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JEREMY MAGGS: Agriculture is a cornerstone of South Africa’s economy. However, how much do South African farmers actually benefit from global agricultural subsidies? While various countries enforce subsidies to safeguard their farmers and food supply chains, the implications for South African farmers, who operate in a highly competitive global marketplace, can be complex.

To delve into these intricate dynamics and their effects on local agriculture, I’m joined by Wandile Sihlobo, an agricultural economist and chief economist at the Agricultural Business Chamber. Wandile, it’s great to have you with us. Could you please elaborate on why this issue is back on the national agenda?

WANDILE SIHLOBO: Certainly. The first step for South Africa is to recognize our role in global agriculture. We are the 32nd largest agricultural exporter worldwide and the only African country in the top 40.

When looking at South Africa alone, we find that we export around half of the value of our agricultural production. With prospects for expansion in new planting areas and productivity improvements across various farms, we need to explore all options for opening export markets for our goods.

However, we face this challenge amid a global trend of increasing protectionism, with countries enacting trade restrictions and various protective measures…

In parallel, these nations are channeling resources into their agricultural sectors, creating a more favorable cost structure for their farmers compared to ours.

This pivotal discussion is largely spurred by recent developments, particularly from the EU. For example, just this week, France has drawn attention and for much of last year, the focus was on the EU and India.

Listen/read: Agri insights: Challenges, wins, and outlook for SA farming

JEREMY MAGGS: Which countries are the most significant subsidizers of their agricultural sectors? You mentioned the EU; can you relate policy directly to South Africa’s market competitiveness? What should we be wary of?

WANDILE SIHLOBO: Absolutely, the primary global agricultural players that employ subsidies are the US and the EU. The EU, for example, has the Common Agricultural Policy, which provides substantial support to its agricultural producers.

In contrast, South Africa lacks any significant subsidies.

The closest thing we have is a diesel rebate, but this pales in comparison to the capital support available before 1994 under the previous government’s agricultural subsidy policies.

While I wouldn’t advocate for subsidies in South Africa due to our fiscal constraints, the impacts on South Africa are manifold.

The consequences …

Firstly, we are competing in global markets against countries that offer their producers considerable support, which has been a critical point of discussion at the WTO [World Trade Organization] for many years.

Secondly, developed nations, especially in the EU, are well-supported, prompting various farmer groups to seek even more assistance from their governments. They raise concerns about competition from emerging markets, regions like South America, and even countries like ours.

These interactions demonstrate how global policies can affect South Africa.

Read: South African agriculture needs to crack the Chinese market

JEREMY MAGGS: Wandile, in terms of protecting our agricultural sector and boosting competitiveness in the face of the protectionism you’ve mentioned, do you think it’s time for South Africa to rethink the subsidy debate, especially for the more vulnerable sectors within our community?

WANDILE SIHLOBO: Jeremy, the heart of the issue is that South Africa simply cannot sustain subsidies. Instead, I believe our near- to medium-term strategy should concentrate on expanding our export markets. Our urgent challenge is the threats posed by potential restrictions or closures in lucrative markets.

We must carefully sustain our relationship with the EU and ensure that we uphold this market, despite the existing challenges, as it is South Africa’s second-largest agricultural export destination.

Nearly 30% of our agricultural exports go there.

Moreover, we should build stronger connections within BRICS [Brazil, Russia, India, China, South Africa], the Far East, and the Middle East, looking for opportunities to diversify our export markets to lessen our reliance on traditional markets.

However, I would hesitate to promote direct subsidies for South African farmers because of the limitations and inefficiencies they have historically caused.

JEREMY MAGGS: Wandile, you’ve highlighted a key point. How can we boost South Africa’s export potential? What measures should we take?

WANDILE SIHLOBO: In South Africa, two critical steps are essential, Jeremy. First, without subsidies, it’s imperative that the government creates an operational environment for farmers that is as efficient as possible. This includes managing animal health concerns effectively, ensuring that municipalities function smoothly, and enhancing infrastructure, such as ports and roads, to reduce transaction costs.

If we can improve these business conditions, it would greatly benefit our agricultural sector. Secondly, regarding export markets, the Department of Agriculture, under Minister [John] Steenhuisen’s leadership, in collaboration with the DTIC, led by Minister Parks Tau, and the Dirco [Department of International Relations and Cooperation], under Minister Ronald Lamola, should amplify their efforts to engage with specific countries, such as China, India, and Saudi Arabia, advocating for increased market access and the elimination of tariffs on a variety of products. Additionally, addressing phytosanitary barriers—like those faced by certain goods in China—should be prioritized.

Ultimately, opening up export markets and improving logistical support are crucial for the agricultural sector in South Africa.

Read: A rare South African export success is threatened by crumbling ports

JEREMY MAGGS: That’s the crux of the issue. In closing, we are significantly lagging in resolving logistical challenges, particularly in ports and rail.

WANDILE SIHLOBO: Yes, ports and rail present considerable obstacles, but we must continue pushing forward. For a sector that exports over half of its production and anticipates higher yields, with more than two million hectares of land still underutilized for agriculture, we need to address logistics to foster agricultural growth and job creation.

This is a vital conversation that policymakers and our nation’s leadership must engage in deeply.

JEREMY MAGGS: Thank you very much. Wandile Sihlobo, agricultural economist and chief economist at the Agricultural Business Chamber, I appreciate your insights.

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