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4 December 2017By: Dr John Purchase

AGBIZ MEDIA DAY

South African Agriculture and Agribusiness:

Outlook 2018

For today…….

1. Political economy: Challenging and complex

environment evolving

2. SA Agricultural Economy and Agbiz/IDC

Agribusiness Confidence Index

3. Trade and competitiveness

4. Legislation environment

5. Wrap up

2

Challenging and complex environment evolving

• Global socio-political environment

• Local socio-political environment

• Consumer trends and activism – need to analyse and note

• Technology dynamic – 4th Industrial Revolution: Jobs dynamic

• Climate Change – adaptation and mitigation: Western Cape impact?

• Increased regulation of agro-food system: Food safety & health

• Sustainable use of, and rights allocation to, water and land as critical natural resources

• Utilisation of renewable energy sources – energy security

• Trade agreements – “Trade wars are the wars of the future”

• Big Data – mine and analyse to drive efficiency

• Human capital and skills – the talent factor NB!3

• Multi-polar global power dynamic – economic power shift to Asia

• Middle East catastrophe – migration effect to Europe

• Religious fundamentalism, e.g. ISIS, Boko Haram, Al Qaeda, etc.

• Brexit and European Unity: uncertainty

• President Trump dynamic

• Ambitions of China & Russia, their geo-political positioning?

• North Korea a real nuclear threat?

• Africa’s demographic dividend and food insecurity?

• Globalisation and Interconnectivity still massive driver

• Blockchain and Bitcoin – IMF CEO quote

More interconnected ➜ greater uncertainty ➜ less control ➜ more risk ➜ greater opportunity!

Global Socio-political Developments

Demographics…..

Either massive opportunity, or a critical risk……!

2017 Global Food Security Index

Source: Economist Intelligence Unit/DuPont

http://foodsecurityindex.eiu.com.

South Africa ranks 44th

http://click.conversations.dupont.com/?qs=eb858739df3bf0e702094b7255f936666d29243bbb8e781e67f717050ad2a584

• Multi-polar global power dynamic – economic power shift to Asia

• Middle East catastrophe – migration effect to Europe

• Religious fundamentalism, e.g. ISIS, Boko Haram, Al Qaeda, etc.

• Brexit and European Unity: uncertainty

• President Trump dynamic

• Ambitions of China & Russia, their geo-political positioning?

• North Korea a real nuclear threat?

• Africa’s demographic dividend and food insecurity?

• Globalisation and Interconnectivity still massive driver

• Blockchain and Bitcoin – IMF CEO quote

More interconnected ➜ greater uncertainty ➜ less control ➜ more risk ➜ greater opportunity!

Global Socio-political Developments

• Deep divisions in ANC – pro-Zuma and anti-Zuma factions.

• Division manifested in ANC loss of three major Metros, viz. Johannesburg, Tshwane and Nelson Mandela Bay, to coalitions.

• New and courageous approach by certain current and ex ANC Ministers and MP’s (e.g. Eskom, SABC, State Capture & Vote of no confidence)

• Bitter ANC succession race and elective conference – Dec 2017

• June ANC Policy Conference resolved very little – positions only hardened

• DA & EFF viable opposition parties and ruling coalitions?

• Major political uncertainty – Zim effect? Not necessarily all bad though.

• Lack of GDP growth and Competitiveness (WEF) decline a real concern

• Massive unemployment (>27%), especially amongst the Youth (>50%)

• Crime & Security factor, including corruption and farm safety concern.

• Calls for radical economic transformation (RET) will not abate.

• Land & water reform will be at the centre of demands.

• HLP Report on Key Legislation and Fundamental Change

• South Africa needs a turnaround strategy.

Local Socio-political Developments

For today…….







5. Wrap up

9

AGBIZ MEDIA DAY

SA agricultural economy: Current conditions

Wandile Sihlobo ([email protected])

04 December 2017

Pretoria, South Africa

Overview…

• Confidence (business and agribusiness) and growth in the sector

• Business and consumer confidence remain low

• Agribusiness confidence index also in a contractionary tarrain

• Weather outlook for the upcoming summer season

• Conditions remain favourable - with prospects of good rainfall until February 2018

• Crop forecasts and equipment sales performance

• We expect a y/y percentage decline in maize, but sill good performance

• Equipment sales have been solid due to increased area plantings

• Agricultural labour market

• The past 3-quartres have been on a declining trend due to reduced activity in the WC

11

Source: BER, Agbiz Research

General SA business and consumer confidence remain depressed…optimistic view regarding business conditions in the country.…

