Structural adjustments in the wheat industry of the Western Cape Province

[摘要] ENGLISH ABSTRACT:The objective of this dissertation was to investigate the structural imbalances of the wheat industryof the Western Cape Province and, with due recognition of a changing environment, to develop aneffective strategy for the industry.It was found that the origins of the structural imbalances could be detected in the interactionbetween policy, technological and demand factors and is not unique to the specific industry. Thefarm problem provides an explanation for the instability of and downward pressure on wheat pricesas well as the sluggish adaptation to environmental change experienced in the wheat industry.Internationally similar problems led to a whole range of policy measures. Relatively unique toSouth African agriculture, but not only to the Western Cape wheat industry, is the circumstancesthat gave rise to the current dual structure of the domestic agricultural sector. The origins of thesecircumstances could be traced back to the Dutch settlement of the Cape in 1652 and the resultingmeasures was later upheld under British rule. After the commercialisation of the local agriculturalsector following the discovery of diamonds in South Africa, certain measures were lobbied for atthe end of the 19th Century to protect white farmers. These measures were expanded in the 20thCentury and gave rise to the particular duality along ethnic lines of the South African agriculturalsector.If it is accepted that the structural problems of the wheat industry are the result of political, policy,technological and demand factors, the question of the potential future role of the sector, and morespecifically the wheat industry, can be asked. It was established that agriculture is a natural catalystfor economic development through the provision of food, foreign exchange, manpower, and capitalformation as well as a market for industrial produce. Whereas the potential exists, agriculture hasnot yet fulfilled this role in Southern Africa due to inconsistent domestic policy, adverse traderegimes, inappropriate technology and problems encountered in the management of development.This potential role of agriculture has been quantified for the Western Cape Province.In the development of a strategy for an industry it is imperative to evaluate the future economic andsocial environment. It was verified that in the next phase of economic development, towardsinformation societies, agriculture would still fulfil the functions previously mentioned. However, anew and more esoteric role relating to identity could be added to this list in an information society.Given the important role of agriculture as described in the previous section, intuition would leadone to expect that government would play an important role in alleviating the structural problems ofthe Western Cape wheat industry. However, contrary to this intuitive expectation it was found that,in alleviating the problems of the Western Cape wheat industry, government intervention will belargely limited to creating a favourable enabling environment. In getting to this conclusion thetheory of welfare economics, public choice and politician - voter interaction were explored. Thetraditional wisdom has it that in searching for a Pareto-optimal state, or at least a second-bestsolution, pressure group activities may play an important role. This is seen as important due to thedifficulties, as indicated by Arrow's impossibility theorem, in transforming individual preferencesinto political preference functions. However, numerous examples have shown that pressure groupactivities may only playa marginal role in influencing the final outcome. The underlying structuralcharacteristics of the national and provincial economies may be a more important determinant. Thisbecame more certain as the way politicians perceived agriculture before and after the 1994 politicaltransition was analysed.It follows that a strategy for the wheat industry of the Western Cape will take the global, social,policy, natural and consumer environment into account and both the strategy and the industry willhave to be self-reliant. It was argued that a solution would be found in changing the slope(elasticity) of the demand and supply functions for agricultural produce. With the aid of a spatialmodel developed the impact of the different elements of the strategy on the profitability of wheatproduction in the Western Cape was evaluated. This model took into consideration the yieldpotential for wheat, the gross and net margin of wheat production, spatial dispersion, transport costsand also made provision for different intermediate markets. It was found that each of thecomponents of the strategy would substantially contribute to a more profitable wheat industry forthe Western Cape. The combined effect of the strategy would result in a 97 percent decrease in thearea where wheat production is unprofitable. Profitable production of wheat would be possible on99,3 percent of the total area that is suitable for rainfed wheat production. The production of wheatwould be highly profitable at a margin of more than R200 per ton on more than 1,1 million hectares(77,1% of the total area).It is concluded that, while taking the global, social, policy, natural and consumer environment intoaccount and without relying on government, a strategy could be developed that will rectify thestructural problems of the Western Cape wheat industry.

[发布机构] Stellenbosch University