The existence of markets (even for smallholder farmers) is assumed to be there and easily accessible (a competitive environment).
The history of South Africa’s market environment is not a resemblance of the market play but history of exclusion.
The two policy reforms of the past two decades have made it difficult for the government to assist smallholder farmers. The WTO readmission and the deregulation of the agricultural marketing environment are two reforms that may have led to this problem – as unintended negative externalities.
It is intuitively obvious (with the benefit of hindsight) to see that it was a huge error to sign the re-admission to WTO as a developed country. The developed country commitments under the Uruguay Agreement on Agriculture (AoA) were heavy and tight leading to an open market.
The opening up of the marketing environment removing all the practical assistance that was provided to farmers as direct farm support that through the control board left smallholder farmers to survive like a wild animal in the jungle “survival of the fit and elimination of the weak”.
The commercial sector, that enjoyed the support of the South African government before the two policy reforms to some degree benefited from the changes except for some instances (reallocations of land use and process of farm consolidation and value chain recalibrations).
The re-joining of the World Trade Organisation (WTO) after the Uruguay Round by South Africa meant that some of the measures (subsidies) that could be used to support our smallholder farmers had to be abandoned or reduced.
It is important to note that South Africa’s re-admission to the WTO was welcomed as a developed country than a developing country following the years of isolations as a result of the Apartheid system.
The implications of the re-admission as a developed country meant that South Africa committed to liberalising it trade rigorously and faster. It reduced the subsidies farmers used to receive including tariffs, to align with the status of developed country commitments.
Bonani Nyhodo – agricultural trade economist by profession writes in his capacity. This is an edited version of “The plight of smallholder farmers in South Africa’s market environment: will it ever change under the current setup?”