House of Assembly: Vol3 - MONDAY 22 APRIL 1985
announced that Mr Speaker had called a joint sitting of the three Houses of Parliament for Monday, 29 April, at 14h15, for the delivering of Second Reading speeches on certain Bills.
laid upon the Table:
To be referred to the appropriate Standing Committee unless the House decides otherwise within three sitting days.
Vote No 21—“Agricultural Economics and Marketing”:
Mr Chairman, I request the privilege of the first half-hour.
A year ago this debate was held in an atmosphere of profound gloom. We were at that time in the grip of one of the most severe droughts this country had ever experienced, and we knew that unless rain fell soon our industry would be facing a major disaster. Fortunately, Mr Chairman, rains have come, perhaps not as copious and as widespread as we might have wished but nonetheless we now appear to be over the worst, and for this we are thankful.
Unfortunately the same cannot be said in relation to our economic position. Indications are that, besides the damage caused by the drought, our farmers have been hard hit by the hammer-blows of rampant inflation, soaring interest rates and ever-increasing input costs. We are consequently in a fairly desperate economic position, perhaps the worst in the history of our profession in this country.
It is this all-important development that should enjoy the closest attention during this debate. Our future depends on it, and we will have either to seek solutions together or else go bankrupt together. It has been said that a problem properly identified is a problem already half solved, and thanks to a number of excellent reports which have been produced by the Department of Agricultural Economics and Marketing, the South African Agricultural Union, the National Maize Producers’ Organization and the Jacobs Committee, the economic plight of our farmers has been well identified and well documented. During this debate we in these benches will be focusing our attention on these reports and on the hon the Minister’s response to them.
By looking at the broad overall picture, as well as by concentrating our attention on certain specific topics such as control boards and the proposed new marketing system for maize, we hope that in the limited time at our disposal we will be able to initiate a constructive and fruitful debate.
With regard to a broad overview of our financial situation, I should like firstly to distinguish between short-term problems which have their own particular needs, and long-term problems which must also involve planning and policy. While we ponder on how to get our wagon out of the drift in which it is stuck, we must also cast our eyes ahead down the road we still have to travel.
In the short term we are confronted by a situation in which some 33% or fully one third of our farmers are in a critical financial position; that is to say, they have a debt-to-asset ratio of 30% and higher. They are currently experiencing great difficulty in servicing these debts, let alone repaying them. At least 18% in this group have a debt-to-asset ratio of 50% and higher and are thus in an extremely precarious position, so much so that one must fear for their future on the land. I should like to return to this point later.
If one takes a debt-to-asset ratio of 10% and lower as representing a healthy economic position, one finds that only 38% of our farmers fall into this category. In other words, approximately 60% of our farming community is experiencing financial problems of some sort or another, ranging from fairly serious to desperate. Given this situation and given the economic circumstances in which the country as a whole finds itself, it appears almost inevitable that we are going to lose a fairly significant number of our farming community over the next few years.
We in these benches are greatly perturbed by this situation, but at the same time we also see it as an unavoidable consequence of socio-economic factors, most of which are beyond the control of this hon Minister. We do not believe that this issue should be politicized in order to gain some short-term political capital. It is easy to produce instant solutions like the writing off of debt or the provision of more generous rates of interest or larger amounts of credit, but such solutions all carry important economic and political consequences for other sectors of the economy. Simplistic solutions are just not going to work, however attractive they may be politically.
We in these benches believe that this hon Minister’s first responsibility is to ensure that the nation is kept supplied with food and fibre. In order to fulfil this responsibility, his immediate objective should be to keep all viable economic units in full production, and that should not mean being placed under an obligation to keep all farmers on the land at all costs. This, of course, does not imply that he should not subscribe to the ideal of keeping farmers on the land, but this ideal must be tempered by economic realism.
If the hon the Minister is placed under a political obligation to rescue every farmer at all costs, then there is the danger that scarce financial resources essential for the keeping of viable units in production will be dissipated on unfortunate, hopeless cases. I hope that the hon the Minister will be able to prove me wrong, but I have an uncomfortable feeling that this might already be happening in certain quarters.
Let us look at some of the evidence. We know that the State has acted generously in making substantial amounts of money available to the agricultural sector. It has done this not only since the drought started biting into our reserves in agriculture. In fact, for many years now the department of the hon the Minister has made attractive subsidies and other forms of aid available to the farming community. The hon the Minister must be given credit for the role that he has played in squeezing this aid out of the reluctant State coffers, but I should like to put a frank question to him: Is he satisfied that the aid which has been made available has been put to the best possible use by the most suitable people?
Let us disregard the almost inevitable abuse of aid which a small proportion of disreputable farmers will be guilty of. Every profession has its chancers. What I am referring to is the continuing decline in the financial fortunes of the broad mass of good, honest, hard-working farmers despite these generous short-term measures. Let me give a few illustrations.
Firstly, between 1983 and 1984 the percentage of farmers with a debt-to-asset ratio of greater than 30%, in other words those in a critical financial position, grew from 22% to 33%, an increase of 11% in just one year. At the same time the number of farmers in a healthy financial position—let us say with a debt-to-asset ratio of less than 10%—declined by 11% from 49% to 38%.
Secondly, the negative gap between gross farming income and farming expenditure is growing at an ever-accelerating tempo. The index weakened from a favourable figure of 1,02 in 1975 to a figure of 0,83 in 1982.
Thirdly, interest payments on the total agricultural debt of R904 million are increasing at a rate greater than the debt itself and represent the largest single item of agricultural expenditure. It is the increase in interest rates which, more than any other factor, is squeezing the life out of our industry.
What I am saying is that despite generous short-term aid by the State, the farming community is sinking ever deeper into debt. Although the community is basically still solvent, it is experiencing ever-increasing difficulties with liquidity. I am suggesting that just part of the reason might be that financial aid is being spread too thin as a consequence of the large numbers of people in trouble, and, by being spread so thin, it is not having the effect that it should have.
The hon the Minister must respond by either increasing the amount of aid or else decreasing the number of people to whom aid is given. This is not an easy decision and particularly so in our present economic climate.
There are many other complex short-term factors which I cannot address in the limited time at my disposal, and I should still like to say a few things about other problems and prospects. We can agree, I am sure, that short-term aid is only a palliative and we must address ourselves to long-term policies if the industry is to be given long-term stability and prosperity.
I would suggest that the first practical problem to be addressed over the long term is that of interest payments. There are those who will respond by saying that farmers should learn to cope with high interest rates in the same way as other entrepreneurs in industry and commerce. I believe that our farmers would be prepared to accept this and would regard it as a challenge, but then we would also need to have our industry freed from all non-economic constraints such as the commitment to providing cheap food, the protection of local industries, and the commitment to making this country self-sufficient in as many basic foodstuffs as possible. These are political rather than economic constraints which serve to distort the free operation of the agricultural market. It is one thing to commit ourselves, as we have done in the White Paper, to a free-market system, but it is another thing then to be bound by extraneous, non-economic constraints.
The other issues which need urgent attention and which I have time enough only to mention in passing, are the ever-increasing input costs which go hand in hand with inflation. Unless we can close the gap between input costs in agriculture on the one hand and producer prices on the other, we are going to sink ever deeper into debt. It should be stressed that this aspect has little or nothing to do with the drought or climatic conditions. It simply refers to the fact that every year it is costing the South African farmer more to produce food and fibre, and that this increase is not being compensated for by corresponding increases in his income. This unfortunately can only forespell long-term disaster for our industry.
What I have tried to do during my speech is to open up the debate around the central issue of agricultural economics in the hope that we can have a fruitful debate on this vital topic rather than address ourselves to issues of lesser importance, however interesting these might be.
Mr Chairman, I take pleasure in following the hon member for Albany, and in my speech I shall touch on the matters he raised here. On this occasion I should like to thank him for his positive approach and particularly for the fact that he wishes to serve agriculture by keeping it out of the political arena. I should like to thank him for that.
Right at the start of the debate I wish to single out and emphasize three characteristics of the present agricultural situation in our country. If we critically analyse the agricultural situation, these three impressions emerge. I want to begin by outlining these three characteristics and later, if time permits, elaborating on them.
The present agricultural situation is characterized by contrasts—strong contrasts among agricultural regions and industries. For example, in an investigation into the financial situation of the farmers carried out by the SA Agricultural Union it was found that at the end of 1984 the position of 41% of the farmers in the Transvaal and 40% of the farmers in the OFS was critical; in other words the debt-to-asset ratio on their farming operations was more than 30%. Therefore these agricultural regions are engaged in a total struggle for survival. In the Eastern Cape this category of farmers comprises a mere 16,6% of the total, and in the Western Cape, 26,7%. This is of course in line with the depression conditions in our economy.
When we look at agricultural industries, we find that after 3 disastrous years of drought the maize industry is struggling to keep its head above water, while the wool industry is at present marketing a clip at marketing levels at which they expect a record sum of R420 million. This year represents an increase of 44,8% in the total value of the clip in comparison with last year.
There are more examples to show up these strong contrasts in an almost dramatic fashion, but there is sufficient evidence that this is a real characteristic. This characteristic of diversity often gives rise to differences in the way the agricultural situation is represented and compared. This in turn gives rise to incorrect inferences, and sometimes misunderstandings as well. In other respects there are differences in regard to the search for guidelines in terms of which we can plan to restore the economic situation and autonomy of the fanners. This in turn gives rise to frustration and a degree of uncertainty.
We shall differ on these matters in this debate, and there is nothing wrong with that, particularly—and I wish to emphasize this—if we state the case of agriculture positively, and in doing so, do not disturb or destroy the broad unitary action of agriculture or lose the understanding and favourable attitude of the consumer. From the government side we undertake to state our case positively and responsibly. The second characteristic is inherent in the fact that the economic problems at present being experienced in agriculture are not a temporary phenomenon that can be ascribed exclusively to the disastrous drought. In fact they are due to a more fundamental problem which may be ascribed in particular to South Africa’s relatively high rate of inflation and the weakening rate of exchange of the rand. Since 1974 this phenomenon has caused a considerable decline in the profit margin in agriculture and there is no sign that the position is going to improve in the short term. It is clear, therefore, that adjustments to existing structures will have to be made in order to make it possible to create reserves in agriculture, reserves which will enable agriculture to help itself. In this regard, too, speakers on our side will make positive and feasible proposals with a view to restoring the self-respect of the South African farmer.
