Land reform uncertainty stalls investment in agricultural industry
By Luyolo Mkentane - Nov 5th 2018, 09:58
Continuing uncertainties over the government’s expropriation without compensation land reform programme has stalled investments in the agricultural industry with farmers holding back on buying machinery in the past few months.
The South African Agricultural Machinery Association (Saama) said most commercial farmers have scaled back on expansion project because of the uncertainties.
Saama chairperson Greg Cadman said farmers had put the purchasing of equipment at the backburners of their lists.
Cadman said sales of crucial equipment such as combine harvesters were down 3 percent year-on-year despite a marginal rise in tractors units sold.
“People are making decisions based on the hype around this issue and the possibility of this land expropriation happening,” he said.
“But the impact of this policy is there and is still being felt.”
With the summer crop harvesting having been largely completed and a small increase in the maize price, Cadman said farmers were looking ahead to the forthcoming summer cropping season.
“They will have to face the ongoing problems of high input costs, availability of finance and political uncertainty,” he warned.
The industry’s lobby group AgriSA said there was a lot of concern from farmers on what the outcome of the land expropriation policy would lead to.
AgriSA deputy executive director Christo van der Rheede farmers were worried about the implication of the policy on their debt with financial institutions.
Van der Rheede said the current amount of production loans owed to financial institutions amounted to R200 billion. "That debt must be serviced and the only way you can do so if you continue producing on the land," said Van der Rheede.
Absa Agribusiness senior agricultural economist Wessel Lemmer said while the policy had impacted on investments in new machinery, low commodity prices globally and the maize surplus had also put more pressure on the sector.
Lemmer said the continuing uncertainties could result in increased food inflation.
“If you harm agriculture and chase investments away through bad policies or policy uncertainty, there will come a time where we will have to import food and that will have an impact on us,” he said.
“We will pay more for food and that is not good. We are going to lose jobs also. Give policy certainty that will increase investments and market access for exports."
“We cannot afford to hold back. We need to continue to invest to keep our productivity up and to be competitive.”
Agricultural economist Fanie Brink said the land expropriation issue had caused uncertainty to farmers as it was yet to be finalised by relevant arms of government such as Parliament.
Brink said farmers were undecided on whether to invest in machinery while the future remained uncertain.
“I don’t think they are going to invest in agricultural machinery at all going forward. And it’s going to be a problem."
The sector fell 29.2 percent in the second quarter, following a 33.6 percent slump in the first quarter, due to a decrease in the production of field and horticultural crops.
Econometrix chief economist Azar Jammine said while the land issue might have had an impact, it was unlikely to define trends in the future.
“You may have incidents where one or two people are holding back from buying agricultural machinery, but I’m not sure if you can extrapolate that into the entire industry,” said Jammine.
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