AGBIZ MEDIA DAY South African Agriculture and Agribusiness: Outlook - - PowerPoint PPT Presentation

4 December 2017 By: 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,

• r a critical risk……!

2017 Global Food Security Index

Source: Economist Intelligence Unit/DuPont http://foodsecurityindex.eiu.com.

South Africa ranks 44th

• 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…….

• 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

9

AGBIZ MEDIA DAY

SA agricultural economy: Current conditions

Wandile Sihlobo (wandile@agbiz.co.za) 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

Gene neral al SA busine iness and consum nsumer er conf nfid iden ence e rem emain ain depressed…

• ptimistic view regarding business conditions in the country.…

12

10 20 30 40 50 60 70 80 90 100

• 60
• 40
• 20

20 40 60

1st 2001 1st 2002 1st 2003 1st 2004 1st 2005 1st 2006 1st 2007 1st 2008 1st 2009 1st 2010 1st 2011 1st 2012 1st 2013 1st 2014 1st 2015 1st 2016 1st 2017

Index Index

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

Source: BER, Barclays Africa, Agbiz Research

Why is business confidence important?…

• ptimistic view regarding business conditions in the country.…

13

• 20
• 15
• 10
• 5

5 10 15 20 10 20 30 40 50 60 70 80 90 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 30 35 40 45 50 55 60 65 70

1st 2nd 3rd 4th 1st 2nd 3rd 4th 1st 2nd 3rd 4th 1st 2nd 3rd 4th 1st 2nd 3rd 4th 1st 2nd 3rd 4th 1st 2nd 3rd 4th 1st 2nd 3rd 4th 1st 2nd 3rd 4th 1st 2nd 3rd 4th 1st 2nd 3rd 4th 1st 2nd 3rd 4th 1st 2nd 3rd 4th 1st 2nd 3rd 4th 1st 2nd 3rd 4th 1st 2nd 3rd 4th 1st 2nd 3rd 4th 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Index points

Source: Statistics South Africa, Agbiz Research

Agbiz/ID iz/IDC C Agribusi ibusine ness ss Conf nfid iden ence e has proven ven to be good d 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…

15

10 20 30 40 50 60 70 80 90 100

• 60
• 40
• 20

20 40 60

1st 2nd 3rd 4th 1st 2nd 3rd 4th 1st 2nd 3rd 4th 1st 2nd 3rd 4th 1st 2nd 3rd 4th 1st 2nd 3rd 4th 1st 2nd 3rd 4th 1st 2nd 3rd 4th 1st 2nd 3rd 4th 1st 2nd 3rd 4th 1st 2nd 3rd 4th 1st 2nd 3rd 4th 1st 2nd 3rd 4th 1st 2nd 3rd 4th 1st 2nd 3rd 4th 1st 2nd 3rd 4th 1st 2nd 3rd 4th 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Index % q/q saar

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

Source: Statistics South Africa, Agbiz Research

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

0.0 5.0 10.0 15.0 20.0 25.0 % y/y % y/y Agricultural GDP f/cast Total GDP (rhs) f/cast

Source: Statistics South Africa, Agbiz Research

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

• ver

er time…

17

2.2 0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 18.0 20.0 % contribution to GDP

18

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

• 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 banks 60% Agricultural cooperatives 7% Private persons 2% Other financial institutions… Other debt 1%

• Total agriculture farm debt

Will the weather behave well in the next few months?

19

The story ry remains ains fairly rly unchanged changed from the prev evio ious us mee eeting ing – posit itiv ive e prosp

• spec

ects ts for r 2017/18 /18 summ mmer r season…

20

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

This chart art basicall ically y shows ws that t the chanc ance of a La Niña a form rming ing in late e 2017 is arou

• und

nd 70% % --

• - triple

le the normal rmal likelihood…

21

Source: Australian Bureau of Meteorology

Implications for the summer crop season and equipment sales?

22

Agricu ricult ltur ural al equip uipment nt sales es have e been en solid id reflec flecti ting ng increased activity in the fields…

23

Source: SAAMA, Agbiz Research

10 20 30 40 50 60 70 80 200 400 600 800 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 rmers are e also optim imis istic ic about ut the upco coming ing season n – they intend to increase the area plantings…

24

Source: CEC, Agbiz Research

• 300 000

600 000 900 000 1200 000 1500 000 White maize Yellow maize Sunflower seed Soybeans Groundnuts Sorghum Dry beans Hectres 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 agric icult ultur ural al labou

• ur 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 33 29 31 14 10 11 6 10 20 30 40 50 1940s 1950s 1960s 1970s 1980s 1990s 2000s 2010s Share of total employment

Source: Statistics South Africa, Agbiz Research

Source: Statistics South Africa, Agbiz Research

South Africa’s agricultural jobs by province…

27

20 40 60 80 100 120 140 160 180 200

Western Cape Eastern Cape Northern Cape Free State KwaZulu Natal North West Gauteng Mpumalanga Limpopo

000 jobs Apr-Jun 2017 Jul-Sep 2017

Source: Statistics South Africa, Agbiz Research

Q-o-Q perc rcentag entage change ange in South uth Africa's rica's agric icult ultural ural empl ploym yment nt

28

100 200 300 400 500 600 Crops and horticulture Livestock Mixed farming (crops and livestock) Animal husbandry Game farming Forestry Aquaculture (fish hatcheries and fish farms)

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…….

• 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

31

4 December 2017 By: Sifiso Ntombela

AGBIZ MEDIA DAY TRADE & INVESTMENT PORTFOLIO

Title of presentation

Today’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 2015 Growth: % 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

SA agricultural trade performance

Title of presentation

Which part of the wold shows biggest trade potential

Global outlook: GDP per Capita US$/c

Source: IMF, 2017

Title of presentation

❖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 Environmental Tax Collection: Rm

Environm

• nment

ental taxes es – befor

• re

e carbon

• n 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

Title of presentation

❖C. Prospects of the WTO MC11

Title of presentation

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

Title of presentation

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

Title of presentation

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: sifiso@agbiz.co.za

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

48

4 December 2017 By Theo Boshoff

Legal Intelligence desk

AGBIZ MEDIA DAY

Title of presentation

Outline

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

Leg egal al Devel elopments in 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

• pportunities

risks

Co Context t – land reform un 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

Co Context t – land reform un underperforming

53

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

Regu egulation n of

• f Agri

Agricultu tural La Land Ho Holdi dings Bi Bill

Content

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

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

Dr Draft Property ty Valu luation Reg egulati tions

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

Expr Expropriation n wi witho thout Com Compensation

• n deba

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
• ccupiers;
• Win-win still possible; leverage funds from private sector through subsidies

loans to make more funds available;” 56

Opportunities

Communal 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

Loo

• okin

ing forw

• rward to
• 2018

Land 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

Loo

• okin

ing forw

• rward to
• 2018

Pragmatic 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

Loo

• okin

ing forw

• rward 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

Loo

• okin

ing forw

• rward 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…….

• 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

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.

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www.agbiz.co.za @AgriChamber AgriChamber