The third characteristic is inherent in the understanding and helpful approach of the State with regard to the problems in agriculture, particularly those due to the disastrous droughts. I believe that thus far the Government has effectively combated the impact of this destructive drought by way of its comprehensive aid schemes in so far as the country’s resources have permitted it to do so. Nevertheless there are those, even in the ranks of agriculture, who contend that the State’s assistance to agriculture is inadequate and even that the State has withdrawn its helping hand from agriculture. That is an astonishing statement if one bears in mind that in the North Western Cape there are farmers who are still farming productively after 7 years of severe drought. State aid to agriculture has been accepted by the broad public in a good spirit, but in the country’s present depressive economic situation there is a notable and even growing feeling against controlled marketing and the so-called preferential treatment of agriculture. Agriculture will have to give careful attention to its relations with the State on the one hand and the general public on the other. If we in agriculture are to have any hope to finding long-term solutions for our problems we need the highest degree of understanding and co-operation from the State and the consumer. Government speakers will be going into this aspect of relations, too, in greater detail.
I have now distinguished three characteristics of the agricultural situation which I believe will be the dominant theme of the debate and I should like to refer to some aspects of each.
With reference to the first characteristic, that of sharp contrasts, I wish to refer to two aspects that we shall have to approach with circumspection as far as agricultural planning is concerned. There are two aspects that exert an influence on the overall image of agriculture. The first is the importance of realistic price determinations. I appreciate that in view of steadily increasing input costs, agricultural industries will have to give careful attention to production costs in determining prices. I recognize that input costs and high interest rates are the major factors that have resulted in the dwindling profit margins in agriculture. But agricultural industries will have to guard against an over-emphasis on production costs as the predominant and determining factor in price determinations—particularly industries with a one-channel marketing system. An over-emphasis on production costs could be the most effective way of losing not only the understanding and cooperation of the consumer but also the confidence of one’s fellow farmer in other sectors of the industry who has to sell his product on the open market. Therefore realistic determining of prices always entails balanced judgment and the reconciliation of all relevant factors.
The second issue is the importance of planned production. I am involved in an industry in which planned production enjoys a high priority. It has made an important contribution to stability in the wine industry. All of us in agriculture realize that our competitive position on the international markets is constantly being weakened owing to a high rate of inflation and sharp increases in input costs. We realize, too, that in-depth consideration must be given to effective ways of bringing up to an acceptable level the competitive position of agricultural exports.
Notwithstanding planned production, however, agricultural surpluses are inevitable because we are dealing with the unpredictability of nature. I believe that there is another reason for agricultural surpluses. We need growth and development if agriculture is to play its key role in the decentralization policy and as the most important employer. The overall decentralization policy and deconcentration projects cannot succeed if sound economic growth and development in agriculture are lacking. Agriculture is still the biggest source of employment at the lowest cost. Therefore a growing population will also make heavy demands on agricultural development.
However, agriculture must also play a key role in another sphere. Agriculture can play a central role in the aim of export-led growth as the precursor of the next economic upswing that we have all been waiting for for so long.
Order! I regret that the hon member’s time has expired.
Mr Chairman, I rise to allow the hon member for Ceres to complete his speech.
Mr Chairman, I thank the Opposition Whip for his considerateness.
It is therefore clear that growth and development in agriculture are imperative if agriculture is to play its rightful part in our domestic economy. Therefore, if surpluses occur, we must market them abroad in the most effective possible way. Agriculture must be supported in this by way of effective incentive measures. A planning committee is deliberating on these measures at present.
In this regard I do just wish to outline to this House the method adopted by the wine industry in dealing with its surpluses. The board of directors of the KWV determines every year the quantity of wine that cannot be sold on the domestic market. This surplus portion is then provided, free of charge, to the KWV by the wine farmers. The KWV then processes this wine into a variety of products which are then sold abroad. The income from this is then paid to the wine farmers by the KWV in the form of a deferred payment. Over a period of 67 years this method has achieved wonderful results in the wine industry as a stabilizing mechanism, in conjunction with two other stabilizing mechanisms. I believe that this method embodies the principle of self-discipline. It is a pure principle that could certainly be applied by other agricultural industries.
The second characteristic entails structural changes and adjustments in order to make capital formation possible in agriculture in a practical way so that agriculture may be placed in a position to help itself. The single biggest problem in agriculture is a lack of confidence due to dwindling profitability and the increasing burden of debt of farmers. The most disturbing fact is that this trend is more widespread among younger farmers. The important question now is: How does one build greater certainty into agriculture? How does one create greater confidence in agriculture? In this regard no less a person than the State President has indicated the only way in which we can build greater security into agriculture. It was at an opening address before the SA Agricultural Union congress on 23 October 1984 in Pretoria. On that occasion the State President committed the Government anew to the crucial policy goal contained in the White Paper on agriculture, viz the pursuit of a maximum number of well-trained and financially sound owner-occupant farmers. Moreover, the State President stated very clearly that to achieve this aim it was of decisive importance, firstly, to restore the economic autonomy of South African farmers and to provide them with long-term security against the risky nature of agriculture. To achieve this aim—and this is important—the State President announced that the Margo Commission was investigating the possibility of capital formation for the South African farmer by creating reserves in terms of an adapted tax system. Personally I believe that this is the most practical basis on which the economic autonomy and self-respect of the South African farmer may be restored. This matter ought to be receiving the undivided attention of every agricultural body at the moment. That is why the agricultural group of the NP, in a submission to the Margo Commission, made various recommendations relating to the creation of reserves in agriculture. Speakers on our side will deal in greater depth with this document. All I want to say—I am immodest enough to do so—is that it is a brilliant document. If the Margo Commission recommends the creation of capital reserves and the abolition or adjustment of the estate duty system and it is accepted, and this is accompanied by effective financial planning and discipline in agriculture, then we shall restore confidence and security in this strategic sector of our country’s economy. Then the agricultural sector will be in a position to play its rightful part in regional development from a position of strength, because without the effective participation of the agricultural sector, the policy of dynamic regional development is out of the question. In the recuperation phase of the farmer’s economic autonomy, financial guidance and planning is of cardinal importance. Everyone who seeks to promote the welfare of agriculture will have to give attention to this and co-operate purposefully to overcome this deficiency.
Another matter of crucial importance in this recuperation phase of agriculture is the understanding and attitude of the consumer. The farmer will have to explain his planning strategy to the consumer. He will have to explain to the consumer why his marketing strategy is built around the Marketing Act and marketing boards. He will have to explain that controlled marketing by marketing boards is in line with the unique character of agriculture and that it is in the country’s interest that stable development in this sector should be assured.
Now, it is most illuminating to look at the finding of the Committee for Economic Affairs of the President’s Council in its report on page 84, paragraph 5.39. This report deals with the measures which restrict the functioning of a free-market-orientated system in South Africa. I quote:
Then, in paragraph 5.40, on page 84, the committee reaches the following conclusion:
The committee then expresses its concern about the image of the control boards and recommends:
The Minister entrusted this investigation to the National Marketing Council, and I know that the hon the Minister gives this matter high priority. We are all looking forward to this report. I believe that this finding of the Economic Affairs Committee attests to clear thinking.
Owing to its strategic value, agricultural production and marketing enjoy protection in some form in most countries of the world. In this recuperation phase of agriculture that is at hand, this sector will have to strengthen and extend its relationship and co-operation with the State and the consumer, because without it we shall not restore confidence in agriculture.
On this occasion I wish to thank the hon the Minister, the hon the Deputy Minister and the entire department for the very clear way in which they have attempted over the years to strengthen and extend this relationship between organized agriculture and the Government. We on the side of agriculture wish to convey our sincere thanks for those very vigorous and sincere efforts. I hope that we shall be able to conduct this debate in this positive spirit and with this positive attitude.
Mr Chairman, I take pleasure in following the hon member for Albany and the hon member for Ceres. I think they gave reasonably good and concise summaries of the bottlenecks experienced at present by the agricultural industry of South Africa.
However, the hon the Minister must permit me to begin by telling him that I have been in the Eastern Free State for a while. The harvest there looks promising, not only in the sphere of agriculture but—in particular—in the political sphere. [Interjections.] I have repeatedly heard it said in this House—I heard it again this afternoon—that we must at all costs keep agriculture as well as agricultural appropriations out of politics. I have no fault to find with that, on condition that those who advocate it, apply it in practice as well.
I found in Harrismith that those same people who say that we must keep politics out of agriculture issued a political sheet, entitled: “Regering steek hand diep in sak vir boere.” [Interjections.] Incidentally, the by-election in Harrismith is of considerable political significance. As part of this “aid” story the allegation is made, inter alia, that the Government is reaching deep into its pocket to help the farmers. Under that heading mention is made of an amount of R7 million that the Land Bank has made available to the agricultural control boards, co-operatives and individual farmers.
Is that true? Is that correct?
However, that is not aid. They are ordinary, simple loans. The actual amount in subsidies allocated by the State from 1 April to 31 December amounted to the colossal sum of R220 million. That is the only amount that can be regarded as direct aid.
What about the interest rates …?
Mr Chairman, I should greatly appreciate it if the hon the Minister would bear in mind that this is not his debate. We shall be coming to that later. I should appreciate it if he would try to restrain himself a little, because we are now speaking to a different Minister.
Just be fair.
To come back to the debate, there is one aspect of this particular vote that I want to mention. This is the first debate under the new dispensation in terms of which a distinction is being drawn between the two departments, in respect of various functions that were previously administered by a single department. The biggest single amount of money to be appropriated in the vote now under discussion, viz R450 million, is in respect of a subsidy on bread and the subsidy on mealie meal.
We have stated repeatedly in the past that the mere fact that these two items are placed under the agriculture Vote creates the mistaken impression that these amounts in fact represent appropriations for the benefit of agriculture, because they do not. They comprise out-and-out consumer support by the State, not support by the State of the farming industry in question. [Interjections.] Therefore we should like to see this factual situation being spelt out very clearly and unambiguously so that the taxpayers of South Africa will not be under the misapprehension—this is a misapprehension which is in fact deliberately cultivated by many people—that colossal amounts are voted for the farmers of South Africa by way of agricultural budgets.
Of the total budget of the agricultural department we are now discussing and of the Department of the Minister of Agriculture and Water Supply, which amounts to less than R1 000 million, these items alone—the two subsidies on bread and meal—represent almost 50%. I ask that we do not fail to bear that in mind.
There is a matter relating to the new subdivision of agriculture which causes me some concern. We are this afternoon discussing a Department with the name of Agricultural Economics and Marketing. In fact, however, the situation in South Africa is that as far as the financing of the farmers and the agricultural industry is concerned, we have a fragmentation. In the first place there is the private sector which, by way of commercial banks and other bodies, provides agricultural financing. Then we have the Land Bank, which is undoubtedly the biggest provider of credit to the farming industry and which in turn falls under the Minister of Finance. Then there is the Department of Agricultural Economics and of Water Affairs, which now, in its new set-up, provides limited financing to certain agricultural industries, inter alia to control boards. Finally there is the new Department of Agriculture and Water Supply which, in its own way, has to provide agricultural financing to individual producers.
