Business & Economy

Sunday, 24 July 2011 22:25

Towards Rural Growth And Poverty Reduction

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Recovering from decades of political and social dis-enfranchisement, South Africa has undergone dramatic economic, political and social transition. Indeed, South Africa has experienced rapid institutional changes. With peace restored, South Africa has moved away from a centrally planned economy to a market-oriented economy. Moreover, there has been a move away from isolationism to embracing regional and global integration. Although political and macroeconomic stability have been achieved and key structural reforms have been initiated, the economy remains vulnerable. Unfortunately, economic growth has not facilitated widespread poverty reduction in the country. The loss of physical and social capital has had a negative impact on human capital. Consequently, there are serious challenges to the country’s overall development. In an increasingly competitive regional and global environment, South Africa is challenged to establish institutions and infrastructure to improve service delivery. The country is faced with the need to mitigate risks associated with regional and global integration.
Economic growth has been moderately strong over the past decade. Characteristically, growth has been concentrated in urban areas and in a few vulnerable sectors. There, however, are signs of weaknesses in the economy. The growth base is narrow and concentrated in the manufacturing and tourism sectors. The rural-urban income gap is widening due to a bias towards the urban areas, exacerbated by minimal growth in rural incomes. With agriculture focused on subsistence for households, agriculture has experienced relatively modest growth, with land productivity and labour output being below regional indicators.

RURAL POOR

The greatest challenge of our time in South Africa is not the conquest of outer space, but the emancipation of millions of impoverished and disenfranchised people in the rural communities. Development of the rural sector must be an integral part of economic development few countries have experienced sustained economic development without growth of the rural sector. Similarly, all countries that have experienced significant growth have also achieved a more rapidly growing economy. Development of the rural communities is therefore, not just an end in itself but has a direct and beneficial effect on overall economic development of the nation.

According to the 2005/06 income and expenditure survey, approximately 28 million people were leaving in South Africa’s urban areas compared to a population figure of 19.5 million people(statistic South Africa 2008). This means roughly 41% of the total population residing in rural areas. At provincial levels, however, the percentage of rural poor is varied . In 5 out of the 9 provinces, the share of the rural population is more than 50% of the total population in the province, exceeding 80% in Limpopo. The other provinces falling in the 50-60% range are: Kwazulu-Natal, North-West, Eastern Cape and Mpumalanga. What these provinces share in common is that they host the former homelands. Studies estimate that more than 70% of South Africa’s population live below the poverty line with many of these residing in the rural areas of the former homelands (Fraser el al 2003;171). To a great extent progress in the National economy will depend on achievements in the rural economy.

There is a general consensus that more inclusive growth and progress on poverty reduction will depend on addressing key constraints faced by the rural economy. To its credit, the government recognizes the need to implement and accelerate reforms. Limited resources must be strategically utilised for agriculture, rural development, education, job creation, health and infrastructure. Although government has identified general priorities, more work is needed to develop purposeful programs to revitalize the rural economy. Priorities must be articulated clearly and actions must be linked to reforms. There must be greater investment in resources, greater focus on outcomes and results, and greater coordination between various stakeholders in order to maximize impact.

A robust rural economy, income growth and employment are crucial for achieving 2014 economic and social goals. Rural populations will continue to grow and there will continue to be weak absorption of labour by other economic sectors. Thus in the short-term and the long-term there will be a need for productive engagement in rural activities. If the rural population continues to grow and with absence of increased employment opportunities outside the agriculture sector, those entering the workforce each year will exert pressure on an already ailing agricultural sector.

Undoubtedly, rural livelihoods have been at risk. Limited incomes in poor rural households give rise to subsistence farming and dependence on communal natural resources. Moreover, poor rural households operate in a risky environment exemplified by economic shocks, crop failure and loss of livestock due to disease. HIV and Aids and the H1N1 flu virus contribute to a health crisis as well. Subsistence farming and reliance on harvesting natural resources are then the only safety nets for poor rural households. In the face of low seasonal agricultural revenues, the rural poor continue to look for work or engage in other income generating activities but are nevertheless inadequately rewarded for their labour input.

