An Overview of the Agricultural Economy

Author: Marvin Silawule
Agriculture_Awaited Opinion

Supply Side Factors:

The agricultural economy is diverse in its range of value chains that are derived from what I would classify as the five main subsectors which fall under this economy.

  • The first subsector is Field crops, which includes the production of yellow maize, white maize (used for “pap” consumption) wheat (used for cake, biscuits and cereal consumption) barley (used for your favourite beer), sunflower (used for cooking oil and butter) and lastly soya-beans (used for the production of soya based products).
  • The second subsector is horticulture which includes the production of various fruits and vegetables that are produced domestically such as grapes, apples, bananas, tomatoes, cabbages, lettuce and spinach. 
  • The third subsector is bucketed under livestock and animal products, which includes cattle farming, dairy farming, poultry farming, goat farming and any other related activity.
  • The fourth subsector is machinery and equipment, this involves all forms of manufacturing within agriculture ranging from the production of special irrigation equipment and the sale of tractors and harvesters. 
  • The last subsector is forestry and fishing which involves the processing of timber into wood based products and all marine activities that involve sardine processing and mussel production.

All the listed subsectors within agriculture have contributed 2% towards total GDP over the last 5 years (2014 – 2018), or in rand value an average contribution of R95 Billion, see figure 1 below.

Figure 1: SA GDP vs AGRI GDP at current market prices

Demand – Side Factors:

From the consumer’s perspective, agriculture may not seem like it is the main driver behind South Africa’s economy however it is the reason why you are reading this article, because you have had something to eat to sustain your energy throughout the day.

South African household expenditure on food and drinks is estimated at 12,5% of total expenditure per household, and the foods that dominate a typical South African household are bread, cereal, meat (mainly poultry), dairy (mainly UHT milk) and fruit & vegetables. Total expenditure on Food in South Africa is estimated to the value of R283 billion for 2019 alone; now that is a lot of consuming given that we are only a population of approximately 58 million people.

Consumers are classified by the different Living Standard Measures (LSM) that they belong to, which are split into (low, medium and high LSM buckets).

  • In the low LSM, there is more expenditure on bread due to its affordability.
  • In the medium LSM bucket consumption is focused on meat and dairy due to higher incomes.
  • In the higher LSM spends less on bread and cereals and more on meat, fruit & vegetables and dairy due to increased nutritional demand from these food items, see figure 2 below
Figure 2: South African LSM Share of Wallet on main Food Categories

In summary, agriculture contributes R95 billion towards GDP on average and expenditure on food in South Africa is more than R250 billion, that is above R340 billion combined in agricultural and food processing activities in South Africa. This is primarily the reason why this sector is so important to ensuring food security in the future; it contributes positively to our economy and our livelihoods.

Silawule Marvin Awaited Opinion

Author: Marvin Silawule

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