I am concerned. I am concerned that what we have here is a fragmentation which may not always be in the best interests of agriculture. The task of the department under discussion is to make a proper evaluation of agricultural production and production cost trends. Apart from that, it has to investigate possible marketing methods and, as a result of this comprehensive investigation, must make recommendations with regard to financial policy. In the light of this one would be justified in asking whether the financing of agriculture is not specifically a matter for a Department of Agricultural Economics and Marketing. I ask the question, and I believe that we shall have to give serious consideration to this matter in future. Co-ordination in this regard is imperative.
I do not wish to try to add anything to what the previous two speakers have already said except that we on this side should like to congratulate the South African Agricultural Union and organized agriculture in general on their contribution by way of an in-depth investigation into the financial position of the farmers in South Africa. It has been done responsibly and scientifically. We hope and believe that the hon the Minister will try to provide the necessary answer.
The hon member for Albany has already pointed out that the biggest problems in the farming industry in South Africa at present is the prohibitive interest rates. We as farmers have on occasion been asked whether we expect the State to feed us. Any farmer, or anyone in agriculture, can however state as a fact—it is not a matter for argument—that in the context of agriculture in South Africa, one cannot borrow money at the present interest rate of 25% and more, and think that one can make a profit on it. That is impossible.
Order! I regret that the hon member’s time has expired.
Mr Chairman, I rise merely to afford the hon member an opportunity to complete his speech.
Mr Chairman, I thank the hon Whip for the opportunity to finish. I reiterate that if an individual farmer does have the cash assets to invest further in his industry, the agricultural industry, then in present circumstances he is in fact subsidizing the consumer of agricultural products in South Africa out of his own pocket, because he can earn a far higher rate of interest outside the agricultural industry, simply by investing in a commercial bank, than he could earn by way of further investment of his cash in agriculture.
Surely that is not the only reason why one owns a farm.
I wish that hon member would not anticipate me. I am not so stupid as not to know that that is not the only reason why one owns a farm. I am speaking about the current expenditure one incurs in agriculture. We know that one of the most important reasons why people invest in farmland nowadays is to use it as a hedge against inflation and to ensure that one’s money does not become worthless. However the fact is—and these investigations have shown this to be so—that the return on agriculture has for years not exceeded 10%. It is sometimes as low as 5%. If I remembered correctly, in only 3 years out of a period of 10 years has it been more than 7%.
How much has the value of your farm increased over the past few years?
Sir, I ignore that hon member. I ask what economist or businessman regards an investment on which one can only hope to earn between 5% and 10% in the present financial climate, as a sound investment?
Therefore we wish to ask something that has been asked before. It is that instead of paying, colossal amounts in consumer subsidies at the end of the line, serious consideration should be given to the possibility of converting this into interest subsidies in order to reduce production costs in agriculture in general. Serious consideration must be given to this, because what are we dealing with now? I am not talking politics when I debate this; in any event, I am trying not to talk politics. The de facto situation today is that we have ad hoc aid from farmer to farmer, depending on the private circumstances of the specific farmers. If one looks at it from a purely objective point of view one sees that there is, necessarily, discrimination against certain farmers. That is how it works in practice. One man gets credit at the subsidized interest rate, but the next man does not get it. We know what the reasons for this are, but this is the practical position. One has to seriously ask oneself the question: For how much longer is this justified? Is it no longer economically justifiable for everyone to be accorded the same treatment, particularly in view of the fact—and I want to repeat this—that present interest rates in particular are prohibitive as regards healthy production in agriculture in this country. I trust that the necessary attention will be given to the matter.
If I may level criticism at the department, I wish to refer to the findings of the subcommittee of the Jacobs Committee which expressed the following criticism:
I think this is a serious matter and we should like to hear from the hon Minister what adjustments he has in mind to rectify this deficiency. If it is not rectified it will remain a serious shortcoming, as is reflected in the committee’s finding.
I wish to conclude by saying that I agree with the hon member for Albany. It is impossible and undesirable to keep in agriculture, people who ought not to be assisted. That would be counterproductive. However, the farmers of South Africa are expected to provide the population of South Africa with relatively cheap food. Therefore I think it should be made possible for them to comply with that directive in the light of the circumstances in which the farmers of South Africa have to produce.
The hon member for Ceres referred to the considerable variation in the economic situation in various regions, and to the variations among various industries. This makes it impossible—and this is a practical fact—to lay down one consistent set of rules for all the various agricultural sectors, because that simply would not work. That is why we have different agricultural control boards for the various branches of the agricultural industry, because the solution for the wool industry as far as marketing is concerned, does not necessarily lend itself to, say, the wheat, maize, wine or meat industries. However, all these industries have the one common problem, and that is that for the present, the interest rates people are expected to pay are the downfall of all these industries. In my opinion, in present circumstances the most important task of the State lies in this sphere.
Mr Chairman, it is a pity the hon member for Barberton tried playing a little Harrismith politics here. As the hon member said, it is true the amount in loans is R7 000 million but he omitted mention of the interest subsidies on them. I want to sketch the position quickly in connection with a single facet of the agricultural industry, namely the maize industry.
To enable the Maize Board to finance its export losses after its own stabilization fund was totally exhausted, the following State guaranteed and subsidized interest loans were granted to the board: In 1980-81, R75 million at 4% repayable over five years; in 1981-82, an amount of R71 million also at 4% and repayable over seven years. An interest subsidy amounting to R18 million was paid to the Reserve Bank by the State during 1983-84. As regards the Land Bank as well a State-guaranteed loan of R75 million at 10% interest was initially granted to the board. During 1983-84, however, the Government approved that the portion of the loan relating to the 1981-82 handling and storage costs of the board be interest free for a period of two years as from 1 May 1984. The loan therefore appears as follows: The interest-free amount is R41,2 million and an amount of R33,8 million carries an interest rate of 10%. An interest subsidy amounting to more than R8 million was paid to agriculture during 1983-84.
Time does not permit me to go into this but I can continue in this vein.
Mr Chairman, may I put a question to the hon member?
No, Mr Chairman, I am sorry but I have only 10 minutes. I must first complete my speech.
The publicizing of the financial position of the farmer in South Africa by the SAAU turned the spotlight afresh upon the vulnerability of South African agriculture with its changeable climate. Uncontrollable factors are the greatest problem in agriculture; it is also these factors which link a greater risk to agriculture than to most other sectors of the economy. In conjunction with these, the enormous increase in the main agriculture inputs such as fuel, fertilizer, tractor and implement costs and especially interest contributes to a very great degree to our farmers’ burden of debt.
Furthermore, in good years there is a lack of incentive measures to the farmer to build up a reserve for the poor and lean years. Income tax measures have encouraged him to purchase capital goods. On the other hand suppliers of credit have also been at fault in granting credit on the security value of farmers and not laying enough emphasis on the repayment capacity of debtors. Security was also determined in the form of personal qualities rather than physical assets. In other words, aided by a cash flow schedule one should examine whether the farming unit is capable of repaying existing debt from the production of the farm. At the insistence of a client banks often granted credit relatively easily and in addition in excessive amounts on the value of the land and not on the repayment or managerial capabilities of the farmer. This credit was usually granted in the short term and took the form of overdraft facilities.
In future banks will therefore also have to pay more attention to the income-generating ability of the farmer and the farm than merely the security value of the land. Capital appreciation of land is unrealized capital gain which does not necessarily improve his repayment ability.
The greater involvement of co-operatives in provision of credit to farmers, especially over the past few years, has increased their exposure to risk and in this way adversely affected the ratio between their internal and external funds. In addition, co-operatives and banks will have to consider working more closely together in future as regards the fanner’s total loan facilities. Jointly we shall have to lay more stress on realistic standards for determining the financing needs and creditworthiness of individual members. That is why I appeal for the appointment and use of more agricultural economists by suppliers of credit in the formulation of agricultural financing policies.
The entry of agricultural economists to the agricultural co-operative sector began only in the sixties and was accommodated in the banking sector only in the late seventies. Unfortunately agricultural economists are used in general to furnish advice as regards staffing functions to the credit control department. Agricultural economists are therefore used chiefly to pay attention to the problem client and not to obviate problems in the formulation of policy. The agricultural economist therefore often has to act as a medical practitioner to cure the disease and is not used to see how the disease may be prevented.
That is why I wish to appeal to suppliers of credit that they should make more use of agricultural economists to co-operate in the consideration and granting of credit to their clients. To me financial planning is therefore the crux of the matter. Expertise in financial management will be expected of the farmer in increasing measure. Long, medium and short-term planning will have to take place and funds should be supplied accordingly. Knowledge of physical as well as financial planning is the most important means by which the controlling factors in agriculture may be applied correctly. Capital expenditure should be applied only for productive purposes and its rapid write-down for tax purposes would then not be the sole consideration in investment.
Financial management with the aid of a workable cash flow schedule is an utter necessity for the farmer who wishes to survive 1985 and subsequent years. Suppliers of credit ought and could also play an important part in the educational process of the South African farmer as a financial manager if cash flow schedules were demanded in granting credit. In the process of taking up credit the farmer should receive more guidance and should also seek and find it as regards the consequences of the credit which has to be taken up.
A co-responsibility therefore rests on the farmer and on the financial institution—especially co-operatives—to co-operate in the consideration and granting of credit based on a joint cash schedule. That is my plea here this afternoon.
Mr Chairman, I wish to deal very briefly with a couple of points that have been raised up to now. I want to refer particularly to the comment made by the hon member for Barberton who pointed out that the subsidies that were being made available by the Government were not producer subsidies but were distinctly consumer subsidies. I believe it is essential that one should get this across to the public as a whole because it is this type of propaganda that becomes twisted and people immediately jump to the conclusion that it is the agricultural sector that is receiving special treatment.
I also wish to refer to the other point that was made in regard to the necessity for not having a standardized system of analysing loan applications. These vary. They must be considered in the light of the varying conditions that pertain throughout the country.
At this stage of the discussion on this Vote one is still feeling one’s way as it were into the new system; one is still trying to establish the actual dividing-line between certain aspects of general agricultural affairs that fall under the hon the Minister’s jurisdiction and those that fall under own affairs. I do expect, however, that with the passage of time we will be able to get more clarity on this particular aspect.
Before dealing with the main thrust of my speech, Mr Chairman, I would like to reiterate the comments that have been made in regard to the officials of the department. I would like particularly to express very deep appreciation to those officials of the Land Bank who have been under extreme pressure during the past few years, and from whom I, as representing quite a number of farmers in my constituency, have always received the utmost courtesy and assistance. We in these benches would like to convey to them our sincere thanks.
