpluses drive the price down. I sincerely
hope the wine industry is putting its house in order in this respect.

Ladies and gentlemen, the economic costs of agricultural disasters to
government in this country have risen dramatically over the past 15 years.
Economic losses as a result of disease outbreaks, floods, veld fires and
drought spells, between the 1990s and 2006, were higher in real terms than in
the 1970s. The maize price market crash last year is another indicator of the
risks facing this country. Novel challenges are posed by new disease outbreaks
that demand research to effectively deal with them. Dry spells have become a
regular feature across the country, especially in Limpopo and most of the
Western Cape.

The floods that ravaged parts of North West, Limpopo, Mpumalanga and
Mozambique in 2 000 are a case in point. Global warming is likely to cause more
extreme weather such as storms, floods and drought. With all this in mind, the
department thought it appropriate that there should be a policy shift in risk
management. That was when the Agricultural Disaster Management Plan was
drafted.

In February this year we held a conference to look at more profound issues
of adaptation and mitigation strategies as a matter of policy. The policy is
still at a draft stage and we expect to finalise it by the end of the year. The
main obstacle to this end could be the less than enthusiastic participation of
farmers, universities, research institutions, municipalities and other
stakeholders in the contribution towards the new policy.

As a department, this policy will have an impact on how we manage
agricultural risks. It must, however, be borne in mind that no single
organisation can handle this on its own and this includes government. It is in
this spirit that there is a need for all key stakeholders to share information,
expertise and resources as required. There should, however, be clearly defined
roles in national, provincial and local government disaster management plans
and these are in the drafting stage.

Ladies and gentlemen, on the land question there has been no ambiguity on
the part of government as to the direction we are taking to redress the
imbalances of our not-so-proud history. Contrary to what some alarmists have
been trumpeting, there has never been any intention to go the Zimbabwe
land-grab route. This country has one of the most progressive Constitutions in
the world.

It is no secret to anyone in this room that this Constitution recognises
property rights. If people have not decided to suffer from self-induced
amnesia, they will remember what we all agreed on at the Land Summit last year.
We agreed that the willing-buyer-willing-seller principle is not workable and
that the instrument of expropriation should be used selectively in terms of the
Constitutional principles which provide for expropriation in terms of the law
of general application and subject to compensation, the amount of which and the
time and manner of payment of which has been agreed to by those affected.

Furthermore, in establishing the amount of compensation the following
Constitutional principle must be considered:

* the current use of property
* the history of the acquisition and use of the property
* the market value of the property
* the extent of direct state investment and subsidy in the acquisition and
beneficial capital improvement of the property
* the purpose of expropriation.

With this in mind and the fact that as government we have set ourselves a
target of redistributing 30% of agricultural land by 2014, I have said that we
are prepared to negotiate only for six months and thereafter will begin with
expropriation. This process cannot go on ad infinitum. It is also in the
country's interest to speed up the process to avoid having a restless majority,
who want land, unnecessarily becoming militant.

It is, however, encouraging that AgriSA signed a memorandum of understanding
with the Department of Land Affairs with a view to fast track land restitution.
Another memorandum of understanding between that department and the Transvaal
Agricultural Union is in the process of being drafted. As you go about your
deliberations, bear in mind that food security in this country lies in your
hands as well as the hands of thousands of new entrants who could make a
meaningful contribution to this sector, if given the necessary support.

As government we are giving them this support but it would also speed up
their transformation to fully-fledged commercial farmers if the mentorship that
some farmers are involved in could be extended. It is also heartening that on
19 June the National African Farmers' Union of SA (NafuSA) and AgriSA signed a
memorandum of understanding with a view to developing a working relationship.
Indulge me to leave you with a quote by a Canadian career soldier Sergeant JG
Holland and I quote, "God gives every bird its food, but he does not throw it
into its nest."

I thank you.

Issued by: Department of Agriculture
5 October 2006