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Regional Agricultural Trade and Changing Comparative Advantage in South Africa PDF

149 Pages·1999·0.4 MB·English
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Preview Regional Agricultural Trade and Changing Comparative Advantage in South Africa

Agriculture, Natural Resources and Rural Enterprise Office of Sustainable Development Bureau for Africa U.S. Agency for International Development Regional Agricultural Trade and Changing Comparative Advantage in South Africa André Jooste and Johan van Zyl University of Pretoria Technical Paper No. 94 September 1999 Publication services provided by AMEX International, Inc. pursuant to the following USAID contract: Project Title: Policy, Analysis, Research, and Technical Support Project Project Number: 698-0478 Contract Number: AOT-C-00-96-90066-00 ii Contents Contents iii Foreword v Acknowledgements vii Dedication ix Executive Summary xi Glossary of Acronyms and Abbreviations xiii 1. Introduction 1 1.1 Background 1 1.2 Objectives 2 1.3 Research Methodology 2 1.4 Delimitation of the Study 3 1.5 Data used 3 1.6 Outline of the Study 4 2. Overview of the South African Agricultural Economy: Structure, Policies and Commodities 5 2.1 Introduction 5 2.2 The Structure of South African Agriculture 5 2.3 Agricultural Policy in South Africa 7 2.4 Overview of the Products Investigated in this Study 25 3. Methodology Used, Enterprise Budgets and Pricing Issues 29 3.1 Introduction 29 3.2 Methodology Issues 29 3.3 Pricing of Inputs and Outputs 32 3.4 Methodologies Followed to Calculate Shadow Prices in South Africa 33 3.5 The Tradable/Non-Tradable Composition of the Value of Inputs and Products 39 3.6 Shadow Prices of Land and Water 39 3.7 Summary 41 4. Agro-ecological Zone Delineation 43 4.1 Introduction 43 4.2 Factors Determining Agro-Economical Zone Delineation 43 4.3 South African Agro-Economical Zone Delineation 46 5. Private and Economic Profitability 51 5.1 Introduction 51 5.2 Private and Economic Profitability 51 5.3 Results 52 iii 5.4 The Domestic Resource Cost Analysis 58 5.5 The Effect of Land and Water Prices on Efficiency Ratios 64 5.6 Conclusions 65 6. Sensitivity Analysis 67 6.1 Introduction 67 6.2 Sensitivity Analysis for Field Crops 67 6.3 Sensitivity Analysis for Livestock Products 72 7. Summary and Conclusions 73 1.1 Introduction 73 1.2 Conclusions 73 References 77 Appendices 83 Appendix A: The South African Land Market 83 Appendix B: Maps of South Africa 99 Appendix C: Crop Production by Zone 111 Appendix D: Livestock Production (Cattle and Sheep) by Zone 143 iv Foreword Southern Africa was characterized by a heavy regu- will reap the benefits by exploiting comparative ad- lated agricultural market before the late 1980s, but vantages that may exist. since then countries in the region followed a strategy South Africa is one of seven countries in the to remove restrictive measures from its agriculture. SADC participating in the Research Program on Re- The deregulation process was also accompanied by gional Agricultural Trade and Changing Comparative the liberalization of agriculture worldwide. South Af- Advantage in Southern Africa. The comparative eco- rica, just as the whole southern African region, will nomic analysis (CEA) study in South Africa therefore have to compete internationally in a more open agri- forms part of a larger activity to determine compara- cultural market. In order to be competitive southern tive advantages in the region. These studies not only African countries will have to use resources more ef- examine the existing comparative advantages, but also ficiently by exploiting comparative advantages that provide a means to evaluate the impact of different may exist. This, among other things, entails that agricultural policies on comparative advantage. This policy and decision-makers should be guided so as to proves to be an especially valuable tool to guide implement policies and strategies that will enhance policymakers in the region. This study provided in- agricultural producers competitiveness. sight into which factors contribute the most to market Various studies have shown that countries can distortions in South Africa. These are mainly policies improve their welfare by opening up their borders to that distort market prices, the exchange rate, and tar- freer trade. There is furthermore a worldwide move iffs and subsidies on inputs. This study also made a toward economic integration. Southern Africa is no significant contribution toward establishing the affect of exception to the rule with the movement toward a water legislation on the South African agriculture. Free Trade Area under the auspices of the Southern This study is one in a series of studies on Africa’s African Development Community (SADC). Not only regional trade and comparative advantage, a joint activity is it foreseen that this movement will improve welfare of USAID Africa’s Bureau’s in the Office of Sustain- in the whole region, but the region’s competitiveness able Development, Productive Sector Growth and may also improve. Within the framework of economic Environment Division and the Regional Economic De- integration in southern Africa countries in the region velopment Services Office for Eastern and Southern Africa (REDSO/ESA). Dennis Weller, Chief Agriculture, Natural Resources and Rural Enterprise Office of Sustainable Development Bureau for Africa U.S. Agency for International Development Dennis McCarthy, Chief Office of Agriculture, Engineering, and Environment Regional Economic Development Support Office, Eastern and Southern Africa U.S. Agency for International Development v vi Acknowledgements A study of this magnitude would not have been pos- • Jurgens du Preez, for gathering important sible without the advice and encouragement of others information; who were willing to contribute to the successful • Staff from the National Department of Agricul- completion of such an assignment. The authors would ture who always were willing to assist; therefore wish to acknowledge their contributions. • Ms Booysen and Ms Geringer of the Department Firstly, the authors wish to thank Professor of Geography at the University of Pretoria, as Rashid Hassan for his valuable input and assistance well as Mr Du Plessis of the GIS Lab, for their throughout the completion of this study. The time he assistance and compilation of the various maps; devoted to the authors’ work, even after working hours, is sincerely appreciated. The major contribu- • Zuna Botha who with willingness and compe- tions, both at managerial and the substantive levels, of tence typed parts of this manuscript; and Professor Glen Magugula of the University of • All the members of the steering committee for Swaziland and Dr Brian da Silva of USAID are also their valuable inputs and motivation. acknowledged. A special word of appreciation goes to USAID for Furthermore, the authors wish to express their their financial and other assistance. Opinions ex- sincere gratitude to the following people: pressed and conclusions reached, are those of the au- thors and are do not necessarily reflect those of USAID. André Jooste Department of Agricultural Economics University of the Orange Free State Bloemfontein Johan van Zyl Principle and Vice Chancellor University of Pretoria Pretoria vii viii Dedication Dedicated to the memory of the late Professor Glenn sight and leadership led to the development and imple- Themba Magagula, formerly Deputy Vice Chancellor mentation of the “Regional Trade and Comparative of the University of Swaziland, whose vision, fore- Economic Advantage in Southern Africa” activity. ix x

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3.4 Methodologies Followed to Calculate Shadow Prices in South Africa. 33. 3.5 The 4.3 South African Agro-Economical Zone Delineation. 46. 5. Private 111. Appendix D: Livestock Production (Cattle and Sheep) by Zone. 143
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