REMARKS BY MEC METH TO THE AFASA 3RD AGRI–BUSINESS TRANSFORMATION CONFERENCE

Programme director;
The Premier of Free State – Hon S. Ntombela
Hon Minister Thoko Didiza;
Deputy Minister M. Skhwatsha
President of AFASA Dr. Vuyo Mahlati;
AFASA chairperson – Mr. Neo Masithela;
Chairperson of Motsepe foundation Dr. Patrice Motsepe
All senior government officials;
CEO’s of agencies and financial institutions;
All the agri – mentors, panellists and moderators
All farmers

Ladies and gentlemen
Good morning

Introduction

The Eastern Cape is the second largest province in South Africa with a population of 6.5 million people which is the third highest in the country. It is the home of the Legends, the home of Dr Nelson Mandala, OR Tambo, Goven Mbeki, Nomzamo Madikizela-Mandela and many more that contributed immensely to the realisation of South African political freedom. This province is endowed with 14.8 million ha of grazing land, whilst 1.3 million ha is for crop production. The coastal belt of the province stretches to 800 km for life below water. It is predominately a rural province with six District Municipalities and two Metros. The Gross Value Addition of the province in 2018 is R334,8 billion of which agriculture sector contributed only R5,6 billion (1.7%).

A vibrant, sustainable and resilient smallholder farming sector is vital for South Africa’s economic future. While productivity of the smallholder farmers has grown, it still lags behind the white commercial agricultural sector, and has not delivered the development dividends to significantly reduce poverty, particularly in rural areas.

National Development plan and Provincial Development Plan
The NDP 2030 Vision advocates for improved productivity in the irrigated areas, prioritise the high value crops and exploit the regional agricultural competitiveness to enhance growth and job creation. This unlocks expansion for agro-processing, secure SMME development and rural based agro-tourism opportunities linked to diverse and attractive landscapes, cultures and vibrant rural economies.

Production based land reform
The Land reform must drive productivity and competitiveness in order to increase the sector contribution to growth and employment. However, government is faced with three challenges:
• Delay in finalising the expropriation of land without compensation
• declining budget for land acquisition
• lack of finalisation of land tenure policy

As government, we need to deal with these issues to minimise their negative impact on potential growth and employment in the sector.

The Eastern Cape agricultural economic potential
The Eastern Cape has the potential to increase the contribution to provincial GDP from 1.7% to 2.6 % and employment from 6 % to 10 % over a ten year period. Despite this potential, this has not been realised through the interventions to-date.
The principal reasons are:
• The smallholder farmers, of which much is expected in terms of growth and development, are resource poor and lack entrepreneurial skills, and are unable to attract investment due to absence of collateral and poor credit records.
• The absence of collateral and acceptable credit records force farmer to depend on grant funding from government that is both inadequate, erratic and effectively denies farmers the incentive, drive and responsibility associated with the risk of loan finance and personal loss.
• Government systems are not oriented to provide business support to farmers instead they increase the costs of doing business.
• Financial support that is provided make it difficult for the farmer to get value for money as all procurement is implemented by officials and farmers become passive recipient of service, effectively denied the opportunity of business practice , experience and building essential business networks.
• Government cycles mostly do not provide appropriate timing for farmers to take advantage of emerging agricultural opportunities.
• Lack of streamlined government funding frustrates farmers but also creates double dipping.
• Government alone is unable to provide access to the scale of investment required to realise the full economic potential of the province.

Eastern Cape has a competitive advantage in terms of livestock ownership. According to Statistics South Africa, the province is ranked number one for cattle (2 819 086), sheep (7 605 248), goats (3 221 829) and pigs (536 108). It shows that for every 10 sheep in the country, 4 are in the province. Similarly, for every 10 goats in the country 4, are in the Eastern Cape. Chickens are 3 843 174, 18% of the country.

Agricultural Economic Transformation Strategy
To address the structural challenges that have hindered agricultural contribution to both growth and employment, the Eastern Cape government will support smallholder farmers to commercialise their agricultural activities in order to derive economic value in the form of profit and employment creation. These commercial agricultural initiatives will be promoted through partnerships to leverage investment, access to markets, technology, skills and business networks between smallholder farmers and commercial agricultural enterprises.

