By Amy Grundling
Market intervention schemes providing support to farmers were implemented internationally for decades. State support grew stronger in the 1930’s with the aim to mitigate the negative effect of the economical great depression. The interventions were enabled by the Marketing Act which was one of the most controversial pieces of economic legislation in the history of South African agriculture. It was first enacted in 1937 (Act 27 of 1937) and amended in 1968.
During the late 1990’s South Africa went through radical political and economical reform. The Marketing Act of 1968 did not comply to the new social, political and economical needs of the new democratic South Africa. The new Marketing of Agricultural Products Act, Act 47 of 1996 was therefore developed.
The Marketing of Agricultural Products Act of 1996 (MAP), which replaced the Agricultural Marketing Act of 1968, liberalized the South African agriculture sector. The Agricultural Marketing Act of 1968 gave the government total control over the domestic and trade market. Partial reforms accrued during the 1980's and early 1990's, but it was only in 1994-97 when radical reform took place after South Africa’s firs democratic elections.
Before the radical reform took place in the agricultural sector, the Marketing Act (1968) enabled the Minster of Agriculture to promulgate marketing schemes which was administered by control boards. The control boards had varies power such as: implementing fixed prices, marketing quotas, fixed transport tariffs, levies on products, registering produces, traders and processors and legally being the sole buyer or seller. These controlled agricultural schemes created problems in South Africa’s economy and food security. Examples of these problems were the limited market access of previously disadvantaged people, the negative impact on other sectors such as the transport industry, the increase of input cost, destroying surplus yields to control prices and eliminating competitive pressure.
These market limitations caused the South African agricultural sector to lose their competitive advantage. Therefore, it was not only the domestic market that was negatively influenced but also the export market. These were the driving forces for the radical reform that took place in 1994. The new Marketing of Agricultural Products Act (1996) reduced state intervention in marketing and product prices in the agricultural sector.
The new Act abolished all the schemes of the 1968 Act and appointed the National Agriculture Marketing Council (NAMC) in the place of the control boards. The role of the NAMC is to advise the Minister of Agriculture in the decision-making process. The first council comprised of 10 members was established on 6 January 1997. The liberalization of the agriculture sector created a free market system that is driven by supply and demand to dictate the market prices.
The Uruguay Round Agreement of Agriculture (URAA), required the South African government to decrease government support. The aim of the URAA was to enable World Trade Organization (WTO) members to trade without causing fluctuations in market prices and failure of export earnings. Through the MAP Act direct controls over imports were replaced by tariffs, which were set according to the bound rated of the URAA and eliminating government control over exports.
The withdrawal of support from the commercial farmers pressured the agricultural sector, while deregulation of input and services. According to the Organisation for Economic Coperation and Development (OECD) report, which was published in 2006, this effected the large changes in the market, which included:
However, the limited state support agreed in the URAA and MAP Act creates an unequal playing field due to WTO countries that do to follow the agreement. Today, many of the WTO countries’ farmers still receives subsidies from their governments. This causes an unequal playing field between these countries. For example, European farmers are paid per liter milk and conservation subsidies by the European Union. This caused them to sell their products at a lower market price as the South African farmers. These agreements make it more difficult to obtain protection against unfair trade practices.
The South African government needs to re-evaluate the position of our agricultural sector. It is important for government support in a free market system to ensure that trade agreements and policies benefit South Africa’s agricultural sector and not limiting it.
By Amy Grundling
The Carbon Tax Act came into effect from 1 June 2019, aiming to decrease South Africa’s carbon emissions. The Carbon Tax Act will contribute towards achieving the objectives of the National Climate Change Response Policy of 2011 (NCCRP) and South Africa’s commitment to the Paris Agreement.
The NCCRP provides the general policy structure for facilitating the transition to a low carbon and climate resilient economy. In order to achieve these objectives, the South African government uses Carbon Tax to change the market behaviour of the consumers and producers. As indicated in the Explanatory Memorandum on the Carbon Tax Bill of 2018, an emissions trading system (ETS) is currently unsuitable due to the dominance of the carbon emissions by only a few oligopolistic companies. Tax is also a financial instrument that is much easier to administer and regulate.
A headline carbon tax of R120 will be levied on fuel combustion, industrial processes and fugitive emissions, for every tons CO2 emission above the allowable threshold. However, during the first phase a relatively low carbon tax ranging between R6 and R48 per tons of CO2 will be allocated. The low carbon tax rate the result of the following allowances:
The low carbon tax rate and the exemption of the electricity sector allows companies to transition to cleaner technology before the second phase starts. From 1 January 2023, the second phase of carbon taxation will come into effect, by increasing the headline carbon tax rate of R120 annually by consumer price inflation (CPI).
The Agriculture Forestry and Other Land Use (AFOLU) sectors are also exempt from the first implementation phase, due to measurement difficulties. Therefore, carbon tax will only affect the agriculture sector indirectly through higher fuel prices. The increased fuel prices will have a great effect on our food prices due to the long distances agricultural products usually needs to travel in the value chain. Not only will the increased food prices influence South Africa’s food security but also farmers profit margins due to increased input cost.
Decreasing carbon emissions is a priority that all countries should partake in. However, the South African government needs to administer and allocate the extra carbon tax revenue wisely. The carbon tax revenue should be reinvested to promote and excel a greener economy that will benefit all South Africans.
By Adelene van Zyl
What is Sustainability?
Sustainability can be defined as the ability to be maintained at a specific level. It is important that the current generation should provide and maintain sufficient resources for future generations to live at the same economic and environmental level as the current generation does. In addition, sustainability entails maintaining changes in a balanced environment. The Earth has a certain carrying capacity in order to function at a good and healthy rate. When we exceed the carrying capacity of the Earth, we are no longer sustainable and put current and future generations at risk of depleting resources.
Sustainability is divided into three main components according to the World Summit of Social Development in 2005. The three components are economic development, social development and environmental protection. Sustainable development will only be effective if these components are interlinked. Sustainability will only attract investments if it promotes economic growth. By increasing economic growth, living standards in communities will be improved. In order for higher living standards to be sustainable, environmental protection and resource management must be applied.
The United Nations also saw sustainability as a key component in moving forward in unity, when 178 countries adopted Agenda 21 for Sustainable Development at the Earth Summit in Rio De Janeiro in 1992. There are seventeen Sustainable Development Goals in the 2030 Agenda of which ten out of these seventeen goals involve agricultural practices. These goals are:
Sustainability in Agriculture
The main goal of sustainability in agriculture is to meet the current food and textile needs without compromising future generations’ ability to meet their food and textile needs. Sustainability in agriculture aims to improve soil health, decrease pollution and to improve the use of water in farming practices. It also aims to increase crop quantity and quality in an efficient and effective manner, without degrading the environment.
In conclusion, I would like to encourage you with a quote from Arthur Ashe to apply sustainability:
“Begin where you are, use what you have, and do what you can.”
Creators of the video: Adelene van Zyl, Amy Grundling, Calvin Cornell, Kaylin Dickson, Prince Lekame Moloto and Renée Grundling