JOHANNESBURG — Mining and biofuels are competing with agriculture for land in South Africa, putting pressure on farmers to become more efficient, particularly through the use of technology.
As a result, SA’s commercial farmers are consolidating into fewer and larger operations to achieve economies of scale and remain profitable, says Nico Groenewald, head of agribusiness at Standard Bank.
Of the 35 000 commercial farmers in SA about 3 000 are responsible for 80% of total agricultural production.
At the same time, arable land is a scarce resource. Only 12% of the land in SA is arable and only 3% of that is truly fertile. Just 1,5% of the land is under irrigation, Groenewald says, and this land produces more than 30% of SA’s agricultural output. He was speaking at a media briefing in Johannesburg on Wednesday.
About 765 000ha of arable land is expected to be eroded by the mining industry in the next few years, says MC Loock, senior manager of agribusiness at Standard Bank. The mining industry also competes with agriculture for water.
Farmers face increasing urbanisation as well, which encroaches on arable farming land.
The rising use of biofuels adds to the challenges and has to be balanced with food security, says Groenewald. “If we play it right we can use both to expand the production of agriculture.” The biofuels industry, for example, would create demand for maize and sorghum that did not exist before.
Nevertheless, SA’s agriculture industry, which Stats SA data show contributes about 2% to the economy, is in a healthy state. It outperformed the economy with almost 5% growth this year.
“To some extent, this is attributable to the fact that, even in economic downturns, people still need to eat,” he says.
Gross farm income over the past year grew 6,7% but net farm income growth was slower, at 3,3%, indicating pressure on profitability from costs such as labour, electricity and fuel prices, Groenewald says.
Agricultural debt is at its highest level on record, with the Department of Agriculture, Forests and Fisheries putting it at R115 billion while Standard Bank calculates it is R126 billion. Nevertheless, the debt-asset ratio is at a “comfortable” level of 36%.
He says debt is increasing at a slightly higher rate than profitability, but it appears this is due to investment in equipment in anticipation of increased growth.
As South Africans’ incomes grow, the diet is changing from mainly starch to protein, which has implications for the agricultural industry, says Loock.
For example, while Brazilians each eat an average of 80kg of meat a year, South Africans consume 40kg, showing “huge potential in the production of protein in SA”, says Groenewald.