Affairs at the public release of OECD Agricultural Policy Review Report of
South Africa
19 April 2006
Honourable MEC
Our visitors from the OECD Secretariat in Paris
Colleagues
It is a pleasure and a privilege to deliver this introduction to the review
of South Africaâs agricultural policies by the Organisation for Economic
Co-operation and Development (OECD). The OECD approached the Department of
Agriculture in 2003 for its agreement for the OECD to undertake a review of
agricultural policies in South Africa in line with the regular assessments it
makes of the policies of its own members, mainly the leading economies of the
world. The OECD intention was to undertake comparative studies of four
developing countries, China, Brazil, India and South Africa, all members of the
G20 in the World Trade Organisation (WTO), following the failure of the Cancun
Ministerial meeting. Early in 2004 agreement was reached with the OECD to go
ahead with the study on condition that a comparative assessment of OECD members
would be undertaken.
The OECD has now completed studies of the agricultural policies of China,
Brazil and South Africa in this series and has done a comparative assessment of
the OECD membership, which covers the same timeframe as the studies of the
above three developing country members of the G20. The comparative assessment
and the studies of Brazil, China and South Africa were discussed in South
Africa and the OECD in 2005.
The final draft of the report on South Africa was used as a basis for a peer
review meeting of the OECD Committee for Agriculture that took place in Paris,
France, in December 2005. The Department of Agriculture participated in this
peer review of the South African Report and also was an observer at those of
China and Brazil. Furthermore it participated in two high level meetings at the
OECD last year to review agricultural policy developments of OECD members and
policy options for development and trade. This process has provided us with an
important perspective on the relationship between the agricultural policies of
members of the OECD and those of the three developing countries. We would like
to thank the OECD for undertaking this review of our policies and in particular
the secretariat staff who worked on our report over the last year and a half
for their professionalism and collaboration.
During the peer review South Africa received much acknowledgement and
admiration from OECD members for the extent and the manner in which it has
approached and succeeded in coping with important reforms and transformation
over the whole spectrum of political, economic and social reforms, although
there is recognition for the challenges that still lie ahead. The report has an
important lasting value in conveying factual information to the OECD membership
and to a wider audience of the changes that have taken place in South Africa,
of current agricultural policies and of the serious challenges still faced by
South African agriculture, not only in the field of trade but also with regard
to further domestic transformation, job creation and poverty alleviation.
We believe the report sketches the reality of South African agricultural
policy and when compared to that of the average OECD member it underscores the
positions we have been taking in the multilateral and bilateral trade
negotiations. Agriculture in South Africa contributes less than four percent to
GDP, but accounts for approximately 10% of total reported employment and nine
percent of exports. The conditions for agricultural production are not
favourable in most regions due to poor soil quality, highly variable weather
conditions and a scarcity of water. Agriculture is well diversified with field
crops, livestock and horticulture the main sub-sectors.
The sector is increasingly export oriented with about one third of total
production being exported. Fruit production has seen the most dramatic
development in the past ten years with a large share of total output exported,
mainly to Europe. South Africa accepted a strategic plan for the Agricultural
Sector in 2001, which has at its core three key strategies competitiveness,
equity and participation and sustainability. These three strategies have driven
the trajectory of our domestic and trade agricultural policy both through the
multilateral WTO route and in bilateral trade negotiations where we are adamant
to ensure that the trading field is indeed a level one. We are keen to open
markets for our products and are willing to make tariff cuts, but not in cases
where products are subsidised.
Important and wide ranging reforms liberalising domestic and foreign trade
and lowering support to agriculture were implemented in the 1990s. Current
levels of support the (Producer Support Estimate (PSE) of around five percent)
are low relative to the OECD average of 34% and are comparable to countries
like Brazil, Russia, China and Australia and New Zealand.
Border control measures have also been significantly relaxed, and are
consistent with an emphasis on new regional trade agreements. The Report
reveals that there has been a lowering of the average tariff level for all
products between 1990 and 1999 from 27.5% to 7.1%. Agricultural applied duties
were at an average of 9.7%, well below South Africaâs commitments at the WTO
where we agreed to an average bound tariff of 39.7%. In general, the tariff
regime has been simplified and tariffs reduced during the 1990âs. No other
significant import measures, other than SPS requirements, are applied. Export
and import permits are only used to implement tariff quotas in terms of WTO and
bilateral trade agreements.
Since July 1997, no export subsidies have been applied for agro-food
products. Budgetary support is increasingly targeted to the beneficiaries of
the land reform process aiming to develop their agricultural businesses into
viable economic operations. Almost half of the budgetary expenditures are for
the provision of general services such as research, training, inspection and
infrastructure development.
The Report reveals several important trends that inform us that South Africa
has made systematic and substantial progress in the opening up of its economy,
in improving transparency and in reducing trade distorting policy
interventions. This presents a challenge to several developed countries that
still continue with high levels of trade distorting policy measures. While in
our experience there seems to be a trend away from the most price and
production distortion types of supports in developed economies the levels of
support remain high. Overall support given by OECD members to their agriculture
is USD280 billion per year based on a comparative period and using standard
OECD techniques of measuring support. Such high levels of support are recent.