In view of the limited time at my disposal it is not my intention to deal to any great extent with the effects of the recent 3-year drought experienced in many of the summer rainfall areas of the country, beyond referring briefly to several particular aspects of that drought.
In the first place one cannot get away from the fact that the drought has had one beneficial effect in that it has been responsible for bringing to a head deficiencies which have existed for many years in the agricultural industry. A crisis in agriculture has been on the cards and was looming for many years prior to the drought. I can recall—I think it was in the second speech I made in this House—that I referred to the fact that agriculture was then already in a crisis situation. However, as a result of the drought the position has clarified itself and has clearly revealed the lack of long-term policy guidelines and the fact that in the past too much emphasis has been placed on ad hoc decision-making.
Now that certain weaknesses in the industry have been exposed, the hon the Minister and his department must give serious consideration to the layout of specific priorities. There is a sense of extreme pessimism prevailing in the agricultural sector at the present time, notwithstanding the drought relief measures that have been made available by the Government. Farmers are looking to the Government to give an indication—this is an aspect I would particularly like to bring to the attention of the hon the Minister—as to where the Government sees agriculture’s future place in the overall economy, and to what degree it is prepared to apply long-term parameters to agriculture, as defined in the White Paper of 1984. I therefore call upon the hon the Minister to give this House a clear indication in the course of this debate as to how the Government sees the lopgterm future of agriculture in this context. This is necessary if confidence in the agricultural industry is to be restored and if the future stability of farming in this country is to be assured.
The current high interest rates, which have already been referred to in this debate, are having a significant effect on the viability of many intensive and semi-intensive farming enterprises. I must warn that the stage has been reached when, unless some form of financial relief is made available, this type of farming will be doomed and will disappear as a result of the ever-increasing input costs of which interest rates are the main component. In this respect I must also point out that when one talks of intensive and semi-intensive farming, one realizes that the risk factor is now becoming alarmingly high. The result is that there is every indication that there could be a departure from the existing production methods which could in turn detrimentally affect the future availability of many agricultural products in spite of the fact that these appear to be freely available at the present time.
I also want to warn that if, for economic reasons, it proves impossible for this form of productive farming to be continued the whole food basket in this country could be threatened. This message was clearly evident and clearly conveyed at the recent Pietermaritzburg rally. It would be foolhardy to assume that the scars left by the drought have been summarily removed by the relief measures which the Government has made available.
I deplore the utterances that are made from time to time that the agricultural sector is being spoon-fed by the Government. The sources of these comments display ignorance and a complete lack of understanding in regard to the unique position in which the agricultural sector in this country finds itself.
Order! I regret to inform the hon member that his time has expired.
Mr Chairman, I rise merely to allow the hon member an opportunity to complete his speech.
Sir, I would like to thank the hon Whip.
Let it be clearly understood that the farming community is the custodian of South Africa’s countryside and furthermore that it plays a vital socio-economic role throughout rural communities. I would like to point out too that the net return from agriculture in real terms in 1983 and 1984 was the same as in 1970. This emphasizes the fact that over the years agriculture has trailed dismally behind other sectors when it comes to actual economic returns. It is little wonder, therefore, that agriculture in South Africa is facing its greatest financial crisis.
I wish to turn my attention briefly to the critical comments which have been levelled at the Marketing Act and the marketing board system during recent months. It is quite apparent that the boards find themselves as the whipping-boys of public comment when less sensational news is available. It is necessary, therefore, that in the light of the intensified attacks against the marketing board system this matter be discussed under this Vote.
I would like to emphasize at the outset that the Marketing Act has helped towards providing a sense of stability in agriculture which was not evident when the Act was introduced in the 1940s. I would go so far as to say that South Africa would not have been able to become a net exporter of agricultural products without the security offered by the Marketing Act.
Critics of the present system have one thing in common—the ability to criticize without coming forward with practical alternative recommendations. To suggest that criticism of certain boards is not justified would be naive, but outright condemnation of the system can only be described as irresponsible and negative.
I am aware of the hon the Minister’s instructions to the Marketing Council to investigate the various control board schemes, and I am concerned that to date we have received only one report relating to one board. This immediately poses the question of how long it will take to finalize the whole investigation.
Which board was that?
The Dairy Board.
There is without doubt the need for a reappraisal of the marketing techniques of certain boards. One asks oneself for example whether the boards have kept pace with consumer trends and eating habits or whether the final product is subjected to strict controls which inhibit consumption. One asks oneself whether in the case of dairy products greater use should have been made of the local market in disposing of surpluses. This is an aspect which I think deserves consideration. I find it extremely difficult to accept the fact that farmers in this country are called upon to subsidize the consumers of other countries.
The disturbing trend which is becoming apparent in regard to the local market is that there is a distinct indication that the gap between the price that the producer receives and the price that the consumer pays is widening continuously. This clearly indicates that the man in the middle is taking an increasing share of the final consumer price at the expense of the producer.
I trust that the hon the Minister will see his way clear in this debate to convey some message of hope to the agricultural sector for the future. This is most necessary now because I can assure the hon the Minister that morale is at an extremely low level.
Mr Chairman, after various speakers have taken the floor, one comes to the conclusion that there is concern over the South African farmer and his economic position and that we are all in search of solutions to enable the farmer to raise his head again and as of old become one of the pillars on which the South African economy rests.
There seems to be dismay in the agricultural sector in consequence of circumstances beyond the control of man which have struck our agriculture. One should like the situation to right itself, but before saying this I think one should realize once and for all what daring, courage, drive and willpower run in the veins of the farming community because they have been in agriculture for the past 300 years or more and only now has it happened that they have to crawl and are compelled to ask for assistance.
Now we know that the publicizing of the financial position of the farmer in South Africa by the SA Agricultural Union has thrown the spotlight pertinently on the vulnerability of the farmer because of uncertain rainfall. The changeable South African climate and the enormous increases in the principal agricultural inputs of which we are all aware are contributing every day to the South African farmer’s economic burden of debt. All indications are that in this financial year, 1985, the South African farmer is also heading for a difficult year economically.
The security value of farmers has been tested to the utmost—the hon member for Smith field referred to this as well—as a result of these burdens, long-term droughts and, ironically enough, sometimes floods as well which are the extremes of the agricultural pattern in South Africa. In fact, one dreads the day when too many farmers will be forced in consequence of financial pressure to put their farms on the market because the saturation of the land market will force land prices down which will place an increasing strain on the security value of the remaining farmers. Suppliers of credit are already concentrating on cash flow schedules in order to determine whether a farming unit is capable of carrying its burden of debt.
From a study by the economics division of the SA Agricultural Union on the financial problems of beginners in farming it is illuminating that security does not play a dominant role in other countries. Seen against the results of the study it is essential that security should preferably be in the form of personal qualities rather than in physical assets. Loans should be granted with a view to the establishment of an economically viable farming enterprise and not because the security value of the land is great enough to carry the loan. The hon member for Smith-field mentioned this as well. It is indubitably so, and I should like to repeat that it is definitely a prerequisite for the success of agriculture in South Africa that the farmer should become economically independent.
As is the case in all commercial sectors, I believe the farmer would also like to become economically independent. If we seek reasons why the farmer finds this so difficult to accomplish, it immediately leads to the erratic agricultural conditions in South Africa. Further we are left wondering whether, over the more than 300 years in which agriculture has been carried on in South Africa, sufficient effective adjustments have been made to counter changing circumstances. One is then plagued by questions, not because one is critical, but because the current situation demands the putting of such questions. Have suppliers of credit perhaps not lent too much on security value, as the hon member for Smithfield pointed out, and laid too little stress on farmers’ repayment ability of the burden of debt? Is the South African farmer aware of the importance of efficient financial management of his undertaking and does he seek and find sufficient guidance on the results of credit which he takes up?
In the past the pattern in South Africa was—it has gradually improved in consequence of farmers’ improved agricultural qualifications etc—that farmers farmed chiefly in accordance with advice from experts round about them, for instance the State with its extension departments. The farming pattern merely followed what was prescribed. One now wonders whether the prescription for the return from agriculture and redemption of debt from the yield of the farm did not fail to come up to scratch in the process. I know a farmer whose farm at one stage boasted the largest vineyard plantings in the Cape. His entire enterprise, including the application of manpower, is controlled with the aid of a computer system. As is so often the case in the South African agricultural structure, water available for irrigation is also his limiting factor. This has caused him to change his production factor from yield per hectare which is the normal standard, to yield per megalitre of water. Coincidentally he knows precisely how much water he has in his dams. In consequence he has sold his entire dairy herd of approximately 130 Friesland cows and now plants onions on the lucerne lands. In addition he is cultivating onions to replace old vineyards because at present onions pay better per hectalitre of water than a dairy or the yield from old vineyards.
I can continue putting more questions. Over the years has the tax system as regards agriculture taken sufficient cognizance of the risk factor of the agricultural industry? To what degree have high tax rates led to injudicious expenditure on capital works and machinery on farms in favourable years? To what degree has estate duty been the cause that young heirs to farms have had to burden unencumbered farms with mortgage bonds in order to continue their farming? [Time expired.]
Mr Chairman, in reply to the hon member for Swellendam I must say that he raised a very important point here when he said that a particular farmer changed his formula for estimating production from production per hectare to production per hectalitre of water. That indicates a highly intelligent and economic farmer in South Africa.
However, before I go on to deal with that particular question, there are a few points that must be corrected. The first one is the question as to whether the subsidy on maize is a subsidy to the farmer or to the consumer. It is neither. First of all, as far as the farmer is concerned, he is paid his price for maize and his profit comes out of that. It is the cost of handling and storage as far as the board is concerned that is really subsidized. As far as the farmer is concerned, he is provided with his full income. He is paid a certain price for his maize, his production costs are covered and he makes his profit. What is actually subsidized is the running of the particular board. The same applies to wheat.
What is the reason? The hon member for Barberton has forgotten the reason. The greatest consumers of maize in South Africa happen to be the Black population. This, as far as the price of food is concerned, is a very important factor indeed. Therefore, to come along and say it is the consumer who is subsidized, is not quite correct. [Interjections.] The fact that the Maize Control Board in itself has been badly managed, is another factor which I shall discuss just now.
I should like to deal with a couple of points which have been raised in connection with the White Paper on agricultural policy. I should like to deal with the question as to whether the measures to achieve the goals of this agricultural policy have been carried out properly.
In the first instance I should like to deal with optimum participation in international trade in agricultural products. The agricultural policy lays down very clearly that South Africa has been, and will be, an important exporter of several processed and unprocessed basic agricultural products in the future. It is a valuable earner of foreign exchange. Then it says, and this is very important indeed, this will only be possible in the long term if the country can export its agricultural products at a profit. The question is: Are we really exporting what the world requires?
