SIMON BROWN: I’m chatting with Wandile Sihlobo, chief economist at Agbiz. Wandile, I appreciate the time today. You and I have chatted a lot over the years. One area we have never spoken about before is livestock farming in South Africa, which I’m fairly sure is probably a very important part of our broader agricultural sector.
WANDILE SIHLOBO: Absolutely. Simon, we’ve been skipping an important part because if you think about the gross value added of South Africa’s agricultural sector, roughly half of that is livestock. So it’s an important part of this and I’m glad that we can speak about it.
SIMON BROWN: Half of it? I hadn’t realised it was quite that big. Is this totally for internal [consumption] or are we also exporting?
WANDILE SIHLOBO: This is a sector where we have been doing relatively well for some time. We’re continuing to see the exports. And in fact, if you had to look at the 2021 figures we saw our exports for beef reaching record levels where we’re exporting just over 60 000 tonnes. And of course there was growth that we saw a lot over the past five years or so, because in years before that we [were] producing just enough to meet our annual needs. And of course, when you think about the poultry sector, still looking more broadly at the livestock industry – livestock and poultry – poultry will remain net imports.
But in livestock, red meat, we are now net exporters.
But, Simon, I must say that while we talk about the issue of exports, the past year in the livestock industry has been extremely difficult for a number of reasons.
SIMON BROWN: The reason I was going to say is drought, but we’ve had really good rainfall. So not rainfall issues.
WANDILE SIHLOBO: Not rainfall issues, Simon, but higher feed costs. Maize prices have risen quite significantly. The second issue is foot-and-mouth disease, which has meant that those exports that we have enjoyed over the past few years were not there last year, as we were kicked out of some of the key markets because of foot-and-mouth disease.
SIMON BROWN: How is the foot-and-mouth disease situation? Is that coming under control? I lived in KwaZulu-Natal way back in the day and actually lived in a foot-and-mouth disease area in KZN. I remember all the controls that were in place. Have we got that under control?
WANDILE SIHLOBO: Not really under control for now, Simon. But I do think that what has increased is surveillance, looking into it and the government mapping up those areas and working with farmers to try to control it. But it had spread last year to six of our nine provinces, which is something that we hadn’t seen before.
SIMON BROWN: That is getting, not out of control, but I suppose definitely [becoming] a concern for the sector. You mentioned beef as the big one, of course. Poultry – we get imports of poultry in that space. What else is there? There’s obviously pork and mutton. Are the other sorts of livestock significant in our life?
WANDILE SIHLOBO: They are fairly significant, Simon, and they’ve also faced similar challenges. If you think about our friends in the Northern Cape, they’ve struggled for quite a number of years with drought.
In fact, there’s interesting work that has been done by my colleagues at Stellenbosch University, Professor Johann Kirsten, where they were looking at slaughtering levels and the profitability of Karoo sheep farming. Over the past two or three years those folks have actually been under financial pressure because of those droughts and the decline in slaughtering numbers. And if you look, last year in much of the Eastern Cape this foot-and-mouth disease that has been in the livestock industry has also affected even sheep farmers in regard to their exports, because key markets like China, which takes up just over 70% of our wool exports, had decided for some time last year that, look, we have to take a step back and look at the South Africa situation. They blocked our exports for two or three months or so. At the time there was some financial pressure, but thankfully towards the end of last year they lifted the ban and we were able to export.
SIMON BROWN: How important are those by-products? Of course, when we think of livestock we think of beef, we think of the pork and the chicken on our table. But there are by-products. There’s wool from sheep. In the beef space there are the skins which can be leather.
WANDILE SIHLOBO: Those by-products, Simon, make an enormous contribution, especially when you think about it, even in less obvious numbers that we typically talk about in the world of finance. But in the community perspective, in the Eastern Cape you will appreciate the fact that you have roughly 24% or so of the sheep farmers and cattle [farmers] sitting with black farmers there.
They produce these at a smallholder level, and they know that in certain months they sell their wool to the market. All of that usually makes a significant impact on finance at a household level.
So those by-products are very important.
SIMON BROWN: How big are the small producers in the space? Or is it, as in most agriculture the world ever, dominated by large farmers?
WANDILE SIHLOBO: When it comes to livestock, Simon, you find that the small producers play quite a significant role. As I was saying, if you think about the cattle industry, you think about the sheep industry, a point to be made is that roughly you’ll find that a third is still sitting with smallholder farmers, which is why interventions like ensuring that some genetic improvements are put in place in those areas, are always useful, because once you do that, you actually make a positive impact on a larger part of our society.
SIMON BROWN: Yes. That’s almost [so] in a sense because my next question was going to be around the employment numbers in the industry. But perhaps the bigger point is [that while] the employment is important, I imagine to a lot of the smaller and more rural farmers this isn’t around employment, this is around income for the household, and perhaps the only source of income.
WANDILE SIHLOBO: Absolutely. That’s the bigger part of this, because it is for them about their income at the household level. And [many] of these farmers go for the whole year doing other things, knowing that when it comes to the shearing months, there will be some income that will actually come to the household. So it plays an important share for them. And of course, the employment condition in the [bigger] scheme of things is also an important component of what we’re doing here. But I do think, as you rightly said, there’s a lot to be gained by just supporting these new entrant farmers.