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1st2014

1st2015

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1st2017

Inde

x

Inde

x

FNB/BER Consumer Confidence Index (LHS) RMB/BER Business Confidence Index (RHS)

Source: BER, Barclays Africa, Agbiz Research

Why is business confidence important?…

optimistic view regarding business conditions in the country.…

13

-20

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00 02 04 06 08 10 12 14 16

BER BCI (lhs) Private fixed investment (% y/y)

Source: Agbiz Research

Agribusinesses’ Confidence is also in contractionary terrain

and could lead to a decline in GDP (agri)….in the country.…

14

*Agbiz/IDC Agribusiness Confidence Index

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2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Inde

x po

ints

Source: Statistics South Africa, Agbiz Research

Agbiz/IDC Agribusiness Confidence has proven to be good

directional indicator for agri. GDP growth (but now?)…

• The shift between the “emotional side of agriculture and hard data” can partly be explained by policy uncertainty, particularly Land Reform ahead of the ANC conference…

• The survey respondents from the WC region were also pessimistic due to dryness – this too partly explains the shift between confidence and agricultural GDP growth…

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t2n

d3r

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h

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Inde

x

% q

/q s

aar

GDP (Agriculture) (LHS) Agbiz/IDC Agribusiness Confidence Index (RHS)


SA economy and agricultural economy growth forecasts…

16

-7.8

15.0

5.8

2.4

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

6.0

-10.0

-5.0

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10.0

15.0

20.0

25.0

% y

/y

% y

/y

Agricultural GDP f/cast Total GDP (rhs) f/cast


Agriculture’s share in the economy is small and has declined

over time…

17

2.2

0.0

2.0

4.0

6.0

8.0

10.0

12.0

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16.0

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% c

ontr

ibut

ion

to G

DP

18

While the agri sector’s share in SA economy is relatively small….risk to collateral, “expropriation without compensation”

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20

40

60

80

100

120

140

160

1980 1985 1990 1995 2000 2005 2010 2015

Nominal Real

Rbn

Land and Agricultural Bank

29%

Commercial banks60%

Agricultural cooperatives

7%

Private persons2%

Other financial institutions…

Other debt1%

• Total agriculture farm debt

Will the weather behave well in the next few months?

19

The story remains fairly unchanged from the previous meeting – positive prospects for 2017/18 summer season…

20Source: Earth Institute, National Oceanic and Atmospheric Administration (US)

This chart basically shows that the chance of a La Niña forming in late 2017 is around 70% -- triple the normal likelihood…

21Source: Australian Bureau of Meteorology

Implications for the summer crop season and equipment sales?

22

Agricultural equipment sales have been solid reflecting increased activity in the fields…

23Source: SAAMA, Agbiz Research

0

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1 000

2014M01 2014M07 2015M01 2015M07 2016M01 2016M07 2017M01 2017M07

Tractors units (LHS) Combine Harvesters units (RHS)

• After declining by 5% m/m in September 2017, the South African tractor sales increased by 28% m/m in October 2017, recorded at 704 units - the highest monthly sales since February 2016.…

• The combine harvester sales were up five folds from the previous month and 11% y/y, with 20 units sold in October 2017…

Farmers are also optimistic about the upcoming season –they intend to increase the area plantings…

24Source: CEC, Agbiz Research

-

300 000

600 000

900 000

1200 000

1500 000

White maize Yellow maize Sunflowerseed

Soybeans Groundnuts Sorghum Dry beans

Hec

tres

2017/18 2016/17

Maize Sunflower seed Soybeans

2016/17 2017/18 f* 2016/17 2017/18 f* 2016/17 2017/18 f*

16.7 m.t. 12.5 m.t.(-25%)

874 595 t. 798 600 t. (-9% y/y)

1.32 m.t. 1.2 m.t.(-7%)

Jobs?

25

SA agricultural labour market over the past 107 years…

Total agriculture employment

SA agriculture employment as a share of total employment has declined

-

500

1 000

1 500

2 000

1910's 1920's 1930s 1940s 1950s 1960s 1970s 1980s 1990s 2000s 2010's

Thousands

42

3329 31

1410 11

6

0

10

20

30

40

50

1940s 1950s 1960s 1970s 1980s 1990s 2000s 2010s

Share of total employment



South Africa’s agricultural jobs by province…

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0

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160

180

200

WesternCape

Eastern Cape NorthernCape

Free State KwaZuluNatal

North West Gauteng Mpumalanga Limpopo

000

jobs

Apr-Jun 2017 Jul-Sep 2017


Q-o-Q percentage change in South Africa's agricultural

employment

28

0 100 200 300 400 500 600

Crops and horticulture

Livestock

Mixed farming (crops and livestock)

Animal husbandry

Game farming

Forestry

Aquaculture (fish hatcheries and fishfarms)

000 jobs

Jul-Sep 2017 Apr-Jun 2017

Conclusion…

• Policy uncertainty will remain a key theme ahead of ANC conference.

