This unease was the focus of the first discussion session of Nation and Conversation at Nampo Bothaville on 17 May 2022. Theo Vorster facilitated the discussion and led a panel of experts, consisting of Kokkie Kooyman (Denker Capital), Prof Ferdi Meyer (Director: Bureau for Food and Agricultural Policy) and Hugo Pienaar (Bureau for Economic Research) to delve deeper into the current state of affairs, where opportunities are, and what needs to be in place to sustainably move forward.
According to Hugo Pienaar the Covid situation in South Africa is normalising and South Africa, after four major waves of infections, are learning to live with the pandemic. This means that the economy is on a recovery path. The downside is that after a good first quarter, the war in Russia and the Ukraine on the global front whilst increased loadshedding and the localised flooding in KwaZulu-Natal have put the local economy under severe pressure.
Professor Meyer is of the opinion that high commodity prices parred with high input costs are responsible for economic uncertainty, especially within the agricultural sector. He states that South Africa enjoys export parity for most commodities which is good news. A warning light however flickers in terms of the risk that exist for when commodity prices do drop given the high input costs.
Asked to comment on the unravelling of the markets, Kooyman, explained that the commencement of the strict Covid-19 lockdown regulations globally gave way to the sharpest economic retraction ever since the principle of supply and demand was fundamentally disrupted. He further ascribes the market turmoil to heightened inflationary pressure due to the war between Russia and the Ukraine that has seen gas and oil prices reaching record highs.
The role of the Agricultural Master Plan was also up for discussion, especially with regards to economic reform within the industry. According to Prof Ferdi Meyer the success of the plan rests on the social compact between government and the private sector. The plan speaks to competitiveness and as such it is important that all social partners agree to the prioritisation of issues. Issues that come to mind include South Africa’s inadequate infrastructure and logistical problems throughout the value chain. The latter has, according to Prof Meyer a greater effect on the national agricultural sector than the war in Russia and the Ukraine. This immense challenge pushes down revenue and infringes on South Africa’s food security.
Linking to this Pienaar says that the country’s growth rate is negatively impacted not only by the infrastructure and logistical challenges, but also a severe confidence problem. This problem speaks to a lack of private sector investment together with great uncertainty on the policy front. The reasons for the dysfunctional social compact can be traced back, according to Kooyman to the fact that ideologically South Africa has a government led economy and challenges such as cadre deployment and broad-based black economic empowerment has tarnished the trust relationship between partners.
All panellists agreed that the South African economy offers a spark of hope, if the challenges are addressed as a matter of urgency in an accountable and transparent way. In short: The South African population must play a more active role and step to the fore as champions of change. The first step to addressing these challenges was taken by President Cyril Ramaphosa in his State of the Nation address, when he highlighted the cardinal role that agriculture plays in economic regeneration.
Asked what the medium term future holds, the panellists warn against a period of global introspection when markets will look inwards and possibly give way to South Africa losing market share since the world will change its trade patterns. An example hereof is China’s current Zero-Covid policy.
Other factors include the country’s energy and the need to increase private partnerships. The impact of South Africa’s failing infrastructure will also be a determining factor of the country’s future growth trajectory.
Watch the session here.