doha and implications for south african agriculture
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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. - PowerPoint PPT PresentationTRANSCRIPT
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Doha and Implications for South African Agriculture
Trade Policy Workshop Date: 15-16 September 2011
Venue: Braamfontein, Parktonian HotelPresenter: Mmatlou Kalaba
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Outline• Introduction• Background• Simulation• Results• Challenges• Recommendations
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INTRODUCTION
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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
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Industry Employment TrendsIndustrial contribution• Services sector is still
the chief employer.
Manufacturing Subsector
• Agro-processing is the 2nd largest of the 10 Manufacturing subsector.
2001 2005 2008 20100%
10%20%30%40%50%60%70%80%90%
100%
1,995 1,717 1,489 1,276
2,322 2,306 2,339 2,106
7,492 8,071 8,921 8,820
Contribution to Em-ployment by Industry
Primary ManufacturingServices
2001 2005 2008 20100%
10%20%30%40%50%60%70%80%90%
100%
265 245 246 249
257 215 188 165
301 324 344 327
718 744 738 629
Manufacturing Subsectors
Agro-Processing Clothing & TextilesMetals & machinery Others
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Manufacturing vs Total Jobs numbers• Employment in manufacturing has been on the
downward trend since the mid-90s.
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Recent Unemployment Trends• Unemployment remained higher than 20% for more a decade.• High GDP growth failed to reduce joblessness significantly.
(2)
(1)
-
1
2
3
4
5
6
0
5
10
15
20
25
30
1996 1998 2000 2002 2004 2006 2008 2010
Econ
omic
Gro
wth
(%)
Une
mpl
oym
ent (
%)
Economic Growth and Unemployment Rates (1996 - 2010)
GDP Growth Rate (%) Unemployment Rate (%)
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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)
0
2
4
6
8
10
12
14
1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009
Mill
ion
0%
5%
10%
15%
20%
25%
30%
%
Agric Employ Total Employ Agric Share
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The Connection
Agro-Processing
Concept• Outcome
• Job creation
• Necessary conditions• Trade• Value adding
• Sufficient?• A mixed bag:• Policy, • Strategies, • Incentives,• Infrastructure,• Competition, etc
9
LEARNING
Employment
Regional Integration
Black Box?
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BACKGROUND
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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
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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.
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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.
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GENERAL EQUILIBRIUM MODEL SIMULATION
The Impact of the Tripartite Free Trade Area
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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
General Equilibrium Model and Assumptions
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$450m
$46m
$516m
$1.1 bn
$3.1 bn
$864 m
ROW
eFTA
Trade Effects: Diversion by Region
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• SA imports mostly manufacturing and services inputs.• Rest of SACU set to expand processed food activities.
Sector/region Botswana South Africa Rest of SACU eFTA 1 Grains Crops 0.2 16.8 1.4 39.5 2 Meat and Livestock -0.2 11.3 -0.1 22.8 3 Mining and Extraction -0.3 12.7 -1 46.3 4 Processed Food 0.1 55.2 18.6 95.5 5 Textile and Clothing 0 20.8 -12.5 50 6 Light Manufacturing 2.9 163.5 8 63.6 7 Heavy Manufacturing 2.9 137.9 6.5 192.6 8 Utilities and Construction -2.2 51.8 3.2 217.2 9 Transport and Communications -0.4 80.3 6.2 115 10 Other Services -1.4 128.4 2.9 77 11 Capital Goods -4.6 286 10.1 336.7 Total -3.1 964.6 43.4 1256.3
Trade Effects: Intermediate Imports
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• Unskilled– Gains in food proc.– Losses in trans. &
comm.
• Skilled– Gains in construction– Losses in services
Grains
Meat & L'stock
Mining
Proc'd Food
Cloth. & Text
6 Light Manuf'
7 Heavy Manuf'
8 Util & Constr.
9 Trans & Comm
10 Other Srvcs
Net Effect
-15 -10 -5 0 5 10 15
Change in Unskilled Labour (%)
Grains
Meat & L'stock
Mining
Proc'd Food
Cloth. & Text
6 Light Manuf'
7 Heavy Manuf'
8 Util & Constr.
9 Trans & Comm
10 Other Srvcs
Net Effect
-4 -2 0 2 4 6 8
Change in Skilled Labour (%)
SACU Employment Effects
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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.
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IMPLICATIONS, CHALLENGES and
CONCLUSIONS
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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.
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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
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Conclusion• HOPEFULLY: ………..Not so BLACK anymore.
• Thank You!!
Employment
Regional Integration
Agro-Processing