Land uncertainty in South Africa held the largest negative connotations for potential international - and even local – agricultural investors, said Kruger International CEO Hein Kruger.
Speaking at the Agribusiness Indaba on Thursday, Kruger noted that “perception was everything” when it came to potential investments, and perceptions surrounding land reform and distribution pushed agricultural investments into a high-risk category.
The government aimed to redistribute 30% of agricultural land among previously disadvantaged individuals for purposes of commercial farming by 2014. Only about 6% of this target had been achieved to date.
He pointed out that there were relative risks to any investment, with consideration required for weather, electricity, currency, international economics, local politics and oil, besides others.
However, TAU SA GM Bennie van Zyl said many skilled farmers were leaving the industry or country, resulting in a depletion of commercial farming skills and output, as confidence in whether farmers would still own their farm in ten years faded.
Kruger said that, owing to the difficult farming conditions in South Africa, the country produced some of the best farmers in the world. However, the number of skilled agricultural workers had dissipated from 432 000 in September 2006, to 61 000 in September 2011.
“No one will invest in a sector where skills are leaving the country or sector,” he said.
The number of workers in the industry dropped from over one-million recorded in September 2006, to 624 000 in 2011.
A KPMG panel recently pointed out that, while agriculture investment opportunities in Africa were increasingly “taking the lead”, it held a number of risks, including the underdeveloped regulatory environment, political risk and lack of skilled human resources.
Further, adding to the uncertainty and dwindling confidence was the approach that the government had towards the South African agricultural sector.
Kruger pointed to uncertainty surrounding whether the South African government supported local farmers economically, noting that the government provided a R40-million grant to Cuban farmers for seed purchases, while South African farmers were denied subsidies.
Consistent positive cash flows and long-term earning growth were the reasons for investments and many investors were not attracted to volatile markets, he stressed.
Agrifica director Dr Lawrence McCrystal pointed out that there were many inhibitors to investments and successful commercial farming, which included the threat of nationalisation and the country's inflexible labour laws.
South African policies on agriculture and farming need to be addressed to ensure sustainable farming, investments and security of food supply in the future, said Van Zyl.