The reason why I say this, is that I was fortunate enough to have met a man who is the quality manager of one of the biggest wholesalers in the USA, a company which has a turnover of over a billion dollars a year. He came to examine the South African fruit-canning factories for the purpose of assessing whether they were suitable enough to supply his company. One of the most important points which came out as to why he had come here, was that the workmanship of South African canned fruit was very good indeed. Why was it good? It was good because we have a large amount of labour and therefore it is possible to examine each and every one of the processes taking place, as compared to the situation in California, where labour has become so expensive and so difficult to obtain that it has not been possible for the fruit industry to continue.
This is a lesson that I think South Africa should learn. We should consider going into those products which are labour-intensive, which require inspection and which require people, particularly because we have a growing Black population in South Africa. I think it is important that this particular point should be very seriously considered in the investigation of marketing our products overseas. I believe that there are a large number of new agricultural products that can be produced in this country.
Another question I should like to ask is whether the instruments we have for fulfilling our agricultural policy are the correct ones. I have raised the question in this House before of the composition of the National Marketing Council. I believe it should be based on five particular areas of production, namely animal husbandry, field husbandry, animal fibres, horticulture, and tobacco and beverages. I believe that the National Marketing Council should be completely revised. I am waiting to hear what the hon the Minister has to say to this. As I say, I have raised the question before of the composition of the National Marketing Council. I did so at the time when a Bill in this connection was discussed.
I believe that one of the problems with regard to marketing in South Africa is the lack of knowledge of marketing itself. There continue to be control boards instead of marketing boards. I think it starts right from the very top. The people who are there do not represent both the consumers and the producers.
Are you referring to the marketing boards?
No, I am sorry, I am talking about the National Marketing Council. What I am saying is that the council is run by the boards instead of the council running the boards. That is the problem we have in South Africa. The Minister finds himself in a very difficult situation because far too many members of the council, capable as they may be, happen to be employees of the Department of Agricultural Economics. It is very difficult to expect them to be able to manage people who come from private enterprise. I should like the hon the Minister seriously to consider that particular point.
Another point I should like to raise is the question whether free enterprise is really respected and encouraged in regard to the marketing of agricultural products. A problem I have discussed from time to time with the hon the Minister is whether, in the whole marketing sphere, private traders have their rightful place in relation to the co-operatives. I think the question must be seriously considered of giving private individuals, private traders, a greater opportunity to handle and market agricultural products.
Finally I should like to come back to the problem of agricultural financing in South Africa. Even those of us who are not actually directly connected with agriculture are very perturbed at the tremendous debt that has been built up. If one studies the Land Bank’s report for this year, one gets even more worried about the situation. I should like the hon the Minister to deal with this particular point—other hon members have already raised the whole question of the debt. It says in the report (page 13):
Then comes the basic problem, and that is the problem the hon member for Barberton raised. I do not know how one is to overcome it. The report says:
Sir, if one wants to get negotiable paper, one has to pay for it. If the Land Bank has to pay higher rates of interest—that is the dilemma—how can one give the farmers a lower rate of interest? The problem is that the Land Bank now has to go into the open market in order to get its money, and the price is very high indeed, the rates of interest are very high. So, it is impossible for the farmer not to be in the same position as the private entrepreneur, who is facing the same problem. [Time expired.]
Mr Chairman, I wish to assert that any hon member of this House who has the necessary sensitivity towards the problems of South African farmers in these times, will be careful enough not to drag agricultural problems into the political arena. I say this in specific reference to the hon member for Lichtenburg—and I am glad the hon member is present.
The hon member for Lichtenburg on occasion saw fit to say in this House that the Government had totally withdrawn its support for farmers of this country. [Interjections.] I want to say that I have not heard that remark from a single responsible leader in agriculture outside this House. It is precisely this hon member who goes further and does not serve the cause of farmers when he comes forward with unrealistic demands. They are unrealistic in the sense that the hon member suggests that farming debt should merely be written off overnight and interest rates in general be reduced overnight. I wish to say to the House I think any right-minded farmer would hold it against the hon member for turning agricultural problems into a political plaything. I wish to say to the hon member that he is knowledgeable enough to politicize any other matter but I call upon him now to take note with the rest of us—as I believe he realizes in his heart—of the gravity of the farmers’ problems and to argue calmly and quietly about them.
We have no objection to criticism being directed at the policy of the Government if it is done in the way of the hon member for Barberton. That hon member expressed sharp criticism—to which there are certain replies—but that is part of sound debating on agriculture and it can mean something to this industry. I believe the hon member for Lichtenburg will later again have and use another opportunity to participate in this debate. I request him then to present what I regard as those irresponsible utterances in a better light if he does not wish to withdraw them. [Interjections.]
It is necessary to realize that the only, or even the greatest problem of many farmers, including those in the summer planting regions, is not the drought but financial abuses existing in agriculture. The burden of interest payable on the accumulated debt over the past years has become the largest cost item in the agricultural industry. If we think that in the past year, 1984, interest payments totalled the gigantic amount of R1 300 million, in comparison for instance with the payment of R1 020 million for fodder, less than R600 million for fuel and less than R600 million for fertilizer, we realize the enormous extent the interest burden has assumed in the agricultural industry. Compulsory interest payments are the chief cause serious cash flow problems. Nevertheless the solvency—the solvability position—or, otherwise expressed, the debt-to-asset ratio—although this has also deteriorated recently—is still relatively sound.
Although a reasonable percentage of farmers are at present not yet experiencing cash flow problems, we should take note that in the past year up to 61% of farmers could not cover current expenditure with current income from the relevant year. If this tendency were to persist, hon members will realize that the liquidity position would become practically uncontrollable within a relatively short time. The principal cause of the deteriorating liquidity problem should therefore certainly be sought in the cost item of interest payments which ran to R1 300 million.
To want to suggest in a time of high inflation, however—as embodied in one of the suggestions of the hon member for Lichtenburg—that interest rates should be forced down through State pressure across the board, in other words, that no real profits—interestwise—could be made on savings investments, would be to turn one evil into two. In the first place solutions to this problem should be sought within the agricultural industry itself. If we take into account that by the end of 1983 as much as R6 441,27 million had been invested by farmers themselves outside agriculture, we can form some idea of the enormous reserve which potentially exists and which could possibly be applied in part within agriculture.
My personal feeling is that if farmers could be enticed by means of favourable conditions to deposit farming profits in a reserve fund, held by the Land Bank, instead of outside agriculture, this fund could then be applied within the agricultural industry. An indication of the extent of such a reserve fund can be obtained if one looks at the enormous amount of R6 441 million in the hands of farmers being kept outside agriculture. The Land Bank would then be able to consolidate farming debts on a much larger scale and reduce the interest burden of farmers drastically.
The hon member for Ceres referred to the fact that the NP Agriculture group had seen fit to consult organized agriculture in this regard and to submit specific recommendations to the Margo Commission. It is the opinion of this group that serious consideration should now be given to the institution of such a reserve fund. Concerning payments to the fund, the suggestion is for amounts paid in to be deductible for income tax purposes in the year of payment. If there should be withdrawals from such a reserve fund, such withdrawals should in turn be taxable in the year of withdrawal.
My request to the hon the Minister is therefore that if these proposals be accepted by the Margo Commission and later possibly by the Government, it should strive to apply them as soon as possible. It has now become essential for the tax system, as it applies to agriculture, to be modified in such a way as to take the risk element in agriculture into account. A modified tax system ought to be the means of encouraging the building of liquid reserves which could be applied in subnormal years. At present the tax system is such, however, that one can justifiably say it is “bad business” to save. [Time expired.]
Mr Chairman, I listened very carefully to the hon member for Fauresmith and to his warning to me not to venture into the political arena.
It was a decent request.
Yes, it was decently put. I merely want to say to the hon member that I find it a little strange for a politician to say he does not wish to practise politics. It puts me in mind of a boxer who gets into the ring and tells his opponent he no longer wishes to box. I shall comply with the hon member’s request, however, and not talk politics, but I am going to accept with alacrity the second invitation directed at me—that of criticizing the Government. I shall put only facts—as requested by the hon member.
I wish to offer my wholehearted support for the hon member’s proposal that the Minister establish a reserve fund. I do not believe in present circumstances we shall actually be able to contribute to and use such a fund but I am firmly convinced that such a fund should be established because, when the CP is in power shortly, it will be possible to make profits again and that is the first fact I wish to state this afternoon. [Interjections.] It will then become possible again to make profits and the reserve fund should already be in existence for us to use.
The second fact I wish to propound is that it is true that the Government is withdrawing its support from farmers. In 1949, when the Government was still accustomed to assisting farmers and its sympathies lay with them, 8,3% of the Budget was voted for agriculture. This year it is just over 3% of which almost half is being spent on consumer subsidies. This shows that Government priorities have changed radically and that it is removing its support from agriculture.
I wish to state a third fact, namely that the hon member for Bezuidenhout was incorrect in saying this was not a consumer subsidy. Summer grain producers are subsidizing the consumer more than the government is doing. Last year the price received by the maize producer was considerably less than production costs; the producer experienced a shortfall and had to borrow. Prof Nel of UNISA found that in 1984 the current income of 61,3% of all farmers in South Africa was less than their current expenditure so farmers had to borrow in order to produce—they had to borrow to subsidize the consumer. The SA Agriculture Union contends that at the end of 1983 summer grain producers had only 7c available to them out of every rand they had to spend on production—they had to borrow the rest. That is why I say our summer grain producers are subsidizing the consumer to a greater extent than the Government is doing. A good Government would not permit its producers to be ruined to such an extent by having to subsidize the consumer in this way. It would have seen to it that the consumer also paid his share. Nampo says the income of 69,3% of summer grain producers—with the current average interest rate of 17%—is below their expenses. If crops are normal they cannot recover as prices are determined today—their income will be less than their expenditure. He said that if the interest rates were reduced to 8%, 45,7% of the farmers would be unable to recover. Under normal circumstances their farming operations would still go downhill; at an interest rate of 4%, 18,2% of farmers could not recover.
I therefore repeat my appeal that a differentiated interest rate be instituted for agriculture. If the hon member for Fauresmith says I advocated a general lowering of interest rates, he has the wrong end of the stick. I am not appealing for a general reduction in interest rates, but, regarding agriculture, these high interest rates cannot possibly counter inflation; on the contrary, they have only one result and that is to push inflation up further. That is why I repeat my plea for a differentiated interest rate in South Africa.
The SAAU has provided statistics which show clearly that if the interest rate were subsidized to the extent that the average interest rate were 4%, it would cost the State R655 million.
