Agricultural productivity: separating the wheat from the chaff

Sarah Wild reports that Shadrack Moephuli, CEO of the Agricultural Research Council (ARC), is concerned that improvements in agricultural productivity are responsible for the decrease in the number of farmers in South Africa today (Technology hides crisis in farming sector, says expert. Business Day, 17 January). To quote Dr Moephuli: “The major reason for us not realising that these farmers are going out of business, while we are still getting food on our tables, is technology”. But Dr Moephuli has no reason to fret. Improvements in agricultural productivity are, in fact, a welcome development and not something over which to agonise.

Only a few centuries ago most of our ancestors were engaged in farming activities. With improved technologies, world food production increased dramatically, causing incomes to rise and lift millions of people out of poverty. One man in particular, Norman Borlaug, has been called the “Father of the Green Revolution” due to his pioneering research. His work which resulted in the development of high-yielding, disease resistant wheat varieties, combined with modern agricultural production techniques, has greatly improved food security for billions of people across the globe.

Perhaps more than anyone else in human history, Norman Borlaug is responsible for the fact that throughout the post-war era, except in sub-Saharan Africa, global food production has increased faster than human population growth. This has averted Malthusian predictions of mass starvation. Improvements in agricultural productivity have emancipated large portions of the labour force and allowed people to engage in other economic activities necessary for a country’s economic growth. That there are fewer farmers in SA today should not alarm Dr Moephuli. It simply means that fewer people are required to do as much as or even more than in the past.

According to the Food and Agricultural Organisation (FAO), food production must increase by at least 70 per cent to meet the growing demands of a world population expected to surpass 9 billion by 2050. It is essential, however, that such increased agricultural productivity is derived from the better use of existing agricultural land and not from an expansion of agricultural land as has been the case in the past four decades when increasing amounts of land put to use for farming were to the detriment of forests, soil, and water.

Like any business, the goal of farming is to deliver goods that satisfy the quantity and quality demanded by the market. To meet the continually increasing demand, farming has to become more profitable. It can only do that by being more efficient, that is, by farming more intensively, not extensively. Contrary to Dr Moephuli’s fears that the “agricultural sector is in a state of crisis”, what we are currently witnessing is something that has already occurred in developed economies the world over and SA is simply playing catch-up. Indeed, as Agricultural Business Chamber CEO John Purchase points out, “Productivity has improved considerably... average yield per hectare has more than doubled in the last 15 years, primarily because of technology”.

As a nation, we do not want be relegated back to a situation where more individuals are sucked into food production. Improvement in agricultural productivity has made it possible for this basic need to be satisfied with the use of less human labour and thus at less cost. With the land needing fewer people to work it, many can escape back-breaking, lowly paid land work and turn their attention to fulfilling other needs, many of which were unimaginable in our great-grandparents’ or even our parents’ day. Indeed, it is only because most of the jobs that existed in the past have been destroyed that we, today, have our modern forms of transport, communication, entertainment, ready-made clothing, foodstuffs, and other items that would have been out of our reach in the past. Activities and developments which have caused large industries to develop that employ labour and grow the economy in general.

Dr Moephuli also laments the fact that increasing amounts of agricultural technologies adopted by South African farmers emanate from foreign countries. He states, “That has to do with historical underinvestment in the ARC. After 20 years of giving a parliamentary grant that is suboptimal, it starts to wear on the institution”. According to Sarah Wild, “The council received total revenue of R870m in 2010-11, with a parliamentary grant responsible for R590m and the rest coming from external and ‘other’ income. The majority of this goes towards salaries”.

For the South African government to divert scarce taxpayer resources from other more productive investments for such a purpose is a deadweight loss to society. And commercial farmers should be allowed to import any foreign technologies they deem appropriate, without any unnecessary restrictions that inevitably will raise the cost of production and ultimately result in increased prices for consumers.

Finally, SA cannot afford to subsidise inefficient farmers. Without the necessary predictability in the security of property rights and the rule of law, farmers (both existing and future) will not be eager to take on the extra risk to increase the food supply. So Dr Moephuli, instead of being concerned that “The children of the current crop of commercial farmers are exiting the sector…. [and] we need to find incentives for people to become interested in being farmers and growing food for the rest of us”, should rather be doing all he can to convince the government that it should focus on creating a stable and predictable environment in which farmers can flourish and allow the natural order to separate the wheat from the chaff.

AUTHOR Jasson Urbach is an economist with the Free Market Foundation. This article may be republished without prior consent but with acknowledgement to the author. The views expressed in the article are the author’s and are not necessarily shared by the members of the Foundation.

FMF Feature Article / 17 January 2012