• The weather forecasts paint a positive picture for the upcoming season -- good for summer crops.

• In the short term, the agricultural sector will remain on a positive growth path. The effects of the WC drought will be clear in 2018’s growth (GDP) numbers.

• The persistent drought in the Western Cape province remains a key risk that could potentially undermine the performance of agricultural labour market along with the expected national minimum wage to be implemented in 2018.

29

Thank you for your attention…

30

For today…….







5. Wrap up

31

4 December 2017

By: Sifiso Ntombela

AGBIZ MEDIA DAY

TRADE & INVESTMENT PORTFOLIO

Title of presentationToday’s Menu

❖Trade potential and actual performance

❖Competitiveness and investments

❖Prospects of the WTO MC11

Title of presentation

❖A. Trade potential and actual performance

Can trade growth boost Agric GDP?

-25.0%

-20.0%

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015Growth: %

GDP AgriGDP

3,1%

1,8%

❖ Agriculture growing at almost half the pace of the country’s GDP

❖ Agriculture is not growing fast enough to address unemployment and poverty

Source: StatsSA, 2017

SA GDP vs AgriGDP performance – 1993 -2017

SA agricultural trade performance


Which part of the wold shows biggest trade potentialGlobal outlook: GDP per Capita US$/c

Source: IMF, 2017


❖B. Competitiveness and investments

-

2 000

4 000

6 000

8 000

10 000

12 000

14 000

2011/12 2012/13 2013/14 2014/15 2015/16

En

vir

on

men

tal T

ax C

oll

ect

ion

: R

mEnvironmental taxes – before carbon tax and sugar tax

Source: Ntombela, S; Bohlmann, H; and Kalaba, M, 2017

Competitiveness – emotional side

Source: Agbiz, 2017

Competitiveness – technical performance

Source: Agbiz, 2017


❖C. Prospects of the WTO MC11


SA’s Trade Position and Multilateral Trade Negotiations ❖ Trade policy to advance regional and continental economic industrialization agenda

❖ the priority is given to negotiating and completing the continental free trade agreement (CFTA), tripartite free trade agreement (TFTA) and SADC FTA

WTO

❖ MC 11 taking place 10-13 Dec 2017, Buenos Aires, Argentina.

❖ Dr John Purchase will represent business in SA delegation

❖ Agricultural trade issues:

➢ Domestic support in developed countries

➢ Market access for cotton

➢ Public stockholding for food security purposes

➢ Special safeguard mechanism for developing countries

➢ Export restrictions

❖ Other issues emerging in WTO

➢ Electronic commerce

➢ Investment facilitation

➢ Transparency of domestic regulations in services


Africa, Europe and America

❖CFTA in the finalization phase of negotiations

❖TFTA working on finalizing and adopting priority export products for various regional economies

❖SADC-EU EPA: Call by DAFF on procedures for the application, administration and allocation of export quotas for 2018

❖AGOA – both SA and USA calling for studies to review the relationship

➢ Agbiz leading the South African call through NEDLAC

➢ USTR issued a letter to chairman of US International Trade Commission to examine the USA-SSA trade and investment relationship


Future expectations

❖Tangible commitments by WTO members on public stockholding and safeguard mechanisms. Not much expectation on domestic support and market access

❖Sugar tax and carbon tax are coming and will affect competitiveness in agriculture through increased input costs

❖Agricultural exports expected to cross R130 billion mark in 2017, driven by fruits, sugar, grains and dairy products

❖Asia claiming an increasing share in SA agricultural exports at the expense of Europe (NTMs)

Thank you@AgriChamber @uSobahle

Sifiso Ntombela: [email protected]

mailto:[email protected]

For today…….







5. Wrap up

48

4 December 2017

By Theo Boshoff

Legal Intelligence desk

AGBIZ MEDIA DAY

Title of presentationOutline

1. Legal developments in 2017 – focus on land

2. Context

i. Regulation of Agricultural Landholdings Bill;

ii. Draft Property Valuation Regulations

iii. Communal Land Tenure Bill

3. Looking forward to 2018:

i. Politics will play a role

ii. Focus on land and water

Legal Developments in 2017

Land reform policies progressing towards law

• A number of land reform policies that have been under consultation for a long time progressed towards law in 2017 –some with definite possibilities but many with potential risks.

