Transcript 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
• Introduction • Background • Simulation • Results • Challenges • Recommendations
Outline
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
sectors.
and other • – 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 Trends
Industrial contribution
• Services sector is still the chief employer.
100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%
Contribution to Employment by Industry
7 492 2 322 1 995 8 071 2 306 1 717 8 921 2 339 1 489 8 820 2 106 1 276 2001 2005 2008 2010 Primary Manufacturing Services
Manufacturing Subsector
• Agro-processing is the 2 nd largest of the 10 Manufacturing subsector.
100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Manufacturing Subsectors 718 301 257 265 744 324 215 245 2001 2005 Agro-Processing Metals & machinery 738 344 188 246 629 327 165 249 2008 Clothing & Textiles Others 2010
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.
Economic Growth and Unemployment Rates (1996 - 2010)
30 25 20 15 10 5 0
1996 1998 2000 2002 GDP Growth Rate (%) 2004 2006 2008 Unemployment Rate (%) 2010
6 5 4 3 2 1 (1) (2)
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)
14 12 10 8 6 4 2 0
1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009
30% 25% 20% 15% 10% 5% 0% Agric Employ Total Employ Agric Share
•
Concept
•
Outcome Job creation The Connection Employment
• • •
Necessary conditions Trade Value adding
• • • • • • •
Sufficient?
A mixed bag: Policy, Strategies, Incentives, Infrastructure, Competition, etc Agro Processing Black Regional Integration
9
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
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
$450 m Trade Effects: Diversion by Region $1.1 bn $516 m eFTA $3.1 bn $46m ROW $864 m
Trade Effects: Intermediate Imports
• SA imports mostly manufacturing and services inputs.
• Rest of SACU set to expand processed food activities.
Sector/region
1 Grains Crops 2 Meat and Livestock 3 Mining and Extraction 4 Processed Food 5 Textile and Clothing 6 Light Manufacturing 7 Heavy Manufacturing 8 Utilities and Construction 9 Transport and Communications 10 Other Services 11 Capital Goods
Total Botswana South Africa
0.2 -0.2 -0.3 0.1 0 2.9 2.9 -2.2 -0.4 -1.4 -4.6
-3.1 16.8 11.3 12.7 55.2 20.8 163.5 137.9 51.8 80.3 128.4 286 964.6 Rest of SACU eFTA
1.4 -0.1 -1 18.6 -12.5 8 6.5 3.2 6.2 2.9 10.1
43.4 1256.3
39.5 22.8 46.3 95.5 50 63.6 192.6 217.2 115 77 336.7
• -15
SACU Employment Effects Unskilled
– Gains in
food
proc.
– Losses in
trans. & comm
.
•
Skilled
– Gains in
construction
– Losses in
services Change in Skilled Labour (%) Change in Unskilled Labour (%)
-4 -2 0 2 4 6 -10 -5 0 5 10 15
Grains Grains Meat & L'stock Meat & L'stock Mining Mining Proc'd Food Proc'd Food Cloth. & Text Cloth. & Text 6 Light Manuf' 6 Light Manuf' 7 Heavy Manuf' 7 Heavy Manuf' 8 Util & Constr.
8 Util & Constr.
9 Trans & Comm 9 Trans & Comm 10 Other Srvcs 10 Other Srvcs Net Effect Net Effect
8
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.
Employment Agro Processing Regional Integration
• Thank You!!