NOMPU SIZIBA: The Global Food Security Index, which is a collaborative effort between The Economist magazine and Corteva, indicates that South Africa has regressed in this regard. South Africa is now said to rank 69th out of 111 countries surveyed. In 2019 its ranking was 44 out of 113. So why has it experienced this massive tumble, especially given that the agricultural sector was largely left to continue operating from the start of the lockdown in late March 2020 until now, precisely to ensure food security for the nation?
Well, to dissect what this all means for us I’m joined on the line by Wandile Sihlobo, chief economist at the Agricultural Business Chamber, also known as Agbiz.
Thank you very much, Wandile, for joining us. South Africa has prided itself for the longest time on being a fairly food-secure country, so what’s happened now that we’ve been found wanting in this global index?
WANDILE SIHLOBO: Indeed, Nompu. We have held the top position in the continent for quite some time. Now we are sitting at number [five] in the continent, with Morocco, Egypt, Tunisia and Algeria being on top. I think the key thing there is really on the affordability side, because the index overall, Nompu, has about four such indices, food affordability, availability… quality and safety, and the last is natural resources (and resilience). If you look at those sub-indices, there are capability issues, the one where South Africa is shown falling off the ladder, and that meant that we fell off in our ranking, technically by just one point from there to 2019.
But, because other countries saw an improvement within jobs, that (falling above?) 1% in affordability, the food price started rising in the fourth quarter much more aggressively than compared to the three quarters of the year.
As you rightly said, we had a good agricultural season, and agriculture pretty much opened. The key driver of food prices was largely on grains, and that was the rising demand from the southern African region, but also global grain prices being higher, as well as the exchange rate. The combination of those is really what saw the food prices rise and the large fall in that index.
NOMPU SIZIBA: So where in South Africa is food insecurity particularly prevalent?
WANDILE SIHLOBO: I think it may be mainly three provinces – Eastern Cape, KZN and Limpopo. That’s where we see a lot of hardship. If you look at the numbers coming out of Stats SA, they point to those provinces.
But also more recently, the work being done by *** the economists at Stellenbosch University and these teams, that work is showing that there is an increase in hunger, but also those provinces are now facing a much more difficult time.
NOMPU SIZIBA: So you’ve been reporting for quite some time that South Africa, especially with its good rains of late, is likely have a good harvest for maize as well as other crops. Do you think these developments will help ease the food price increases that we saw during 2020?
WANDILE SIHLOBO: Yes, absolutely. I think they will, because already, looking at food-price inflation, that is somewhere around 5% for the year. So we do think that the increase in the grain prices, as you have observed in the fourth quarter coming into the beginning of this year, I think from round about the end of March going forward you could see that softening. And obviously there’s always the lag about two to three months before that filters through to the retail prices. But I think there will be some softening on prices going forward.
NOMPU SIZIBA: But in the meantime, with government only being able to provide additional assistance to the poor through the special Covid grant until the end of April this year, are you not worried that that’s going to drive so many more people into extreme hunger? And, if so, given that you look at agriculture all the time, do you not think there are mechanisms that can be put in place to ensure that poorer South Africans don’t go hungry, because surely there’s enough food for all of us?
WANDILE SIHLOBO: I do think that the issue of increasing hunger definitely will probably do that, because already, Nompu, the fundamental thing that makes the Eastern Cape, KZN, Mpumalanga have the highest level of poverty is the fact that there’s also high unemployment there. So without economic opportunity we will see that.
I think in the near term … agriculture there isn’t much that we could do…. But if people are out of work and they have no money to buy food, that would be the challenge. But in the medium term to long run I do think that boosting agricultural activity in those provinces pretty much tells them that message along the master plans that have been developed, and making sure that there could be some job creation, agro-processing, agriculture and other industries, that could assist those provinces that we have mentioned.
NOMPU SIZIBA: Yes, that would be a good development, given that the fourth-quarter labour stats showed that agricultural employment declined by 8%. Now we know that people like the winemakers had a hard time and they weren’t employing people during last year, but what were some of the other drivers behind the decline?
WANDILE SIHLOBO: I think that was one of the major ones. Nompu, if you look at the agricultural jobs on the fourth quarter, there are really three provinces that saw a bit of an improvement in jobs – Mpumalanga, Gauteng and the Eastern Cape. Most of the provinces were pretty much on the decline, but I think the other added factor on the wine side, is the fact that seasonal labour is the one that you would see boosting up job opportunities in the last quarter of the year, especially when you have had a flat to good agricultural season. But because now they have to maintain social distances and all of those things following the health protocol, which are necessary, I think that also contributed to the muted job opportunities that we saw in agriculture.
NOMPU SIZIBA: Now I see that there are concerns that have been raised about agricultural workers’ minimum wages being raised by 16% to R21.69/hour. That’s basically the national minimum wage. On the face of it, it does look like a very low wage, but just explain to us what the issues are for employers from an agriculture employer’s of view – is it the rate of increase or what?
WANDILE SIHLOBO: I think many people are complaining largely about the rate of increase. But this is a difficult thing, Nompu, because at the same time you want welfare for people who are working in agriculture to be better off, have some better living standards; but at the same time the employers are facing rising input costs. So it’s a balance. But I also do think the message there is different, depending about which sub-sector you’re speaking about.
The people that I’m worried a lot about are those folks in the wine business, given that they were really facing some cashflow challenges because of the recent bans on sales. I do think they will struggle.
But overall for agriculture, I do think that we will have to look at the second quarter/third quarter numbers or data to actually see if there will be massive unemployment, or what really will happen. But certainly I haven’t personally done some modelling to see what the impact of the outcome will be. But my sense, judging from experience, is that it would be *** value chain by value chain and also sub-sector by sub-sector.
NOMPU SIZIBA: Now there are many factors that influence food prices, but what’s your outlook for the year around the food price trajectory? And to what extent does a major cost driver like the fuel price affect the picture, because we know that Brent crude oil has been hovering well above that $60/barrel level and doesn’t look like it’s going to be slipping anytime soon.
WANDILE SIHLOBO: I think the rising fuel prices are one of the upside risks, and you will remember, Nompu, that roughly 70% or so of South African grain is transported by road. So that always is one of the key cost issues to watch. But overall, if one looks at the output that we are expecting, as well as the price forecast for agricultural commodity prices, we do think that food-price inflation won’t be an issue from the second quarter. In the first quarter you might see a bit of a continued uptick, but from the second quarter ……. for the year we have just under 5% on average for South Africa’s food price inflation, slightly higher though, than last year, because last year’s average was around about 4.8% or so. But overall I do think that it will still be a good year.
NOMPU SIZIBA: Super. Wandile, always a pleasure talking to you. Wandile Sihlobo is chief economist at the Agricultural Business Chamber, also known as AgBiz.