Let us now see where the Government’s supporting hand is and whether it is still extended towards farmers or not. I say it has been withdrawn from farmers which is why we shall not see it.
I wish to return to the hon member for Prieska’s speech in which he said production costs in the Western Transvaal were R100. I wish to point out that the South African public and the general consumer have a totally distorted image of the farmer in South Africa. A totally distorted image exists. They think farmers are the people being showered with money by the Government whereas farmers are subsidizing consumers. That hon member contributed enormously to perpetuating and consolidating that image of farmers in South Africa in making that statement. Having had time to reconsider and to check his facts he returned and repeated that statement—he repeated that statement. Whereas actual costs are R474, he came and said they were R124 after which he came with the dodge of saying he had been talking of input costs. When it was pointed out to him that input and production costs were precisely the same thing, he said he had been talking of cash input costs.
Go and read my Hansard.
I have read it very thoroughly. The fact is that hon member made a mistake—the farmer’s costs can surely not be cash only and they cannot be initial costs only. His total costs determine his financial position and the price is estimated on total production costs—they are what count. That hon member, however, had time to establish this but he repeated his incorrect statements.
Then the hon member Dr Odendaal came along and said the hon member had actually been speaking only of variable costs and in arguing the point we would come to understand each other on the concept of “variable costs” and “fixed costs”. The hon member Dr Odendaal said both were production costs and the hon member for Prieska had meant only variable costs. Now I wish to ask that hon member: During our few years of drought, farmers’ tractors surely wore out and they had to buy new ones. Surely they had to incur fixed costs and pay interest on the farms which they had bought—after all, this was not written off for them. Does that hon member now wish to say that during drought we should take only variable costs into account? I wish to tell the hon member that the fact that the Government has withdrawn its support from farmers is the responsibility of hon members like him who do not inform their Minister correctly.
The worst was the hon member for Schweizer-Reneke’s attempt to come to the aid of the hon member for Prieska. First he illustrated that the hon member had been wrong in saying that the farmers’ costs were R124. After that he acknowledged that a cooperative had found the costs to be R248—in other words, the hon member for Prieska was wrong, but the hon member for Schweizer-Reneke was also wrong. That does not represent the farmers’ total costs. He enumerated the list of costs but there was a large number of items missing. The hon member then went a step further and said that as representatives in this House we should now approach co-operatives and request directors to fight for the farmers in having input costs reduced.
Within the free-market mechanism.
Within the free-market mechanism. He sits here, here where decisions are taken. It is not they who sit here, but he. He says, however, that he does not wish to rise here where he has a seat and fight the farmers’ cause. He says he wants to approach directors of co-operatives; the directors should put their case.
Go and read the rest of that speech.
Now I wish to tell the farmers of Schweizer-Reneke that if they want to be sensible they should send some of the directors of the co-operatives here who will have the courage to speak up and not the hon member for Schweizer-Reneke.
Go and read the rest of that speech.
I have read it very thoroughly. [Time expired.]
Mr Chairman, it seems we are back with the original discussion on maize and maize inputs. As in the past, the topic has been changed to suit the hon member for Lichtenburg. The discussion was about the cash necessary to plant a new crop. That is the cash necessary to do so.
I spoke about the outlay for the new harvest. Go and read my speech in Hansard again.
No, I did read it. The hon member changed it very nicely to adapt to what I had said. That is not what he said originally, however. The farmer’s outlay for the planting of a new crop—if we can now have a proper agricultural debate—amounts to approximately R200. I said that naturally he must make provision for additional expenditure. Nevertheless, it compares quite differently with the calculated cost of R558 per hectare, which the hon member for Lichtenburg mentioned here.
Is that the true cost per hectare?
The hon member spoke about the true cost, which, according to him, amounts to R558 per hectare.
I want to add only one other figure, however. Certain cooperatives in the Transvaal and the Free State—I refer specifically to maize co-operatives—made production loans available to their members. These are cash loans to be used to plant the new harvest. In one case it was R371; in another it was R189.
Is that the only expense those farmers had?
No, it was cash they needed in order to plant the new harvest.
Come now, surely they need other things too!
But that was not what it was about.
Order! I cannot allow a dialogue across the floor of the House. The hon member for Prieska must continue to make his speech; he alone is speaking now.
That is what the conversation was about, Mr Chairman. It was about the cash needed for the planting of the new harvest. The hon member for Lichtenburg said, however, that the income from the new harvest is more than the cost of planting that harvest. Then the hon member said that the cash necessary to plant next year’s harvest is more than the income that will be derived from that harvest. But that is not true.
You have done the same thing for the third time now!
That is not true.
Order! I repeat, I will not allow a dialogue here. The hon member for Prieska must make his speech. He may only address the Chair.
Mr Chairman, in connection with this whole discussion, I refer the hon member for Lichtenburg once again to my speech in Hansard, in which I replied to this fully. The hon member for Lichtenburg is, however, still trying to find a loophole.
Now I want to address myself to the hon member for Barberton. I want to congratulate him on the fine way in which he set out the farmers’ problems. I am grateful for the fact that we can have a discussion on agriculture which concerns the true problems without trying to elevate tiny facets to political issues within agriculture. I am grateful that it could be done in this manner.
Today I want to confine myself mainly to problems concerning the meat industry. It is true that South Africa produces enough food for the future. This food that we produce, comes from mainly two sources. We produce mainly protein and energy fodder. As far as the protein fodder we produce is concerned, we are going to experience the problem in future that, to an increasing degree, animals will compete with man for the available protein. In 1990 we are going to come up against immense shortages of protein in this country. That will mean that we shall have to look to other sources of protein for human nutrition at that stage.
A large part of South Africa is not suitable for intensive agriculture, and in those areas the agricultural production is obtained mainly from the livestock industry with its respective branches. What is actually happening here, is that sunlight, bushes and grass are being marketed in the form of meat and protein. The extensive sectors, therefore, are some of our most important providers of protein for the future. Very interesting conditions have developed around the extensive livestock industry—socio-economic conditions. Communities, schools, towns and so forth have all been established, directly as a result of extensive agricultural conditions. Job opportunities were created for Whites, Coloureds and Blacks—for doctors, lawyers, teachers, tradesmen and so forth. Secondary industries followed as a result of this primary utilization of extensive agricultural conditions. In total we have therefore created socio-economic conditions in the rural areas in which prosperity can follow to a large degree if we have enough rain.
The human material there is good. I often make the statement—it is a daring statement—that the people who come from the dry areas in our country, and who work with animals, sometimes understand people much better than is the case with people who work with people.
The meat industry has certain problems, however, some of which were elucidated also by hon members of the opposition parties. The most important of these is the problem with the profit margin, which is shrinking slowly—to such a degree that the profit is no longer sufficient to provide for the normal financing. The main cause of this is that the price we receive for our product, is no longer quite enough to make up for the inputs we have to make, and still be capable of building up a reserve for the future. In addition, there is a marketing problem. The problem in connection with marketing is that there are two facets of marketing. Firstly there is the co-operative marketing facet, and secondly, marketing by the private sector. What happens is that, in connection with the marketing by the private sector, different strategies are at work. For example, there is a recruiting agency in the field; there is a wholesaler who buys; there is a cooling chamber that stores the meat; there is a distributing organization that distributes the meat; and in the end there is the butcher who sells it. Each of these instances has its own set of books, but in the end they are all still under the same roof. What happens, therefore, is that the agency, upon the recommendation of the wholesaler who buys, secures the meat. When the wholesaler’s cooling chamber is empty, he buys at high prices, and when the co-operative marketing facet wakes up, and gets its marketing off the ground, it overfeeds the market, and the wholesaler buys stock at lower prices. He then fills his cooling chamber, and in the end sells all the meat he bought at a low price to the butcher, as if he had bought it at the high price.
We shall therefore have to start at the core of the problem, and then we shall have to look—especially from the side of the department—at how one can ensure the orderly marketing of meat. This orderly marketing will have to take place more or less on the basis of what the wool farmers managed, namely marketing in an orderly way, arranging the supply and then finally getting a price for it which does not vary to such an extent, and which does not lend itself to the exploitation of the public, because in this respect the public on the one side, who have to pay the price offered to them by the meat industry, and the farmer on the other, who has to accept the price the meat industry is prepared to offer him, are in the same boat. The people in between work on a basis of cost plus, whereas the farmer must absorb the cost as inflation increases, and the consumer has to pay the price before him.
There is a further aspect that hampers the marketing of meat. If one takes note of the consumer resistance that is building up against meat, certain of the statements made in respect of meat today make me very uneasy. A connection is pointed out between animal products and heart disease, and that is detrimental to the meat industry. If one looks at figures in this connection, they indicate a very interesting story. Where meat and porridge was mans staple food for decades, it is being replaced increasingly by more refined products. Figures that I obtained from the statistics service of South Africa and from the World Health Organization, yield very interesting information. Since we are approximately twentieth on the list in connection with meat consumption, and approximately twenty-first—here I am speaking of White South Africans, who have a reasonably high meat consumption—on the list in connection with heart disease, it appears, if one takes note of statements in the Press and statements frequently made in today’s advertising world, that suspicion is constantly being cast on meat whereas refined products are being promoted. Take note that here it concerns refined products which are produced by industry from agricultural products, but are presented in such a way that indirectly they cast suspicion on the agricultural product from which they are primarily derived. [Time expired.]
Mr Chairman, I am pleased to have my turn after the hon member for Prieska. He made a very interesting contribution, and I agree with him that we should motivate the public to eat more red meat.
Firstly, I should like to refer to the hon member for Lichtenburg’s speech. He has the habit of dragging me in by the hair every now and then, but I want to tell him I think it unfair. When I spoke the previous time, I referred to a co-ordinated effort which had to be established amongst the co-operatives, the farmers themselves, marketing representatives and the Government in order to make production costs as low as possible for the farmer. I agree with the hon member that it is expensive to produce maize today. My idea was simply that the co-operatives should negotiate more for our farmers on the free market. I think, if he is honest, he will agree with me and not argue about the point any more. He should rather thank me, for I established a splendid fund in co-operation with the Western Transvaal Synod of the Dutch Reformed Church, not only for my constituency, but we went further, also to Lichtenburg, and I think he should be very grateful that the State President consented to humanitarian assistance being given to our people. We should be more grateful instead of levelling unnecessary criticism. [Interjections.] Does he not want it? I think Lichtenburg’s people must slaughter him if he says that.
The topic I want to discuss today, is the re-establishment of agriculture as well as the role the Government must play in it, the cooperatives and the farmers themselves. Before I come to that, I want to refer to the role played by Mr Jaap Wilkens, the former President of the SA Agricultural Union, in South African agriculture.
