Donald MacKay is a trade policy expert and founder and director of XA Global Trade Advisors.
Here he shares a few insights that may enable our new leadership to better assist our farmers and feed our most vulnerable.
Our new government certainly has its work cut out for it, especially when it comes to the sustainable growth of the agriculture industry.
South Africa is a trade dependent economy; we have a tiny internal market and rely on imports to satisfy local demand. So we can discuss the merits of updating our infrastructure – which would undoubtedly benefit every South African and every local industry – but it is a given that this must be fixed. Let’s assume then that there’s already a plan to fix the harbours and railways, and look instead at other obstacles to growth.
Let’s start by shedding some light on the hidden costs of trade policy implementation delays. Take anti-dumping duties as an example. Historically, once an application was launched and the investigation ran unopposed, such a case would seldom stretch beyond 12 months. In fact, duties were typically imposed within three to six months.
Unfortunately, along with Covid came unnecessarily lengthy investigation and review processes. Or rather, unnecessary lengthy reviews of the findings of an investigation.
If you wait longer than 12 months, following an investigation, you make decisions on outdated information – Covid was a dramatic example of just how quickly things can change.
The norm then became 18 months. In some cases it has taken years for a decision to be made. The unmeasured cost of these delays is the jobs we lose due to inaction.
When it comes to agricultural policy, we should be led by data, not ideology. Agriculture is supposed to be agile, adapting to disease and unpredictable weather – agriculture policy therefore cannot continue to be anti-agile.
Another area of turmoil is the government’s position on expropriation of land without compensation. This has caused tremendous uncertainty, which fosters a local and international reticence to invest. It’s a policy disconnected from the reality of the farmer – who makes a long term commitment to a lifestyle of trying to feed people.
Unfortunately, the tale of expropriation without compensation is an ideological tale, its mere telling inhibits those who want to feed South Africa and their investors from doing so. Do away with talk of expropriation – there are other instruments one could devise to achieve the ideology without the costly compromise.
Speaking of financial instruments, when evaluating risks in the agriculture industry, a risk that one can’t simply “hand-off” is that of avian influenza. Farmers are left to fend for themselves following an outbreak, and it’s about time that we get some sort of insurance product off the ground to better mitigate this risk. If a private insurer can work with government as an underwriter to develop and cost such a product, it could relieve tremendous financial pressure from both the farmer and the fiscus. And when it comes to avian influenza, it’s a case of “when”, not “if”. It has been a problem since 2017, and we should really try to fix in the next five years, if not sooner.
Finally, any application to remove VAT on certain portions of chicken has my full support. It’s criminal that we charge VAT on chicken livers, giblets, walkie talkies and the like. The economic impact of this removal will be relatively muted, but can you imagine the societal impact? Fed students can focus and learn, fed workers can work harder and longer.
But I wouldn’t restrict our new government to removing VAT from just chicken – look at all meat cuts consumed by poor households, and help to feed South Africa more cheaply.
