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Doha and Implications for South African Agriculture

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.

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Doha and Implications for South African Agriculture

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  1. Doha and Implications for South African Agriculture Trade Policy Workshop Date: 15-16 September 2011 Venue: Braamfontein, Parktonian Hotel Presenter: Mmatlou Kalaba

  2. Outline • Introduction • Background • Simulation • Results • Challenges • Recommendations

  3. INTRODUCTION

  4. 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

  5. Industry Employment Trends Industrial contribution Manufacturing Subsector Agro-processing is the 2nd largest of the 10 Manufacturing subsector. • Services sector is still the chief employer.

  6. Manufacturing vs Total Jobs numbers • Employment in manufacturing has been on the downward trend since the mid-90s.

  7. Recent Unemployment Trends • Unemployment remained higher than 20% for more a decade. • High GDP growth failed to reduce joblessness significantly.

  8. 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

  9. The Connection Agro-Processing Employment Concept Outcome Job creation Necessary conditions Trade Value adding Sufficient? A mixed bag: Policy, Strategies, Incentives, Infrastructure, Competition, etc LEARNING Black Box? Regional Integration

  10. BACKGROUND

  11. 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

  12. 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.

  13. 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.

  14. GENERAL EQUILIBRIUM MODEL SIMULATION The Impact of the Tripartite Free Trade Area

  15. General Equilibrium Model and Assumptions 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

  16. Trade Effects: Diversion by Region $450m $46m $516m $1.1 bn eFTA $864 m $3.1 bn ROW

  17. Trade Effects: Intermediate Imports • SA imports mostly manufacturing and services inputs. • Rest of SACU set to expand processed food activities.

  18. SACU Employment Effects • Skilled • Gains in construction • Losses in services • Unskilled • Gains in food proc. • Losses in trans. & comm.

  19. 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.

  20. IMPLICATIONS, CHALLENGES and CONCLUSIONS

  21. 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.

  22. 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

  23. Conclusion Employment • HOPEFULLY: ………..Not so BLACK anymore. • Thank You!! Regional Integration Agro-Processing

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