The report shows South African support levels at five percent versus the United
States of America (USA) at four times that level or 20% and an OECD average of
31% and European Union (EU) support well above these levels.
South Africa is in good company with other G20 developing countries whose
support levels have been assessed on the last two years, namely Brazil four
percent, China six percent and OECD members, Australia and New Zealand, who are
like South Africa agriculture exporters and members of the Cairns Group in the
WTO.
South Africa, a member of the G20, Africa Group and Cairns Group in the WTO,
is approaching the current Doha Round of negotiations from a development
perspective with the objectives of greatly reducing trade and production
distorting subsidies by others, eliminating all forms of export subsidies,
substantially improving market access, and maintaining adequate policy space to
ensure that our development challenges can be met.
Many features of our agricultural landscape and policy interventions are
mirrored in the situation of other developing countries where rural poverty and
deprivation are major focus areas of policy. The OECD reports on agricultural
policies in Brazil, China and South Africa will have clear benefits in favour
of the development aspects of the Doha Development Round of multilateral
negotiations.
In recent months the South African agricultural implementation agenda has
been accelerated and it would be useful in the context of the publication of
this report to highlight a few of the important recent developments.
In order to ensure that all South Africans shares in the wealth of the
country, the Government is striving to address the issues of land ownership,
equal participation in agriculture and the true empowerment of all South
Africans. A summit on Land and Agrarian Reform was held last year to review
progress in enabling access to agricultural land and at the same time to
encourage dialogue among key partners and stakeholders on the best way to
accelerate access to land. The fast-tracking of the implementation of the
Comprehensive Agricultural Support Programme (CASP) has been a major challenge
in the strategy to promote agricultural production among previously
disadvantaged individuals and communities. Where previously the focus was on
providing access to agricultural land through the Land Redistribution for
Agricultural Development (LRAD) programme, CASP adds the vital element of
post-settlement support, which is imperative to improve the production capacity
of emerging farmers.
Following the publication of the Agricultural Broad-Based Black Economic
Empowerment (AgriBEE) framework in 2004, a wide consultation process was
followed, which culminated in the launch of the draft AgriBEE Charter at a
national AgriBEE Indaba in December 2005. Upon the signing of the AgriBEE
Charter later this year, AgriBEE initiatives will have an agreed guideline and
can become fully operational.
In terms of access to finance, the department has worked together with the
financial sector in launching the Micro-agricultural Financial Institutions of
South Africa (Mafisa). This is the first state-owned scheme to provide micro
and retail agricultural financial services on a large, accessible,
cost-effective and sustainable basis. The objective of the scheme is to provide
capital to increase support to agricultural activities in the communal land
areas as well as the emerging farming sector.
Skills development and the broadening of access to agricultural education
and training at all levels are critical success factors for the growth and
transformation of the sector. To address the inadequacies in the current
education system, the Department and its partners developed the Agricultural
Education and Training Strategy to restructure and reorient the system and
address the education needs of small-scale and emerging farmers.
In a further endeavour to bridge the gap between the first and second
economies in our country, I announced an exciting new initiative last year
linking agriculture with tourism. The AgriTourism programme is a response by
the Department to the opportunity that was offered by the growing tourism
industry to enable emerging farmers to become participants in this venture.
During 2005, South Africa once again excelled in its endeavours to prevent
and control the outbreak of animal diseases. Following a major effort on
national and provincial level to curb the spread of avian influenza, South
Africa was declared free from the disease in November 2005. This has in part
maximised the opportunity for economic growth for our poultry farmers and the
industry and at the same time demonstrated our ability to work in partnership
with the industry to achieve national objectives.
In its endeavour to contribute towards the realisation of Governmentâs
Accelerated and Shared Growth Initiative for South Africa(AsgiSA),which aims at
increasing economic growth to 6% and above and broadening its benefits to
society the department has started a process of developing detailed business
plans for identified AsgiSA projects. The five key areas which have been
identified include livestock development, establishment of new and the
rehabilitation of existing irrigation schemes, bio-fuels, accelerated land
reform and the development of agricultural development corridors.
We look forward to meet the new challenges, to achieve higher rates of
economic growth and development in the agricultural sector, to improve the
quality of life for all our people in striving towards fulfilling our vision of
a united a prosperous agricultural sector. I can thus identify with the report
when it says, and I quote: âWithin the past ten years, wide-ranging reforms
created a good base for continuation of efforts to address further, often more
profound, economic and social challenges facing South Africa. While important
progress has been made, there is much more to be doneâ¦.â
I would therefore like in conclusion again like to thank the OECD for
compiling this agricultural policy review. It is a very useful record of the
process of policy transformation and implementation success of Government in
the agricultural sector. For the first time our agricultural policy measures
have been formally evaluated according to the OECD methodologies and compared
to the performance of several countries on the same basis. The Report justifies
the policy reforms we have undertaken, the negotiating positions we are
following, and it highlights the challenges that lie ahead and clearly it
demonstrates the critical importance of a favourable development outcome to the
World Trade Organisation negotiations, which are currently underway in
Geneva.
I thank you.
Issued by: Ministry of Agriculture and Land Affairs
19 April 2006
Source: Department of Agriculture (http://www.nda.agric.za)
