An updated TFP series for South African Agriculture with improvements to official data on land, labour, and machinery measurements

Yu, Jianbin

An updated TFP series for South African Agriculture with improvements to official data on land, labour, and machinery measurements

Thesis / Dissertation

2024

Publisher

University of Cape Town

Department

School of Economics

Faculty

Faculty of Commerce

Abstract

The agricultural sector in South Africa has undergone significant shifts over the years, raising substantial concerns about food security and productivity. This comprehensive study analyses these trends and their implications to offer insights for policy formulation to address these challenges. The analysis uses historical data from 1947 to 2020 to examine output, inputs, productivity indices, and sector dynamics. It provides an in-depth exploration of the changes in agricultural composition and the factors influencing productivity, highlighting the need for nuanced policy interventions. In this thesis, I employ the Törnqvist-Theil aggregation techniques to measure input, output, and total factor production indices. The study delves into changes in crop production, shifts in input usage, and the impacts of labour reforms and minimum wage laws. Specifically, I examine the evolving shares of high-value horticultural crops, staple food crops, and livestock within agricultural outputs. The analysis focuses on the intricate relationship between input usage, labour, and land productivity to elucidate the declining Total Factor Productivity (TFP) growth rates. The study's significance is in identifying key trends that shape South Africa's agricultural landscape and their impact on food security, utilizing official South African agricultural data from Agricultural Abstracts and Censuses. It emphasizes the urgency of revitalizing rural development strategies and investing in agricultural research and development (R&D) for long-term productivity growth. Further, the results urge policymakers to establish incentive structures that promote sustainable farming practices while ensuring the sector keeps pace with population growth. Moreover, the study augments the Abstract and Census data by incorporating datasets from the United States Department of Agriculture's Economic Research Service for land quantity, employing rainfed-equivalent cropland as a quality-adjusted measure. Furthermore, the labour quantity and cost index from the Post-Apartheid Labour Series are incorporated to bolster the study's analytical robustness and reliability. Key findings reveal a notable shift from staple crops to high-value horticultural production, affecting food accessibility and affordability for low-income households. The stability of livestock production presents nuanced issues concerning dietary components and resource usage. Labour reforms and the introduction of minimum wage laws have led to decreased labour use, indicating enhanced labour productivity. Notably, the study unveils a positive impact of the minimum wage on Total Factor Productivity (TFP). The analysis showcases an average increase of 1.67% per annum in TFP from 1947 to 2020, exhibiting minimal growth during the deregulation and the new South Africa period (0.34% per annum) from 1989 to 2003, but a subsequent rise in TFP (1.06% per annum) from 2004 to 2020 following the increase in the minimum wage. Additionally, this paper underscores concerns about declining Total Factor Productivity (TFP) growth rates and their implications for food security. It emphasizes the need for effective policy strategies to bridge the gap between population growth and TFP growth rates. It also highlights the urgent requirement to improve on data quality in agriculture in South Africa. In summary, this study offers comprehensive insights into the changing dynamics of South Africa's agricultural sector between 1947 and 2020, emphasizing critical challenges and the urgent need for effective policy interventions to safeguard food security and increase productivity.

Keywords

Economics

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