Academic journal article African Studies Quarterly

Public Spending on Agriculture and Poverty in Eastern Cape Province, South Africa

Academic journal article African Studies Quarterly

Public Spending on Agriculture and Poverty in Eastern Cape Province, South Africa

Article excerpt

Introduction

Agriculture has since occupied the center stage in meeting the Millennium Development Goal 1 (MDG1) in many developing countries, which sought to reduce poverty worldwide by half by 2015. (1) Studies from six such countries strongly concur that rural economic growth and widespread poverty reduction require increased production in agriculture. (2) Multiple authors provide evidence that buttress this important linkage among agriculture, income growth, and poverty. (3) The agricultural sector has both a direct and an indirect impact on economic development. (4) In China, it was agricultural growth that enabled a significant reduction in poverty during the period 1978 to 1997. (5) The importance of the agricultural sector goes well beyond its direct impact on rural incomes as it has both upstream or backward linkages on the supply side and downstream or forward linkages on the manufacturing side. (6) The agricultural sector has a high degree of interrelatedness with the other sectors that emerges as a consequence of both the demand and supply effects of inputs and outputs.

South Africa has a dual agricultural economy, with both a well-developed commercial farming system and a more subsistence-based communal farming system. (7) South Africa's GDP data from agriculture averaged R57972.17 million from 1993 until 2016, reaching an all-time high of R77828.85 million in the fourth quarter of 2014 and a record low of R33530.55 million in the first quarter of 1993.8 The agricultural sector represented less than 10 percent of the economy in 1960, and currently this figure is below 2.5 percent. However, the fact that the sector represents less than 2.5 percent of the economy does not provide the true picture of the sector's impact on the greater economy as this excludes the multiplier effects like buying inputs from the manufacturing sector, provision of raw materials for manufacturing and purchases a host of services. (9) The multiplier effect implies that each additional unit demanded from the agricultural sector has a strong effect on other sectors. Agriculture is an important source of inputs for other production activities and other industries/sectors, and the output of other industries is used in the form of inputs, which confirms the fact that agriculture's linkages with the rest of the economy are not only important but are usually underestimated. Calculations from national statistics show that primary agriculture has a backward linkage of 2.14 and a calculated forward linkage of the sector of 1.81. Despite the declining share in GDP, the South African agricultural sector continues to play an important role in the economy as it operates as a net exporter of agricultural commodities. South Africa maintained its status as a net exporter of agriculture, forestry, and fisheries products during 2013. (10) Agriculture has a direct bearing on income growth, poverty reduction, and overall economic growth. Continued investment in the sector will have a significant impact on a large number of households and the greater economy due to its employment and food security effects. (11) Growth in agriculture does not only benefit the rural communities; increased output in the rural areas has a direct bearing on the urban sector through its food price decreasing effect and creation of employment.

Economic growth in the former homelands of South Africa, where more than 70 percent of the population is regarded as poor and land is abundant, will definitely require significant improvements in agricultural production. Thus, there is need for studies analyzing the linkages between agriculture and agricultural growth and consequent reductions in poverty. With the objective of proposing a methodology for estimating the required investment to achieve any specified development target, this study presents an analysis of the linkages between public investment flows, agricultural growth, rural income levels, and the level of poverty in Eastern Cape Province of South Africa. …

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