industries

More labour intensive industries moving up into Africa

The high cost of electricity, labour legislation and land reform in South Africa mean labour intensive agricultural industries are set to move to African countries with more favourable conditions.

“There are certain industries that are slowly moving past South African borders, like the banana industries that moved to Mozambique,” said Dr Theo de Jager, president of the Southern African Confederation of Agricultural Unions (SACAU) at a Grain Handling Organisation of Southern Africa (GOSA) symposium in Mossel Bay.

“This could have been predicted since there is no banana farm in South Africa without a land claim, and some parts of Mozambique are only an hour and a halves’ drive from South Africa.”

De Jager said the Eskom debacle was a great blow to farmers using electricity for irrigation. Bananas are labour intensive and need 1.2 workers per hectare. The cost to renew a hectare is R180 000 (US$13 000) and farmers do that every 12 years.

He said it is logical for banana farmers to make alternative plans when they are unsure about ownership of their property.

“Now they just have to drive an extra hour and a half to Mozambique. The bananas are packed in the same box and sent to the same South African markets, but it also puts more money in the Mozambique box.”

He said the cost of labour is half of that in South Africa, and workers are not allowed to strike. The cost of electricity is about 22% of that in South Africa and farmers don’t have to pay for water. That profit however won’t go back to South Africa.

Even more agricultural activities will over time move to other African countries, with mangoes already going to Zambia and maize to the Democratic Republic of the Congo. The potential for irrigation agriculture in Zambia and Congo-Brazzaville is also better than in South Africa.

CHALLENGING FINANCING

Farming in other African countries however is not a walk in the park. There are very few financing opportunities, and most pioneer farmers use their assets in South Africa as collateral to obtain loans for investments in other countries.

“In the whole debate around land reform, I miss this dimension. Everyone talks as if it is the farmers who might lose a farm or three, but very few people say the banks might lose all our farms. Even fewer people say the heartbeat of commercial agriculture in Africa is depending on the security value of farms in South Africa.

“It is when market worth fails, like in Zimbabwe, that you observe the domino effect when the tap for financing closes.”

He says except for political risks, the availability of input financing is the greatest single barrier to agricultural growth in Africa.

“What Africa needs are value chains and investment in financing, technology and knowledge. Africa has everything that money can’t buy and needs everything that money can buy.”

He warned that someone will at some point make the necessary investment in Africa to unlock the continents’ potential.

“Every day I pray that it will be us.”

share this