Small land holders (but not family households per se) in the agricultural sector must be weaned away from subsistence farming and guided towards more rewarding commercial farming. One strategy is that of municipal or district specialization to improve productivity and maximise incomes of farmers. Such a strategy could accelerate agricultural growth and alleviate poverty. Nevertheless, attention to food security will continue to be important for nutritional purposes. There, however, remains a need to focus on specialisation and developing local markets. The pace of any paradigm shift will almost certainly depend on the perception of government’s response to addressing risk factors associated with market dependency to meet basic needs and generate income. Markets, for example, will be expected to function optimally and to the benefit of the poor. Risks can be mitigated by improving security in land tenure and engaging in contingency planning for natural hazards such as drought and winter flooding in the cape flatlands. Access roads must be improved and market access fees eliminated to facilitate products being brought to market. This will require greater investment in infrastructure and facilitation of efficient channels of distribution.

While progress has been made, basic services and infrastructure are critically lacking. Access to infrastructure is closely tied to the growth of the rural economy and linking producers to markets. Reducing the costs of production inputs and increasing the competitiveness of South Africa’s exports are also tied to growing the rural economy. Promoting private sector investments in rural areas is critical as well. Despite significant investments over the past decade, rural areas are still in need of basic social services and infrastructure development. Financial services are limited in the rural areas and do not focus on serving the rural poor. Education and health facilities are also under-developed. Increasingly, rural households are vulnerable and have limited access to economic opportunities.

Improvements in basic social services, infrastructure, and the broad business environment will facilitate the development of off-farm activities that can contribute to growing the rural economy. Presently, informal non-farm rural economic activity makes a large contribution to rural household incomes. Income diversification will minimise risks and generate income for households. Additionally, rural households are involved in a wide range of activities cantered around agriculture, construction, transportation and manufacturing. Other activities include government work as wage labourers and employment in micro-businesses that make processed foods. Services are provided while trading in farm produce, fish, livestock and manufactured goods.

To contribute towards achieving the Millennium Development Goals (MDGs) and to ensure sustained growth of the rural economy, the benefits of agricultural and rural development must reach poor rural households. Some proposed strategic interventions include: 1) combining improvements in output and input markets; 2) promoting policies and investments to support diversification and intensification of production; 3) setting annual growth targets of 5%-6%; and 4) matching the needs of a growing rural labour force with the needs of the local economy. Investment in basic infrastructure, access to social services, and access to financial services will be critical for growing the rural economy as well. More specifically:

-Additional investments are needed in basic education, particularly to increase matric rates of girls in rural areas. Investments are needed in health facilities to improve general health of women who account for over 50 percent of agricultural work force. Lower cost of health services can minimise household vulnerability.

-Improved access to roads, electricity and water will increase opportunities for market access and provide opportunities for development of non-farm activities.

-Improved access to a broader range of financial services tailored to the needs of rural households will minimise household vulnerability. Diversification of the rural economy is recommended as well.

The diversity of income sources and the significant variations between and within districts and communes makes it clear that there are no generic solutions for rural development. Rather, the process needs to be locally specific, responsive to the local conditions and circumstances, and to maximize the participation of local organizations and populations. Strengthening the participation of local organizations and populations in planning and policy development will contribute to a better prioritization of public investments. In addition, local planning and governance processes need to be supported at national level by addressing the broad policy and institutional issues affecting the rural sector.

THE NEXT STEP: DELIVERING RESULTS

In order to deliver results, a rural development strategy must take into consideration additional elements that cut across the rural economy to tie in with the greater national economy. Those elements include: 1) horizontal links to other national agendas; 2) institutional capacity building to focus on the public sector on its role in the rural economy; and 3) coordinating the activities of civil society organisations such as donor organisations in the rural areas.

Government has a critical role to play in itself adhering to principles of good governance. Government, for example, must set the example through zero-tolerance of corruption. Additionally, donors must show greater support for public investments. Donor activities must then be influenced if not coordinated so that they are aligned with national priorities. Limited capacity in government agencies impacts a strategy of selectivity – especially in supporting and providing various services to rural producers. Rural producers, nevertheless, must diversify their activities and respond accordingly to market opportunities. Finally, government must create conditions for further private sector development. When possible government and the private sector must leverage their capacity and resources to provide the inputs, services and infrastructure needed to revitalize the rural economy.

REFERENCES

Fraser,G.,Monde, N and Van Averbeke, W. (2003)Food Security in South Africa: A case study of Rural Livelihood in the Eastern Cape. In Nieuwoudt, L. & Groenewald, J. (Eds) The Challenge of Change: Agriculture, Land and the South African Economy. Pietermaritzburg: The University of Natal Press.

Statistic South Africa,2008” Income and Expenditure Survey 2005/2006”reease Po100. Pretoria: Stats SA.

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