Agricultural trade and food security

Decline in spending

Actual spending on land reform has declined from R358.27m in 1998/99 to R103.68m in 2000/01. This is coupled with a decrease in the budgeted allocations for land redistribution and tenure reform in the Medium Term Expenditure Framework (MTEF) from a projected R421.86m in 2001/02 to R339.48m in 2003/04. The main reduction is made in the allocations for land reform grants⁶⁴. This suggests that, not only is there no plan to expand the land reform programme in the medium term, the programme is envisaged to shrink.

The total agricultural budget constitutes approximately 2% of the national non-interest budget (i.e. the budget remaining after interest repayments have been deducted), and is set to remain at this level in the medium term⁶⁵. In terms of the WTO Agreement, the South African government had to reduce its AMS by 20% based on levels of support in 1986-88.
Yet current levels of support are well below what was required. It can thus be said that “the principal constraints on government subsidies for the agricultural sector do not directly originate from the Agreement on Agriculture provisions, but rather from self-imposed government reform policies and its macroeconomic reform programme”⁶⁶.
While it is difficult to work out the precise amount of the agricultural budget being used for small farmer development, this is also unlikely to have any major effect on the current situation. At a provincial level, there is little planning to improve the infrastructure or personnel requirements that LRAD requires to be successfully implemented⁶⁷. The low budget allocations for the programme suggest that wealthier, commercial farmers eligible for the programme will access by far the greatest portion of the budget.
This is because they will receive larger grants and will also better be able to meet the technical requirements for accessing the grants (for example, business plans) than resource-poor farmers⁶⁸. Establishing a target of only one third of land to women also works against support for small scale, food security-type projects, since more than 70% of existing subsistence producers are women⁶⁹.
The programme will resultantly favour support to male commercial producers. Therefore, there is little likelihood that LRAD will make any significant inroads into creating a broader base of producers and redistributing existing assets.
Regarding infrastructure development, while this is a priority both in the NAI and in South African domestic policy, again the practice does not match the rhetoric. In South Africa, the most recent example is that just 29,2% of the provincial capital expenditure budget for 2001-02 had been spent by September 2001⁷⁰. This is on top of rollovers and returns to the national treasury of unspent budgets from previous years. Health, education and agriculture budgets in the provinces remain unspent and are returned to the national fiscus and represented as surpluses. One main reason for this failure to deliver is the lack of capacity that is a direct result of the gutting of the public sector through downsizing and retrenchments over the past few years.
A neo-liberal policy of reduction in state employment is therefore in direct opposition to improvements of public services and infrastructure development. The same applies to extension, training and research services in agriculture.
Likely consequences of the AoA for food security in South Africa
The influence of the current AoA can be measured in three ways⁷¹:

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  by the ability of the government to protect and promote the domestic agricultural sector;
  
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  by the ability of exporters to access the markets of developed countries;
  
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  by the influence of current multilateral subsidy disciplines in the AoA on South African agriculture.
  

It is important to recognise that the domestic agricultural sector is dualistic, with a core of white commercial farmers and a large periphery of semi-commercial and subsistence black farmers.

Without going into the history, it appears that the beneficiaries of an export oriented agricultural strategy will be the commercial farmers who historically have had high levels of state support as well as decades to build up their connections to international markets.
The Department of Agriculture itself recognises that “international trade opportunities created by globalisation… sometimes benefit mostly large multinational companies who have the means to pay the initial costs of utilizing the international market”⁷².

The promotion of the domestic agricultural sector could well mean the consolidation of inequality, if redistribution of current assets is not a significant element of that process.

The impact of structural adjustment programmes (SAPs) in Africa cannot be separated from the impact of the AoA, since both are based on trade liberalisation, export orientation and state deregulation. This is very much in line with South Africa’s own approach to agriculture, as detailed above. Although the effects have been uneven on a national scale in many countries, the evidence shows that the impacts on the poor have been overwhelmingly negative⁷³.
One of the most important of the impacts of trade liberalisation has been the dumping of cheap imports onto developing country markets. The imports are cheap not because of greater efficiency in production, but because producers are highly subsidised by their governments, as indicated in the discussion on CAP reform and the WTO above. This subsidisation has the effect of reducing prices below the cost of production of even the most efficient producers, since it encourages overproduction in the countries where there is subsidisation and allows the subsidised producers to sell at below the cost of production. While in the short term this may result in a lower food price, it undermines domestic production and thereby leads to greater poverty and food insecurity in the medium to long term.
Cheap imports also do not resolve the issue of access to food where there is no effective demand in the market i.e. from those who do not have the purchasing power and are most food insecure. In South Africa, the immediate losers are commercial farmers who are not subsidised by the government but who have to compete with subsidised goods from other countries. But cheap imports also inhibit the widening of the base of producers, especially when new entrants would be aiming to produce for the market.
The closure of marketing boards in Africa has had a negative effect on many smaller exporters and producers who are unable to guarantee sufficient volumes in advance to attract price premiums. The result is a shift from high input to low input smallholder agriculture, caused by the dissolution of parastatal systems and trade liberalisation⁷⁴.
Inputs have increased in price, thus effectively becoming unavailable, while regulative, R&D and quality control functions have disappeared. Lack of guarantees for credit repayment to private input suppliers, and significant increases in input prices as a result of subsidy removal and devaluation, has meant that input use for cash crops has declined, with consequent declines in quality and hence revenues⁷⁵.
“It appears to be the case”, say Shepherd and Farolfi of the UN Food and Agriculture Organisation, “that the potential implications of major changes to the marketing system were not considered in advance, and are only now, at far too late a stage, really being considered”⁷⁶.
Trade liberalisation has meant more food imports in developing countries – partly because of cost and partly because of legal requirements for greater access under the WTO and conditions applied to SAP loans. Related to this is greater priority on export crops that has resulted in a decline in the local production of food, in both quantity and variety, with negative effects on local and household food security.
An export orientation has also not necessarily resulted in farmers receiving higher prices for their crops. In Africa, case studies indicate the opposite, partly because of the power of traders in relation to the primary producers. The link between cash crop production for exports and increased use of agro-chemicals is well documented, and has increased soil degradation and accelerated the loss of biodiversity. These have been made worse by increases in mono-cropping and extractive forms of agricultural production. Trade liberalisation also increases the pressure of developing countries to export their natural resources⁷⁷.
Marginalisation of small producers
An export orientation has resulted in the concentration of farms and the marginalisation of small producers. Vertical integration or “tight vertical co-ordination” has been encouraged, excluding of smallholders, because of lack of access to information and production inputs, economy of scale effects and high transaction costs⁷⁸. The result is that resources are concentrated in high potential areas, and on farmers with more of their own resources – who tend to be male, with a resulting acceleration in spatial, social and gender differentiation⁷⁹.
An increase in landlessness has also been noted. There has been a deepening differentiation between producers, because only those able to integrate production and exporting can guarantee the volume, quality and reliability required while at the same time supplying post harvesting services and engaging in product innovation⁸⁰.
Transnational corporations have grown in power and increased control over resources as a result of trade liberalisation in agriculture. Private sector involvement in trading has also increased, with traders using their bargaining power to buy at low prices from farmers. At the same time this has not resulted in an increase in employment in trading.