doha and implications for south african agriculture
DESCRIPTION
Doha and Implications for South African Agriculture . Trade Policy Workshop Date: 15-16 September 2011 Venue: Braamfontein, Parktonian Hotel Presenter: Mmatlou Kalaba. Outline. Introduction Background Simulation Results Challenges Recommendations. INTRODUCTION. Introduction. - PowerPoint PPT PresentationTRANSCRIPT
Doha and Implications for South African Agriculture
Trade Policy Workshop Date: 15-16 September 2011
Venue: Braamfontein, Parktonian HotelPresenter: Mmatlou Kalaba
Outline• Introduction• Background• Simulation• Results• Challenges• Recommendations
INTRODUCTION
Introduction• Motivation….High National priority on job creation
• 2011: a year for job creation• New Growth Path, National Planning Commission, Jobs Fund.
– Sectoral level• DAFF & Rural Development, Land Bank, IDC• High unemployment – high job losses in agriculture and other
sectors.
– Projected low economic growth does not help the situation.– What next?
• Definitions• Agro-Processing Sector – Mainly Food, Beverages and Tobacco• Subsector of Manufacturing• Regional Integration- focus is mainly on SADC
Industry Employment TrendsIndustrial contribution• Services sector is still
the chief employer.
Manufacturing Subsector
• Agro-processing is the 2nd largest of the 10 Manufacturing subsector.
2001 2005 2008 20100%
10%20%30%40%50%60%70%80%90%
100%
1,995 1,717 1,489 1,276
2,322 2,306 2,339 2,106
7,492 8,071 8,921 8,820
Contribution to Em-ployment by Industry
Primary ManufacturingServices
2001 2005 2008 20100%
10%20%30%40%50%60%70%80%90%
100%
265 245 246 249
257 215 188 165
301 324 344 327
718 744 738 629
Manufacturing Subsectors
Agro-Processing Clothing & TextilesMetals & machinery Others
Manufacturing vs Total Jobs numbers• Employment in manufacturing has been on the
downward trend since the mid-90s.
Recent Unemployment Trends• Unemployment remained higher than 20% for more a decade.• High GDP growth failed to reduce joblessness significantly.
(2)
(1)
-
1
2
3
4
5
6
0
5
10
15
20
25
30
1996 1998 2000 2002 2004 2006 2008 2010
Econ
omic
Gro
wth
(%)
Une
mpl
oym
ent (
%)
Economic Growth and Unemployment Rates (1996 - 2010)
GDP Growth Rate (%) Unemployment Rate (%)
On Farm Employment• Declining employment over the past four decades.• Represents less than 5% of total employment.• To change the trend, bold steps are required
Employment (Agric, Total and share)
0
2
4
6
8
10
12
14
1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009
Mill
ion
0%
5%
10%
15%
20%
25%
30%
%
Agric Employ Total Employ Agric Share
The Connection
Agro-Processing
Concept• Outcome
• Job creation
• Necessary conditions• Trade• Value adding
• Sufficient?• A mixed bag:• Policy, • Strategies, • Incentives,• Infrastructure,• Competition, etc
9
LEARNING
Employment
Regional Integration
Black Box?
BACKGROUND
Why Agro-processing?• High multipliers and many linkages• The agro-value chains impact within and
outside the sector• Utilises most of the semi-and unskilled labour• The sector keeps jobs even tough economic
times• Relative global and regional competitiveness
Why Regional Trade• SADC offer more prospects than
other trade arrangements (TIPS policy paper).• Comparative advantage in the region.• Relatively high import demand.• Potential to play a role in some of the policies,
regulation and infrastructure development.• Concern over losing regional market shares to other
competitors.• Possibility of even larger markets with the enlarged
FTA.
Drivers of Agro-processing Trade• Demand factors
– Population growth rate– Urbanisation rate– Growth of middle class
(SA) and per capita income
– Change in diets.
• Supply factors– SA retailers in the region– Agric value chain– Competitiveness– Tripartite FTA (potential)– Low
manufacturing capacity.
GENERAL EQUILIBRIUM MODEL SIMULATION
The Impact of the Tripartite Free Trade Area
Explanation of the Model• Used the Global Trade Analysis Project (GTAP) model• It is a global economy-wide analysis.• Includes all sectors of the economy (services,
investment, capital goods and others).• The GTAP database has 2004 as a reference period.
• Key Assumptions
– Full liberalisation in the enlarged FTA and within FTA.– Labour closures : capped the real wage
General Equilibrium Model and Assumptions
$450m
$46m
$516m
$1.1 bn
$3.1 bn
$864 m
ROW
eFTA
Trade Effects: Diversion by Region
• SA imports mostly manufacturing and services inputs.• Rest of SACU set to expand processed food activities.
Sector/region Botswana South Africa Rest of SACU eFTA 1 Grains Crops 0.2 16.8 1.4 39.5 2 Meat and Livestock -0.2 11.3 -0.1 22.8 3 Mining and Extraction -0.3 12.7 -1 46.3 4 Processed Food 0.1 55.2 18.6 95.5 5 Textile and Clothing 0 20.8 -12.5 50 6 Light Manufacturing 2.9 163.5 8 63.6 7 Heavy Manufacturing 2.9 137.9 6.5 192.6 8 Utilities and Construction -2.2 51.8 3.2 217.2 9 Transport and Communications -0.4 80.3 6.2 115 10 Other Services -1.4 128.4 2.9 77 11 Capital Goods -4.6 286 10.1 336.7 Total -3.1 964.6 43.4 1256.3
Trade Effects: Intermediate Imports
• Unskilled– Gains in food proc.– Losses in trans. &
comm.
• Skilled– Gains in construction– Losses in services
Grains
Meat & L'stock
Mining
Proc'd Food
Cloth. & Text
6 Light Manuf'
7 Heavy Manuf'
8 Util & Constr.
9 Trans & Comm
10 Other Srvcs
Net Effect
-15 -10 -5 0 5 10 15
Change in Unskilled Labour (%)
Grains
Meat & L'stock
Mining
Proc'd Food
Cloth. & Text
6 Light Manuf'
7 Heavy Manuf'
8 Util & Constr.
9 Trans & Comm
10 Other Srvcs
Net Effect
-4 -2 0 2 4 6 8
Change in Skilled Labour (%)
SACU Employment Effects
Summary of Simulation Results • Overall Employment changes are not that impressive, but
– Food processing and construction are main beneficiaries.– SA Service sector is likely to face tougher competition.
• Exports show potential, but adjustments are needed:– Trade diversion,– Expand domestic production, or– Displace domestic allocation.
IMPLICATIONS, CHALLENGES and
CONCLUSIONS
Implications• POTENTIALLY: Additional jobs can be
created through agro-processing– Regional networks/hubs– Policies and strategies/co-ordination and
cooperation– Regional standards– National level
• REDUCE: - the cost of doing business.• Ambitious and Bold regional trade agenda.
Challenges• Agro-processing
– Labour regulations– Energy cost– Technology– Climate change– Politics
• Regional Integration– Infrastructure– NTMs – particularly RoO– Tariff alignment- Large FTA– Regional politics &
institutions– Competition
Conclusion• HOPEFULLY: ………..Not so BLACK anymore.
• Thank You!!
Employment
Regional Integration
Agro-Processing