By Manyewu Mutamba of Idasa’s Economic Governance Programme

For more than a decade government has faltered in its efforts to tackle the dual challenge of revitalising smallholder agriculture in former homelands and ensuring the successful establishment of land reform beneficiaries. Given the magnitude of the problem, the numbers of people involved, and the levels of poverty, nothing short of a radical change in direction will be required to transform smallholder agriculture and with it, the lives of millions of poor South Africans in rural areas. Sadly, the 2010 Budget suggests a ‘business-as-usual’ approach, with government pursuing more of the same despite the obvious lack of progress.

The 2010 budget speech places great emphasis on transforming the structure of the country’s economy so that all South Africans can benefit. In his Budget Review, the Minister of Finance acknowledges that about 85 % of the poorest South Africans live in rural areas. He also notes that rural communities face economic marginalisation, high unemployment, environmental deterioration, ineffective land management, and slow progress in agricultural land reform. The Minister indicates that he has proposed significant investments to enable development of vibrant, equitable and sustainable communities.

Despite these indications, an analysis of trends in budget allocations suggests piecemeal efforts that are far short of what is required to transform key facets of the rural economy.
To start with, there is little to support the Minister’s assertions that government will prioritise agriculture and rural development and make significant new investments. The proposed allocation to agriculture will remain around 2 % of the national budget for the coming years, while allocations to the newly created Ministry of Rural Development and Land Reform will also remain unchanged under 1 % of the national budget. This falls far below the 10 % target as set by the Maputo Declaration by African heads of state through the Comprehensive African Agriculture Development (CAADP) initiative. It has been argued that since agriculture earnings make up only 3.6 % of the national GDP (compared to an African average of about 18 %), it therefore does not make economic sense for South Africa to invest as much in the sector. Although this is a valid argument, it should be noted that the target as set by CAADP is informed by evidence of the true potential of smallholder agricultural development in alleviating poverty by getting a large percentage of the population participating in the economy and hence benefiting from it. Despite differences in the causes, the character of rural poverty and the constraints facing smallholder agriculture in South Africa closely mirrors the rest of sub-Saharan Africa.

While the inflation-adjusted national budget is projected to grow by about 6 % between 2008 and 2013, the agriculture budget will only grow at an average of 4 % during the same period. Conditional grants from the national department of agriculture for agricultural support programmes such as the Compressive Agriculture Support Programme (CASP), Ilima/Litsema, and LandCare, are all projected to start declining by 2013. The Minister rightly noted that the current allocation to agriculture has grown by 12.3 % from the 2009/10 budget. Although this is a substantial increase it should be noted that this is coming off a very low base as the agriculture budget had actually shrunk by 9 % in 2009/10. Despite this increase, the growth in the agriculture budget is still below the levels of 17 % seen in 2007/08. Similarly the Rural Development and Land Reform budget had an 18 % increase following a 4 % decrease in the previous budget. The land restitution leg of the land reform programme will however get 18 % less this year despite the massive backlogs and outstanding claims.  With the entire land reform programme having only transferred 4 % of white-owned land since 1994, a lot more urgency is clearly required if the 30 % target by 2014 is to be achieved.

The magnitude of the challenges facing smallholder agriculture in South Africa call for sustained levels of commitment, and a clear shift in government priorities towards the rural poor. Piecemeal efforts will not achieve poverty alleviation at ambitious levels such as those envisaged in the Millennium Development Goals. Rather than maintaining the status quo, the government needs to commit to a new, more radical course of action that clearly puts the rural poor at the forefront. Transformation of smallholder agriculture will require a rethink on various fronts, including models for extension support, financing of agro enterprises, and even investments in non-farm rural ventures. While a range of incentives were proposed in the 2010/11 budget for other sectors, similar packages could make a significant difference in encouraging effective participation of the private sector in overcoming some of the challenges facing smallholder agriculture. The rich experience among the thousands of successful commercial farmers could also be tapped through creative budget-based incentives that encourage skills transfer and long term mentoring of emerging farmers.

Dealing with the challenges such as those facing smallholder agriculture in particular, and rural development in general, will require more than a ‘business as usual’ approach. The persistence of these problems, the deepening levels of poverty and the widening inequality gap suggest that more radical solutions will be required over a sustained period of time to make a significant dent on rural poverty.