Promotion of Smallholder/communal/ commercial partnerships for growth and employment
The department will promote the following types of partnerships:
• Joint venture initiatives, when communities/farmers make their land available as part of the venture and the private sector provide production finance, technical advice and managerial expertise.
• Contract farming is when the community / smallholder carry out production on the basis of a contract which clearly spell out specific quality requirements, practices and the price.
• Commodity/ industry partnerships, where the farmers are supported by the industry through access to finance, technical support and mentoring.

Transactional advisory services to enforce transformation in partnerships
To ensure that these partnership drive meaningful transformation, the Department will provide all farmers that want to enter into a partnership with transactional advisory support to ensure that the partnership is not parasitic or predatory but rather benefits the owners of the land. We will build a strong capacity within the department to drive mutually beneficial commercial partnership initiatives.

Access to finance through provincial agricultural blended funding
The recent strategy session of the DRDAR also resolved to initiate the Establishment of a Provincial Agriculture Commercial and Innovation Fund in partnership with Land Bank and other commercial banks to enable farmers to access finance to increase black farmers’ contribution throughout the value chain. The fund will target black farmers to graduate from subsistence to commercial level through a blended flexible finance model incorporating both grant and loan portions. This fund will increase investment into the sector, productivity and competitiveness of the agricultural activities in the province.

The Agricultural Commercial and Innovation Fund will:
• Enable farmers to access finance directly and timeously to exploit agri-business opportunity
• Enable farmers to gain credible credit records essential for further access to finance
• Fund should provide blended finance for production, infrastructure, market access in labour intensive commodities,
• Funding model aims at providing a risk sharing (grant and loan)
• Funding model should be a revolving credit facility.
• Enable farmers to access syndicated agricultural development funding streams available through the Land Bank from time to time.

The Eastern Cape Rural Development Agency (ECRDA) has to been repositioned to drive catalytic initiatives that will contribute to economic growth and employment. In this regard, the ECRDA will now focus on:
• Investment Promotion
• Business Support to promote SMMEs and entrepreneurship (financial and non- financial)
• Infrastructure Support through effective programme and project management
• Research and development with special focus on development of new industries
• Monitoring and evaluation

Agricultural Infrastructure to minimise the cost of doing business

The infrastructure backlog is one of the major cost drivers that inhibits agricultural development in rural areas. Both bulk rural infrastructure and on-farm infrastructure are effective for development only when synchronised through strategic area based planning. The infrastructure includes:
• Agri-parks, Agri- Hubs and Farmer Support Production Support Units
• Establishment of commercial grain storage facilities at 30 km radius
• Initiate a fertilizer blending plant with distribution warehouses in areas driving cropping in the province
• Establish nurseries to support high value crop (inclusive of sub-tropical fruit) expansion
• Establish commercial and custom feedlot linked to existing abattoirs.
• Promote the use of technology to increase efficiencies that will reduce the cost of production.
• Increase irrigation capacity to intensify production and ensure that farmers can produce throughout the year
• Promote the development of the cannabis industry in the province
• Invest in upgrading of agricultural access roads

Climate change mitigation
The manifestations of climate change, such as increased incidence of drought and variation in weather patterns pose challenges that require strategic mitigation measures:

• Promotion of Climate smart agriculture are to include practices of conservation agriculture/ minimum tillage, precision agriculture, rain water harvesting improved strategies for pest & disease surveillances for both animals and crops.
• Increasing the intensity of monitoring climate change at local level to enable mitigation through improved accuracy of forecasts and targeted interventions.
• Develop strong Disaster Risk Management structures to enable effective mitigation measures and response capability.

For the 6th administration, Rural Development and Agrarian Reform in the Eastern Cape will pursue “A sustainable agriculture sector that drives food security, agro-processing and contributes to industrialisation, Rural Development and wealth creation”

In conclusion, vibrant, sustainable and resilient smallholder farming sector is vital for South Africa’s economic future. While productivity of the smallholder farmers has to grow to its full potential, it still lags behind the white commercial agricultural sector, and has not delivered the development dividends to significantly reduce poverty, particularly in rural areas. Considering that more than half of the population in rural areas still rely on agriculture as a source of food and the poorest households, food makes up almost three quarter of consumption expenditure. As a result low productivity of smallholder farmers, the growing urban population is also confronted with higher food prices. In order to make a significant dent on poverty, one of the key elements that can accelerate change and unleash growth is to catalyse a shift towards a deliberate policy efforts to make black farmers commercially viable, efficient aligned to sustain the rigors of progressive climate change.

I thank you!

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