51

opportunities risks

Context – land reform underperforming

• Still no agreement as to who owns SA and how far we have progressed with land reform; however

• High Level Panel led by former President Mothlante highlighted crucial shortcomings:• Corruption;

• Ownership not transferred;

• Budget transferred away from land acquisition;

• Poor implementation.

• Communal occupiers still vulnerable.

52

Context – land reform underperforming

53*Source: High Level Panel on Assessment of Key Legislation and the Acceleration of Fundamental Change Report, 2017.

Regulation of Agricultural Land Holdings Bill

Content

• Introduces land ‘ceilings’ and prohibits foreign land ownership.

Analysis

• Can harm agricultural sector by denying ‘economies of scale’;

• Financiers’ mortgager bonds will also be at risk;

• Unlikely to help beneficiaries – will end up with a patch work of ‘off cuts’ that;• May not be economically viable;

• May not have access to services, water or resources.

54

Draft Property Valuation Regulations

Content

• Contains a formula for valuing land at ‘just and equitable’ value.

Analysis

• Rigid formula not in line with s25 of Constitution – will differ in each set of facts;

• Can lead to outlandish valuations that will never be agreed to;

• Thereby slowing down land reform.

55

Expropriation without Compensation debate

• Not Government policy but very much on the table:• Will be discussed at the ANC elective conference.

• Agbiz has focused on publishing articles highlighting the possible implications of such an approach:

• “No compensation will increase the price of food twofold;

• expropriation without compensation could cost ordinary citizens R160 billion;

• Expropriation without compensation will short-change communal occupiers;

• Win-win still possible; leverage funds from private sector through subsidies loans to make more funds available;”

56

OpportunitiesCommunal Land Tenure Bill

• Provides for title deeds to be transferred to communities;

• Communities can decide on nature of individual rights within communal land (use rights, lease or title);

Analysis:

• Title deeds a positive step for agricultural development; but

• Minister’s discretion should be curtailed – cannot look out for the interest of the state (player) and decide on transfer (referee) at the same time.

Preservation and Development of Agricultural Land Bill

• Regulates the competing interests for agricultural land;• Agriculture, mining, urban developments etc. to retain scarce, high potential land for

food security purposes.

57

Looking forward to 2018Land reform

• The focus on land reform will likely intensify as frustration from the ground is building;

• The outcome of the ANC’s December policy conference will be critical as there are divisions emerging within the state regarding the direction we should follow with land reform;

Outcome of ANC meeting can overshadow all of the draft legislation currently on the table but can also stimulate real urgency to deal with problems!

58

Looking forward to 2018Pragmatic approach

• PPPs and blended financing models;

• High-level panel report led by former President Mothlante:

• Funds/compensation not the biggest stumbling lock!

• Renewed focus on implementation;

• Tough on corruption;

• Pro-poor programmes;

• Transfer of ownership;

• Greater Parliamentary oversight & framework legislation to guide all processes

Radical approach

• Expropriation without compensation; or

• Greater state control over compensation (Property Valuation Regulations);

• Centrally-planned and controlled agricultural sector;

• Land Ceilings;

• Prohibit foreign land ownership;

• 1 ha 1 household;

• State-funded value chain (Agri-Parks).

59

Looking forward to 2018

Water reform

• Even compared to land reform, water reform has been lagging far behind;

• Recent scarcity have brought focus on water regulation and pressure is mounting on DWS to revamp the water legislation. Expected:

• Greater focus on water reform & BBBEE rating in allocation;

• ‘use-it or lose-it’;

Sector will need to be wide awake and respond to changes to retain security of supply!

60

Looking forward to 2018

2018 could see:

• Higher raw water tariffs;• Financial woes = pressure on user to fund infrastructure

& operations.

• Revision of National Water Resource Strategy;• Turn-around strategy for DWS;

• Cut-down on institutional plans – CMAs could be abandoned in favour a simplified structure.

61

For today…….







5. Wrap up

62

Wrap up……..

• 2018 will be challenging on the political, economic,

social and environmental fronts

• Currently a greater sense of uncertainty…

• However, uncertainty also creates opportunity, and

we must be ready to identify opportunities and

create value and prosperity for our members, but

also for all South Africans.

63

www.agbiz.co.za

@AgriChamber

AgriChamber

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