Mr Wilkens is also a Western Transvaler. He began on the lowest level and ended on the highest. While he was in office as President of the SAAU, important matters in which he played a large part, were accomplished. I think his greatest contribution was helping to create a situation of trust between organized agriculture and the Government. Our farmers no longer have the political voting power today that they had 30 years ago, and as a result it is important to try to achieve what one wants for agriculture by way of responsible negotiations. We and organized agriculture will remember him as one of the great sons of agriculture in South Africa. [Interjections.]
I also want to congratulate the newly chosen President, Mr Kobus Jooste, and the new Vice-President, Mr Nico Kotzé. I know that they have the competence and ability at their disposal to put the case of the agriculturist in a responsible way. I should like to wish them the best of luck.
We have experienced difficult years in agriculture, especially during the past few years. Our farmers have been hurt, but we have not been broken. We shall rise again. It will be very difficult, however. If one looks at a report released by the SAAU recently, one finds the following in it: The financial position of farmers dominant in the production of summer crops was particularly critical at the end of 1984. At the end of 1983 the financial position of 52,4% of them was critical, and this figure increased to 64,9% at the end of 1984. It is alarming that farmers in the 26 to 35 age group are those whose position is the weakest. At the end of 1983 the financial position of 37,7% of this group was critical, but at the end of 1984 it had increased to 50,4%.
Although the solvency position of farmers was generally healthy at the end of 1983, the liquidity position of farmers at present is alarming. At the end of 1983, farmers in all the provincial unions, except in the Eastern Cape, experienced liquidity problems. The branches of farming with the worst liquidity problems were the summer crops. At the end of 1983 some producers had only seven cents available for every rand of their business obligations.
One can probably continue to quote figures from this report, but I think I am making the point by saying that financially our farmers are not doing well. That brings me to my point.
With this fact in mind we shall have to look ahead—I believe that, as in the past, the Government will play a prominent role here too—to assist the farmer in this difficult time. The Government also affirmed officially, in the White Paper tabled by the hon the Minister of Agricultural Economics and of Water Affairs last year, that agriculture is one of South Africa’s key industries. The Government admitted, too, that as such it plays a very important role in the economy of the country and makes a contribution to the deconcentration of economic activities.
That is why it is imperative for the country for the greatest measure of stability to reign in agriculture. I believe that the Government will again, as in the past, make assistance available in order to cushion the effect of the drought in the short term and to help us to assist as many farmers as possible in surviving this difficult period. I am also convinced that in the long term the Government will bring about certain structural changes which will enable agriculture to assist itself. My friend the hon member for Fauresmith referred to this in detail; therefore I shall not discuss it any further.
Our co-operatives have an important role to play in the re-establishment of agriculture. Co-operatives will have to ask themselves whether they still truly fulfil the role for which they were originally established. Have they not already become too clumsy and too large? We shall have to answer these questions honestly and make certain improvements and innovations if necessary. In this time our co-operatives will also have to strive towards negotiating the lowest input prices possible within the free market for our farmers. Our farmers, too, will have to show greater loyalty and support to the co-operatives so that the co-operatives can strengthen their power of negotiation.
The co-operatives should also, in co-operation with the Land Bank, investigate the possibilities of adapting the system, according to which production credit is made available to the livestock industry, in such a way that farmers can make use of it more easily.
In this connection consideration should be given, inter alia, to the lengthening of the term of cash credit loans for the establishment of pasturage. In my area in particular, where in some cases we want to switch over from maize cultivation to cattle farming, this is an important matter.
The co-operatives have not only developed as an institution that supplies farming requirements to our farmers, but are also an important financing institution. In 1983 cooperatives supplied 23,5% of all financing in agriculture. In addition I want to ask whether we should not allow co-operatives to build up funds tax free so that they can afford farmers a greater degree of assistance. If we accept the principle of the establishment of tax-free reserves for the farmer as an individual, I can see no reason why we should not make this concession to co-operatives as well.
Our co-operatives have also done a lot in the past to give technical and agricultural advice to the farmers. In addition they have moved in the sphere of financial guidance. I want to request today that we extend this aspect of financial guidance. Private financial institutions will also have to operate in coordination with co-operatives in this respect.
In the process of the re-establishment of agriculture the farmers themselves will probably play the most important role. He is the one who will have to determine in the end how he is going to use the assistance and support given by the institutions referred to.
I believe that the drought has not only hit our people hard, but has also made them hard. During this time our people have been hit by certain truths which I believe will have an everlasting influence on future planning. Many of our people have once again been struck by the truth that one should not undertake long-term projects with short term money. Many people realize today after the drought that excessive mechanization and over-capitalization can be catastrophic.
I personally, as well as many of our farmers, will have to take note of our cash flow and repayment possibilities when additional future planning is done. In addition we shall have to realize that with the present expensive inputs we can no longer produce agricultural crops on marginal ground. We shall have to proceed increasingly on the principle that we must farm with what our soil and our money allow us.
I believe that if each of the three partners, namely the Government, the co-operative and the farmer himself, plays its role open-mindedly in the re-establishment of agriculture, agriculture can hold its own and can even, if need be, increase in importance. I want to tell the farmers of South Africa today: Do not look back, look ahead, for a farmer who looks back, ploughs crookedly. We shall get back on our feet again and all will be well again. After everything perhaps it was necessary to experience the difficult years, for I believe it once again stressed and intensified our sense of values and our dependence upon our Creator.
Mr Chairman, I take pleasure in following the speeches of the hon members for Schweizer-Reneke and Prieska. The hon member for Prieska pointed out that it is often the farmer who works with animals who gets along better with people than the person who works with people. I hope that this prove to be the case today as well. Some of my friends in this House are aware that I am a pig farmer, and that is perhaps a good indication of who I will get along with in this House.
Order! I hope that the hon member’s remark does not contain any insinuation.
By no means, Sir; on the contrary.
It is clear to all of us today that the patient, agriculture, is not at all healthy. It has been pointed out that the gross revenue for 1983 declined by about 5% in companion with 1982. It has also been pointed out that the net revenue over the same period showed a decline of 48% and that although this decline may to a considerable extent be attributed to drought, it is predominantly due to rising costs. This has been expenditure which has to a large extent been beyond the farmers’ control. As far as field husbandry is concerned, this has been a catastrophic period. At the same level—one can therefore say that the inputs and the investments made have remained more or less constant—the maize harvest has declined by 4,3 million tons in comparison with the previous year, and the wheat harvest by 0,6 million tons. Over the same period the sugar harvest was 31% lighter. I believe—and the PFP will agree with me—that these reductions cannot be ascribed to the deficiencies of the farmers or their workers. We on this side of the House also accept without hesitation that it is in the interests of the country to hasten to the assistance of the agricultural community in these difficult times. In contrast to the hon the Minister of Finance, who is unfortunately not present today, the PFP does not regard this aid as a donation to the White farmers, nor does the PFP try to play the businessmen off against the farmer, as has in fact happened. Those of us who were in this House last Monday will recall that in referring to this aid the hon the Minister of Finance said:
He did not make a mistake, because he went on to repeat it:
He went on to indicate where the amount was obtained. His conclusion was:
Since I have been in Parliament—and it is true that that has not been so very long—I have not once heard an hon Minister playing off one community that has been hard hit by weather conditions, against another as the hon Minister of Finance did by intimating that money they are not entitled to is being given to the few thousand White farmers. We believe that subsidies and loans to farmers are aimed at ensuring that food can be provided at reasonable prices and that employment opportunities are not lost. Those, I should say, are the reasons why funds and loans and subsidies must be provided to the farming community. It has been statistically proved that about 1,2 million workers made a permanent or semi-permanent living in the agricultural sector. If we were to permit those farms to be destroyed, then that would also mean the end of those job opportunities. We must bear in mind that 1,2 million workers means that approximately 6 million South African citizens are dependent on the agricultural industry. It is the interests of those people as well as of the producers that the Government or the State should have assisted those people.
I should say that these loans and subsidies mean that a massive effort has been made by the taxpayer of South Africa to attempt to ensure stability and peace among the agricultural workers of South Africa. From that point of view and for those reasons we thank the Government for what it has done. However, I want to place it on record that we do not regard this as a donation.
I believe it would be wrong to create the impression that despite the drought there are not also structural problems in the industry. To ensure that the industry is put on its feet we shall have to take certain steps. The Government will have to ensure that nothing is done to force up input costs still further in future. I am now addressing the Ministers specifically. If we look at fuel prices over the past number of years we see that since 1975 the fuel price has been increased by 322%. I ask the hon the Minister: What has the Government done to stabilize the fuel price? Personally I do not know of a single international oil company that has not made considerable profits in this period. Over the same period the price of tractors has increased by no less than 226%, whereas everyone in this House is aware that tractors can be imported at approximately half the price the South African farmer has to pay today. When ADE was established, tractor prices skyrocketed. If ADE—and this may indeed be a standpoint adopted by the Minister, although I do not agree with him—is strategically necessary, then I say that the farmers should not be the only ones to pay for it. Everyone in South Africa must pay for that issue of strategic importance. Fertilizer is another product the price of which has risen excessively. It is true that since January 1984 fertilizer has been removed from control, but the provision of ammonia as a by-product is still in the hands of two large companies. I believe that the tariff walls should be abolished so that this product, which is an important constituent of fertilizer, can be provided at a world price and can find its way to the agricultural sector itself. This would contribute considerably towards reducing the price of fertilizer.
Mr Chairman, the hon member for Wynberg touched upon a very important aspect, and that is that the aid to farmers should not be seen out of context. There are also other hon members who referred to this. I think the hon member for Mooi River referred to it. If I am not mistaken, he said he deplored the accusation that farmers are spoon-fed. From time to time it becomes necessary for us to explain matters to the non-agricultural sector and defend the assistance given to agriculture by the Government, because agriculture occupies an exceptionally important place in the economy as a whole. Agriculture occupies that position, however, not in terms of volume, because if one were to look at the statistics, one would probably find that agriculture’s contribution to the gross domestic product was, at the moment, in the region of 5% to 6%. It is dangerous to rely solely on statistical data and on the strength of that determine the importance of agriculture in the economy. If one thinks of agriculture generally, one sees that it is closely linked to an aim shared by every government in the world—regardless of what government is in power in South Africa, that will in any event have to be its aim—and that is to feed the country’s population as well as it possibly can and to be as independent as possible as far as the nutritional needs of the country are concerned. One should also look at the tremendous role played by agriculture as an industry in the provision of job opportunities. The hon member for Wynberg referred to that a short while ago. We shall have to look at the importance of agriculture as a decentralization instrument. These are all factors that have to be borne in mind when the Government announces certain agricultural aid measures.
