Africa-Press – South-Africa. PERFORMING the duties of municipalities that failed to deliver basic services in an acceptable manner was a huge growth drawback for local agribusinesses working in rural towns, says the Agricultural Business Chamber (Agbiz).
Wandile Sihlobo, the agricultural organisation’s chief economist, said this week that the wool industry’s agribusinesses operating in the Eastern Cape had recently contended with service non-delivery.
The operational costs of these businesses had increased notably partly because of unmaintained roads and the absence of basic service delivery, which had forced some businesses to perform functions that the municipalities would have ordinarily performed.
“Such challenges are binding constraints to expansion and divert energy and capital that agribusinesses could have spent expanding their business activities, and creating employment to perform basic services that are key for business survival.
“This is one of the big constraints to agribusinesses, agriculture as well as other sectors that require urgent attention,” Sihlobo said.
Some cases include branded foods and beverages group Clover’s announcement last year that it intended to leave Lichtenburg because of unsatisfactory service delivery by the municipality.
Astral, a poultry processing company, is another agribusiness case that suffered from poor service delivery in Mpumalanga.
Sihlobo said inept municipalities service “non-delivery” was a significant challenge for agricultural and agribusiness sectors that operated primarily in rural towns. This saw them having to deal with increased business costs.
In an article by PwC, partner government and public sector Craig Kesson, and, partner PwC strategy and economics Lullu Krugel, they said that after public corporations, municipalities were the most important source of public capital spending, however, their capital spending had consistently declined over the years from R64 billion in 2016 to R41.2bn in 2020.
“Infrastructure provision at this level has a variety of delivery challenges not always related to financing. There are many municipalities that are unable to spend their budgets, and so fall short on delivering their developmental objectives.
“In 2020, where municipalities spent only 60 percent of the adjusted budget allocated for capital spending that year, underspending was partly due to restrictions on activity that prevented construction and maintenance work,” they said.
They added that in other years, municipalities’ inability to spend their budgets and deliver on their development objectives had been the result of the lack of capacity and skills within the metros to plan, programme, and implement and carry out capital projects.
“The reasons for these shortcomings need to be fully considered at the level of governance arrangement, administrative capacity, and regulatory provisions,” Sihlobo said.
Agbiz said there were also other agriculture-specific binding constraints that stifled the sector’s growth, which the Department of Agriculture, Land Reform and Rural Development had started working on collaboratively with the private sector.
Sihlobo said as an example, for years, the challenge of lack of modernisation of the Fertilisers, Farm Feeds, Seeds and Remedies Act 36 of 1947 had been highlighted as a significant threat to the registration and importation of various agricultural input products.
“These were crucial products for improving agricultural productivity, and the global competitiveness of the South African agricultural sector,” he said.
Similarly, the Onderstepoort Biological Products’ (OBP) inability to produce the required vaccines for the South African livestock industry presented risks for the major commercial livestock producers, and the developing farmers that aimed to build their herds and commercialise.
“It is also critical that the National Treasury and the Minister of Agriculture, Land Reform and Rural Development properly investigate any corruption and financial management issues at the OBP, in the process of reforming the institution.
“As with the challenges above, the solution will require that the Department of Agriculture, Land Reform and Rural Development engage with organised agriculture, communicate its turn-around strategy of this vital entity, and leverage the private sector expertise where necessary.”
The sabotage of the South African infrastructure was another major problem for the agricultural sector, and other sectors of the economy. Cases of the theft of railway material which disrupted trains and the movement of goods and export activity.
Agbiz said the establishment and effectiveness of the Land Reform and Agriculture Development Agency by the Department of Agriculture, Land Reform and Rural Development, which President Cyril Ramaphosa also highlighted in his State of the Nation Address last week, had the potential to improve the delivery of land redistribution and work collaboratively with the private sector.
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