Macroeconomic strategies, agriculture and rural poverty in post ...

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Cosatu, Sam Shilowa, responded to the macroeconomic strategy by stating that it would have been ‘inconceivable’ to the ANC in the period before the 1994 elections. 1 With a restrictive fiscal policy and a commitment to free market principles, Gear is not very different from a standard IMF/World Bank structural adjustment programme. Indeed, this is a policy which owes much to the ‘Washington consensus’ (Taylor 1997). The similarities between Gear and the neo-liberal model are in fact striking: compare, for instance, Broham’s (1996 108) description of the neo-liberal model, which involves the “..adoption of an open, market-led economic regime of export oriented industrialization based on trade liberalization, direct foreign investment, and the export of goods for the world market”, with Gear’s emphasis on the importance of a “competitive outward oriented economy” and a programme of “accelerated tariff liberalisation” to guarantee “a stable environment for confidence and a profitable surge in private investment” (Republic of South Africa 1996, 1-5). Despite its considerable deviation from earlier ANC economic thinking, the government’s decision in favour of a conservative macroeconomic policy emphasizing fiscal austerity and tight monetary control was not entirely surprising. Nor did it represent, as the business press has suggested, a new phase in ANC economic policy (e.g. Business Day 14 March 1997). As early as 1992 there were indications that ANC economic thinking was shifting away from the proposals drawn up by Merg and towards a strategy dominated by fiscal restraint and strict monetary control (Nattrass 1994). The release of the 1994 White Paper on the Reconstruction and Development Programme confirmed the direction of change in ANC economic thinking: the paper marked a radical reversal in economic thinking and a “...very significant compromise to the neo-liberal, ‘trickle down’ policy preferences of the old regime” (Adelzadeh and Padayachee 1994, 1). While Gear is a product of a new phase in ANC economic thinking that may be traced back to the early 1990s, various economic events in the mid-1990s ensured that the shift to a more conservative economic policy was not reversed. In 1995 the economy was faced with a balance of payments crisis that was perceived as a threat to the macroeconomic stability of the economy. And in the first few months of 1996 the value of the Rand lost more than 30% of its value in relation to the other major currencies. These were clearly not ultimately responsible for Gear’s emphasis on fiscal austerity and neo-liberalism; nevertheless these contingencies did shore up any lingering support within the ANC leadership for a strategy based on fiscal expansion as proposed by Merg and the labour movement. These debates and decisions on economic policy have come at a time when the depth and extent of poverty and inequality in South Africa is being exposed through an important countrywide survey on living standards. The results of the 1993 Project for Statistics on Living Standards and Development (PSLSD) which surveyed 9,000 households has confirmed what numerous regional and local studies indicated: that South Africa remains one of the most unequal societies in the world, that there is a strong race dimension to poverty, that there are more poor people in rural areas, and that women and children are affected more seriously by malnutrition, destitution and poverty (RDP 1995; May 1996; May, Carter and Posel 1995). Of all the PSLSD results the most striking is the depth of rural poverty: the data indicate that three quarters of the population living in rural areas live below the poverty 1 1 Cosatu has gone so far as to suggest that it might contest the 1999 elections separately from the ANC (Financial Mail, 17 January 1997).
line. 2 The nature of poverty in South Africa raises several important questions on the relationship between poverty and Gear. Indeed, the macroeconomic strategy must ultimately be judged on its ability to redistribute wealth more equally and, in the South African context, improve the livelihoods of the rural poor. Examining the impact of Gear on agriculture, an important source of livelihood for poor rural people, and Gear’s emphasis within the land reform programme, is one way of beginning to explore the relationship between rural poverty and South Africa’s new macroeconomic strategy. This report moves beyond the abstract debates on the appropriateness of different macroeconomic strategies for South Africa and explores the possible impacts of Gear on agriculture and rural livelihoods. It begins by examining the position of agriculture within the South African economy using published and unpublished information. It examines why agriculture was singled out for its potential contribution to growth and job creation by policy analysts from very different ideological positions. The second section of the paper examines Gear’s strategy for the economy and contrasts its approach to agriculture with previous policy positions. The last two parts of the paper explore the probable impact of an open export-oriented economy on commercial agriculture, rural livelihoods, and on small scale farmers, a key component of land reform in South Africa. Agriculture in South Africa’s Economy There have been several attempts to specify and quantify the contribution of agriculture to South Africa’s broader economy (Faux 1990; Lindesay 1991; van Rooyen, Fenyes, and van Zyl 1987; van Zyl, van der Vyver and Groenewald 1988; van Zyl and Vink 1988). Most concur that the sector’s direct contribution to gross domestic product (GDP), employment and exports has declined significantly in the post-war period. Agriculture’s share of GDP has dropped from a high of over 17% in the 1950s to around 4% in the 1990s (Abstract of Agricultural Statistics 1995). While data on the number of people employed on commercial farms is notoriously inaccurate, the broad pattern reflects a decline in the number of farm workers in the post war period, but especially since the 1970s. The number of people employed in agriculture has declined from a high of more than a million and a half in the 1970s to less than 1 million in the 1990s. When considered in relation to the working population as a whole, these declines are even more dramatic: in 1951, 33% of those in wage employment worked on white owned farms; in the 1990s agricultural wage work accounts for less than 10% of those working in South Africa (Agrifutura 1996). The reasons for the lower number of agricultural workers despite far greater volumes of production is complex and geographically varied (Marcus 1989); nevertheless, the rapid mechanisation and industrialisation of agriculture in the late 1960s was almost certainly responsible for the lion’s share of these declines. Finally, agriculture’s contribution to exports, and therefore to the country’s balance of payments, has also declined as a percentage of total exports. While the value of agricultural exports was over 10% in the 1970s, it has since declined to 4% in the 1990s. Based on figures related to agriculture’s direct contribution to the South African economy, the post-war period has seen the sector’s importance in the economy decline significantly. The impact of the droughts on the economy suggests that agriculture’s role in the economy is more complex (Van Zyl 1993; Van Zyl, van der Verver and Groenewald 1988). 2 2 Standing et al, 1996 argue that the level of rural poverty may even be worse than the PSLDS data suggest because of the survey’s small and biased sample in the country’s poorest rural areas. The study also sampled a very small number of farm workers, a group identified as the poorest sector of the rural population in previous poverty studies.
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