Regional Agricultural Trade and Changing Comparative Advantage in South Africa

149 Pages·1999·0.4 MB·English

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
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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
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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
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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
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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
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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.
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