High prices and green grass not enough
Job losses and consequent poverty take precedence in budgetary allocation during times of crisis, but development opportunities are often overlooked, says a prominent agricultural economist.
19 May 2021 | Agriculture
Elaborating on the challenges of rebuilding agriculture in Namibia, Dr Kobus Laubscher, a well-known agricultural economist, says it is a mistake to focus only on the contribution of primary agriculture to the economy.
He says changes during the year to the various sectors' contribution to the economy must be carefully analysed.
“It fluctuated significantly for the first three quarters of 2020.”
Laubscher says the coronavirus has severely disrupted Namibia's economy, which in itself places great demands on budgetary dynamics.
“It is common knowledge that one cannot wait until after the pandemic to realign the economy.”
However, he says that any realignment takes place within a very restrictive fiscal space.
“One lesson so far is that priorities need to be reviewed, as the coronavirus is [likely to become] endemic and will remain a liability.”
In a developing economy, an extra burden rests on the shoulders of governments, namely social protection, says Laubscher.
“Job losses and consequent poverty and even persistent hunger necessarily take precedence in the allocation of the fiscus, but development opportunities are often overlooked that are necessary to effect allocation and optimise the so-called multiplier effects.”
He says agriculture is a good example, because most agricultural products need to undergo essential transformation.
“It would be a mistake to focus only on the contribution of primary agriculture to the economy.”
According to him, that contribution shrinks as an economy develops, but remains indispensable to the economy, because the real value is added outside the farm gate.
The unprocessed product is admittedly the fuel for the value chain between farm gate and the consumer's fork.
He points out that the country has undergone probably the worst droughts in human memory in recent years and rebuilding now is necessary.
“Herds had been culled and now, with better grazing and price prospects plus the expectation that these conditions will continue, farmers have decided on a growth strategy.”
He says animals have been kept in the herds and high auction prices underline this renewed confidence.
“On that side of the farm gate, the value chain is pulling its weight.”
According to him the question is, to what extent the government supports the investment decisions that farmers have already made.
“This is where things go wrong, as high prices and green grass may mistakenly be seen as sufficient for rebuilding.”
He says agriculture right now needs the leverage to re-establish sustainability at farm level and could therefore claim greater contributions such as infrastructure development and greater spending on research.
Laubscher says when a farming enterprise is profitable, economic development begins in the right place.
“Profitable farms can employ their people and compensate them properly. These employees then spend their money in the rural economy.”
He says this is where the real power of the agricultural sector lies and is certainly the cheapest way to stop and reverse the economic downturn.
“What is required is to make it easier to produce food where farming is practised, namely the rural areas. In most cases, it is not necessarily about fiscal support, but mostly about getting out of the way where agriculture wants to take care of itself.”
He says that agricultural leaders are therefore right when they argue that agriculture is neglected in the allocation of the fiscus.
“They, the leaders, simply have to negotiate aggressively for changed views at the fiscus, namely to fearlessly show that the recovery of farming conditions is by no means sufficient for agriculture to play its role. They should insist that improved farming conditions are the right foundation from which to launch an economic growth revolution."