Government should use regulation as a tool for good.

A NEW ERA OF GROWTH AWAITS

Government should use regulation as a tool for good rather than as a straitjacket, writes Agri SA economist KULANI SIWEYA

The agricultural sector has in recent years shown itself to be a key contributor to the South African economy. The sector excelled through the COVID-19 pandemic and has continued this strong performance, registering greater economic growth than any other sector according to the latest GDP statistics released by Statistics South Africa. This has all happened despite a regulatory framework that often creates signifi cant challenges. The sky is the limit in terms of what could be achieved with some key interventions.

A standout example is the impact of onerous labour regulations on the sector’s ability to expand employment opportunities. The agricultural sector directly employs more than 800 000 people and indirectly supports millions more. These jobs provide an essential economic lifeline in South Africa’s rural communities.

Labour policy should be geared toward maintaining these jobs and expanding opportunities in the sector. We need innovative legislation with the understanding that accelerating inclusivity requires tailored solutions for South Africa’s diverse sectors.

Loosening regulation would unleash the power of business to create economic growth and new opportunities to bring more people into the economy. This shift would be a But the time for talk and refl ection is short and running out fast, and any reticence to act swiftly to mitigate the immediate threat to the country’s food security is another example of the potent regulatory levers at our disposal not being adequately used to alleviate the plight of farmers

The current AgriBEE regime is so convoluted that it has created a whole new industry just to help businesses understand the regulations.

game-changer, incentivising employers to hire more people without the threat of the tortuous regulatory compliance requirements to maintain or expand their workforces.

Similarly, more attention needs to be paid to the economic consequences of the increasingly complex AgriBEE Sector Code. The current regime is so convoluted that it has created a whole new industry just to help businesses understand the regulations. This in turn has discouraged engagement with this important project, especially by small businesses. Here again a process of simplifi cation rather than expansion would be a boon to both compliance and the underlying objective: greater sector inclusivity.

Mitigating price shocks

In the more immediate term, economies across the world are feeling the impact of the Ukraine crisis. The results of the Russia’s invasion of Ukraine have been especially acute for the agricultural sector. Russia and Ukraine are some of the world’s biggest producers of wheat and gas, with Russia also producing signifi cant quantities of fertiliser. Commodity prices have thus skyrocketed.

Farmers are price-takers; they are as vulnerable to price shocks as consumers. The longer input costs rise, the more farms will come under fi nancial pressure. The cumulative result of all these price hikes will therefore be higher food prices for consumers and job losses in the agriculture sector.

To address the impact of this crisis, Agri SA has called on government to suspend fuel levies to give much-needed relief to farmers and consumers alike, and recent reports suggest that ministers are mulling over the proposal.

We need to shift perspective

Finally, as we look forward, another looming threat is the proposed reduction of farmers’ ability to offset previous years’ losses against their tax burden in good years. South Africa’s farmers work under unpredictable and diffi cult circumstances in a cyclical business. Farmers often carry losses for years owing to natural disasters and market forces, even as they continue to provide sustenance for the nation.

Moreover, we compete with European and North American farmers, who receive substantial state subsidies. If government takes away the little assistance it currently provides, it will endanger both South Africa’s food security and the sector’s global competitiveness as farmers sink under the weight of an unsustainable tax burden.

These examples barely scratch the surface of all the levers government has to unlock agricultural sector growth and the expansion of employment opportunities. Government has a sizeable toolbox fi lled with measures we can tighten or loosen and switch on or off to stimulate growth. A shift in perspective towards business and regulation could mark the beginning of a new era of growth and opportunity to the benefi t of the national economy, the sector and South Africa’s millions of jobseekers.