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Job creation in rural South Africa

Mandela Initiative newsletter (Issue 3, July 2017)

 

 

The objective of this project was to estimate the potential for employment creation in selected agricultural commodities (citrus, deciduous fruit and smallholder fresh produce), as well as in fisheries and forestry. In addition, it explored policy options to promote job creation in South Africa’s rural economy.

Researchers included Michael Aliber (University of Fort Hare), Jeanette Clarke (independent), Amelia Genis (independent), and Moenibeba Isaacs and Ben Cousins (both of PLAAS, University of Western Cape). Preliminary findings address the structure of the rural economy, the role of government policies and partnerships, the potential of new markets and an expanded resource base, and the feasibility of creating one million new jobs in the rural economy as specified by the National Development Plan.

The number of workers per hectare is dropping, and the trend is to employ smaller numbers of highly-skilled, better-paid workers

 

Fruit packers A.Genis cropped

Image: Amelia Genis

Rural economic structure

South Africa’s rural economy remains divided and ‘dualist’ in character. Relatively small numbers of large-scale farming, forestry and fishing enterprises and companies, both up- and down-stream of farm production, dominate most sub-sectors. A degree of vertical integration exists in some sub-sectors (e.g. poultry), and exports are important in sub-sectors such as fruit and wine. Processes of concentration have resulted in a minority of producers being responsible for the bulk of produce and exports. Barriers to entry are high, formed by the costs of land and capital, as well as demanding standards in formal value chains in relation to the quantity and quality of products.

However, a large number of small-scale primary producers (farmers, timber growers and fishers) also exist, often producing for their own use or for sale in informal markets. Larger-scale producers and companies are mostly white-owned; smaller-scale are mostly black. There are relatively few successful small-to-medium enterprises between those that are very large and those that are very small; these are sometimes termed the ‘missing middle’.

Large-scale producers, input suppliers, processors and retailers are investing heavily in new technologies to improve labour productivity and remain competitive. The number of workers employed per hectare or other measures is dropping, and the overall trend is to employ smaller numbers of highly skilled and better-paid workers. However, employment of temporary and casual labour remains important for some operations. Smaller-scale enterprises are more labour intensive in character, albeit with lower returns, and wages are often below statutory minimums.

The size and nature of the informal rural economy is poorly understood, in part because of a dearth of reliable statistics. Case studies (e.g. of small livestock on communal grazing) suggest that it may be much more significant than generally acknowledged. The potential for its expansion, and as a base for further accumulation and growth, is largely unexplored. Expanding the number of producers on smallholder irrigation schemes, who could help supply the growing market for fresh produce, are emphasised in the NDP, but the availability of water for such expansion is unclear. This debate needs to be resolved as a matter of urgency.


Tractor driver A.Genis

Image: Amelia Genis

Government policies

Government policies, in practice if not in policy rhetoric, tend to be supportive of large-scale producers and companies. They also tend to be biased against small-scale, labour-intensive and black-owned enterprises in the informal sector, whether this is intended or not. Budgets for the support and promotion of such enterprises are small, and policies and programmes (e.g agricultural support programmes aimed at smallholder farmers and land reform beneficiaries) are generally ineffective.

Government policies, in practice if not in policy rhetoric, tend to be supportive of large-scale producers and companies

Partnerships between rural communities and the private sector, often with government funding and support, are often proposed as a way to fill the ‘missing middle’. ‘Strategic partnerships are often proposed in land reform projects, especially in cases where considerable investment has been undertaken and continuity in production is desirable. Here, private sector partners supply both capital and expertise, and government funds help to capitalise the venture. Some success stories have been noted in agriculture and forestry, but problematic cases and failure are also found, where few real benefits accrue to community members. The contribution of these joint ventures to job creation may be limited. However, well-designed projects could play a small role in rural job creation.

New markets and an expanded resource base

Our research indicates that there is limited but definite scope for the expansion of certain forms of production, such as citrus and deciduous fruit and smallholder fresh produce. There is also some potential for new forms of processing (e.g. dissolving wood pulp, furniture) and expanding production to supply new markets, both international and national (such as informal markets for snoek). The support of government is often necessary if these potentials are to be realised, as in the case of negotiating trade agreements.

Our research also reveals that there is limited but real potential to expand the resource base for certain kinds of rural enterprises. This includes 100, 000 – 160 000 ha of forestry land in communal areas and elsewhere, new smallholder irrigation schemes (perhaps on 200 000 ha), and the redistribution of under-utilised grazing land on commercial farms to small-scale livestock producers through land reform.

Can 1 million new jobs be created in the rural economy?

Initial estimates of job creation potential in the sub-sectors explored in this project are: citrus: 24 000 – 58 000 new jobs; smallholder irrigation in the Eastern Cape: 16 000 new jobs; and forestry: 43 500 new jobs plus some from new industrial products. The employment potential of new ventures in fisheries (such as support for the informal snoek market) is difficult to estimate.

If all of agriculture is considered, including market-oriented smallholders and land reform beneficiaries, as well as related off-farm jobs, the NDP’s projection of one million jobs in agriculture may well be achievable. Forestry and fisheries can also make modest contributions. What is required for this potential to be realised? Our research suggests that we need a capable and well-informed state, coherent and well-targeted policies aimed at sub-sectors with potential for employment growth, and effective implementation.

 

Contributors
This research summary was written by Prof Ben Cousins, DST-NRF South African Research Chair in Poverty, Land and Agrarian Studies and Senior Professor at the Institute for Poverty, Land and Agrarian Studies (PLAAS), University of the Western Cape.