Jan Greyling, a visiting scholar of RHI won the AEASA (The Agricultural Economics Association of South Africa) best Master thesis award 2013. The prize is annually awarded to the author of the best Masters thesis in the field of Agricultural Economics from a University in South Africa. Jan Greyling graduated with distinction (Cum Laude) from the Stellenbosch University in South Africa. He will be at our chairgroup until Christmas, doing research on African rural history and formulating a new research project in this field. His office is in 'the Leeuwenborch', room 1057 (firstname.lastname@example.org).
The role of the Agricultural sector in the South African Economy
The importance of the agricultural sector in the South African economy is often stressed by farmers and agricultural industry organisations. The reality, however, is that the sector has constituted less than 3% of the economy since 2005 (DAS, 2012). It is therefore important that the current role of the agricultural sector in the South African economy is investigated. This has been the subject of a number of studies. The most comprehensive study to date wasundertaken by Brand (1969) within the well-known framework of Johnston and Mellor (1961). A number of less comprehensive studies have followed. This is the second comprehensive analysis of the role of the agricultural sector in the South African economy. This study reapplies Brand’s (1969) framework to the data currently available. The results are contrasted with those obtained by Brand (1969) and other authors, in order to establish whether, and if so how, the role of the sector has changed in the last 50 years. The results obtained are then incorporated into policy suggestions. The findings of this thesis are, firstly, that the agricultural sector has been unable to meet the demand for the main food items consumed domestically since 2000. This, however, did not result in the predicted rapid increase in food and general inflation. Secondly, agricultural exports have not played a growth-leading, but rather a balancing role in economic development, because the sector maintained a positive trade balance during the full period of analysis. Thirdly, the sector has released labour to the rest of the economy since 1962, thereby fulfilling what is seen as a requirement by the economic development literature. Fourthly, the sector has probably made a net transfer of capital to the rest of the economy since the mid-2000s. Lastly, the agricultural sector plus the sectors with which it has the strongest linkages represented around 7% of the economy in 2010. This study concurs with Brand’s (1969) main conclusion that the South African agricultural sector does not play a growth-leading or initiating role in the economy, but rather a growth-permissive role. This is due to the sector’s relatively small quantitative significance in the economy, which limits the growth impact of agricultural exports, capital transfers from the sector and linkages with the rest of the economy. The sector plays a growth-enabling role, however, by supplying food to consumers at the lowest possible price - either by producing it domestically, or by affording food imports with the exchange earned through the export of agricultural produce. In addition, the sector has an important role in providing employment, especially in rural areas. It is recommended that the current agricultural marketing and international trade policy framework, which is conducive to international trade and limits market distortions, is retained. The sector has the potential, given the adoption of the required policy, to create employment by virtue of its relatively high labour intensity and the existence of some complementarities between capital and labour in the sector. Also, the competiveness of the sector should be increased by means of an investment in infrastructure.
Full text can be downloaded here.