I find that one can defend this, provided the demands made by the agricultural sector are at least realistic too. So bearing the image of agriculture in mind, it is a pity when speakers sometimes, from public platforms, make unrealistic demands of the Government. From the speaker who opened the debate, the hon member for Albany, onwards I gained the impression throughout that no one here had unrealistic expectations of the Government. The truth of the matter is that the Government’s ability to assist agriculture is limited, as is its ability to assist any other sector in the economy. With regard to its financing, the Government moves within certain parameters and must remain within those parameters for fear of distorting the economy completely.
One should also be very careful of generalizations, and this is equally valid when one is speaking about agriculture. Simply to say, generally speaking, that agriculture is in a state of chaos or that there is a crisis in agriculture, could create the wrong impression. As far as the economic situation of the farmer is concerned, surveys conducted by the SA Agricultural Union indicate that the solvency aspect is not really all that bad. One could, in fact, ask what influences that solvency. One then comes across an item such as fixed assets and asks oneself whether fixed assets are overvalued or undervalued. Perhaps that is one of the structural problems the hon member for Wynberg referred to as a problem we are struggling with. In my opinion—it is only my opinion; other people may have other opinions about that—land prices in South Africa are too high.
If one looks at the farmers’ liquidity position, one sees quite a different picture. One is then forced to admit that on average the liquidity position does not look all that good. Now averages are also dangerous. Hon members surely know the story: If one were to sit with one’s head in the fridge and one’s feet in the oven, the average temperature ought to be just right. One must be very careful not to generalize, nor to rely too heavily on averages. Once we have all told one another that things are not going all that well in agriculture, the fact still remains—and certain hon members referred to this—that within certain industries in which things are not going too well, there are still individual farmers that are doing well. Nobody can argue with me about that. When we say that things are not going very well for the farmers, there are still certain industries within the overall agricultural sector where things are, in fact, going well. We must therefore be very careful of generalizations.
I think we have all reached consensus about the fact that the problems we are experiencing in agriculture today are chiefly the following: Firstly the drought; secondly the extraordinary burden of debt; thirdly the extremely high exchange rate and fourthly the general rate of inflation. Those are the problems we are struggling with. There are indeed certain remedial measures we can resort to for solving these problems. We are quick to refer to the fact that the USA and England have solved their inflation problems in a certain way, and the question that is then asked is why South Africa cannot also solve its inflation problems in that way. The South African economy, however, is a relatively small one, and the smaller the economy, the greater and deeper the effect, on that economy, of certain steps to curb or give impetus to the economy. One could also say that we are also a combination of First-World and Third-World economies requiring, therefore, extremely unique steps in our particular circumstances. Once we have told one another what our problems are, we should probably tell one another what it is we have to do to solve those problems; what we have to do in agriculture in the future to allow proper utilization of those positive factors which will again come to the fore.
In that connection I should like to make a few suggestions. Firstly we must protect our most important production factor, and that is land. One is concerned about the fact that a person who is subject to financial pressures might throw sound farming practices overboard. I think the hon member for Mooi River referred to that. We must be very careful that we do not now resort to over-cropping. We must not be permitted to exhaust our land, because if we do not look after this most important of production factors, ie our land, we shall not be in a position to utilize it when the factors become more favourable. This applies equally to our grazing and the fertility of our land.
There is also a second step we should take during these times. By way of very good planning we must make the best possible use of what we now have. The question arises: Do we, in these particular circumstances, make optimum use of our land, our implements, our labour and the available capital? Unfortunately I do not have the time to elaborate on that, but I think it is obvious that because we are experiencing these difficult times at present and are being hit hard by costs, we must make the best possible use of what we have.
I am a practical farmer and I know how far one can get with an old tractor. If an old tractor is properly cared for and maintained, it does as good a job as a new one. Our farmers are fond of saying “’n boer maak ’n plan” and talking about their ingenuity. One does, in fact, encounter the most remarkable innovations to implements and to tractors, innovations which the farmers themselves design, at little cost, to avoid large-scale expenditure.
There is, however, a further means at our disposal which we must make the best possible use of. We have a Marketing Act and a Co-operatives Act. These instruments are of such importance to agriculture that one cannot really ascertain their value. Over the years these instruments may, however, have developed certain deficiencies. There was a time when we had no control in South Africa. At the time the situation in agriculture was chaotic. No one can have any doubts about that. Even the hon member for Bezuidenhout would acknowledge that prior to the Marketing Act conditions were chaotic, but then we introduced control measures.
I am prepared to acknowledge that the possibility of too much control does exist. We should not, however, discard the instrument. We should not try to break away from the control introduced by the Marketing Act. We should rather analyse the Marketing Act and determine where the fault lies. I always extend an open invitation to farmers. I put it to them that there is no marketing scheme—now I am not talking about a control scheme—that cannot be amended. If producers therefore feel that a scheme has served its purpose and that amendments ought to be introduced, in fact even that a new scheme should be introduced, they are free to tell the Minister: This old scheme no longer works. I am the last to say we should not change schemes. If we want to change them, however, we must just ensure that we do effect an improvement on the existing scheme.
Thirdly, in these difficult times we must limit capital expenditure. This is not the proper time for extensions or for erecting new buildings. This also applies to our cooperatives. The co-operatives are, after all, an extension of the farmers themselves, and here and there they are also finding themselves in difficulties. As fair as co-operatives are concerned, we must also limit our capital expenditure in a period of such high interest rates.
I am now going to say something that I have, on occasion, said from public platforms when talking to our farmers. It normally elicits a frown from them, and perhaps there will also be hon members here today who will frown at me when I say it. In these difficult times it is my contention that we can curtail operating capital. It can be done. I recently visited the hon member for Schweizer-Reneke’s area in the Western Transvaal. We went to have a look at tests being conducted there by a co-operative. That day it was very clearly demonstrated that by adjusting seed density, fertilizer applications and methods of cultivation, a tremendous saving in operating costs can be brought about. One can save on expensive items such as fertilizer and fuel, and that is why it is futile, in my opinion, to argue about what the real costs of agricultural inputs are. They vary so tremendously from person to person. Within the same industry, in the same region, one will still find people making a success of things, in spite of these difficult conditions.
A fourth step we should take involves marketing, marketing and still more marketing. Last year certain industries, which encountered tremendous marketing pressure overseas, proved that if we acted correctly and displayed the necessary finesse, we could still operate on a competitive basis overseas. One should perhaps not mention any names, but in spite of the wine flooding the European market, last year the wine industry did some successful marketing. In spite of international surpluses, the meat board has recently done some successful marketing. We must therefore become marketing-orientated, and in this regard I also want to refer to the hon member for Bezuidenhout who also emphasized this. We must become more marketing-orientated. On 1 January next year two further countries, Portugal and Spain, will be entering Euromart. We shall then have even more problems on European markets. I believe, however, that if we focus on quality and innovation, doing what the Egg Board did by mixing eggs with other elements to bring a new product onto the market, we shall still be able to compete on overseas markets.
Lastly we must make agriculture as free as possible. I have already said that I thought that in some instances we had overreacted as far as our control was concerned. Today I want to reiterate that if there are any unnecessary, irritating control measures which do not benefit either the producer or the consumer, we should get rid of them. That is why our hon Minister has already given the Marketing Council instructions to take an in-depth look at the various marketing schemes of the various boards. If necessary, we must amend those schemes.
I am afraid that time has caught up with me, but I do just want to make a last point. Some of our export industries have, in the past year, done very well. The other day I quickly had the amounts quantified, and it seems to me we shall be earning approximately R450 million in additional revenue from our exports. I now want to appeal to those industries to place these, what, one might call “windfall profits”, in reserve. I think it has been proved in the past that those industries with strong stabilization funds, such as the wool industry and the fruit industry, can deal with market fluctuations. I therefore appeal to those industries that have done very well this year to place a considerable portion of those profits in reserve.
Mr Chairman, I should very much like to convey my sincere congratulations to the hon the Deputy Minister of Agricultural Economics on his customary solid contribution here today. Then, too, I should very much like to associate myself with him by speaking about one of the agricultural industries under control which, during the past few years, has in fact fared very well in contrast with some of the others, viz the wheat industry. It is interesting, in the light of the polemic between the free-market mechanism on the one hand and control on the other, that it was exactly 50 years ago today that control was imposed on the wheat industry. The hon the Deputy Minister has just referred to the chaotic conditions that prevailed before control was in fact imposed. If there is one very good example of where chaos really prevailed it is the wheat industry. This was just after the depression in 1934-35; there happened to have been a record harvest. The farmers were simply unable to get rid of their harvest. They had no storage facilities. They were in the hands of agents, and in those years things went very badly with the farmers, generally speaking. This gave rise to the first wheat regulation scheme—which was later replaced by the winter grain scheme in terms of the Marketing Act of 1937—in terms of which the Wheat Board, as we know it today, came into being.
For the rest—this also relates to what the hon the Deputy Minister said—at that stage wheat farmers were in fact hesitant to produce wheat because they simply did not have an established market for their product. Today, after 50 years, the wheat industry is in my opinion one of the best examples of the one-channel fixed-price scheme. In practice this means that the Wheat Board is the only buyer and seller of wheat in South Africa, and that it determines the producer price as well as the sale price of wheat and of wheat products, subject to approval by the hon the Minister of Agricultural Economics. I wish to state clearly that I know of few industries in which there is such a good understanding, and such sound co-operation, between the wheat industry and the hon the Minister together with his Deputy Minister.
On the other hand the bread price is a matter of Government policy and is determined by the Cabinet itself. The same applies to matters such as subsidies. Now, criticism is often expressed—not so much in this House, but elsewhere—as to the cost of control; including the cost of control in the wheat industry. I took a look at the statistics. As far as the value of the cost of production of a loaf is concerned, the real cost of control with regard to that bread is 0,3%. The total cost of control in this industry amounts to R57 million. The total turnover of this industry is R1,3 billion. That is to say, out of a total turnover it costs 0,44%. For the rest one must always bear in mind—and I believe it is as well to place this on record—that the total cost of control in this industry is in fact borne by the producer himself by way of the levies imposed on him. Within the industry there are constant efforts to rationalize, and to outsiders this rationalization may often given the impression that monopolistic conditions exist within the industry. However the Competition Board has investigated this on more than one occasion and they are keeping a constant check on the position. I believe that they are satisfied that rationalization under control is justified, as long as it is indeed in the interests of the consumer. What better evidence that it is working well could be required than that we have the cheapest and most reasonable bread price in the world and that the content of the wheat in the product eventually bought by the consumer is also the highest in the world, viz virtually 40%. I believe that this is very clear evidence that everything is in order as regards control in this industry.
Over the past year the wheat industry has had a very good harvest and I believe that their prospects for the future, too, are favourable. I believe that the industry is showing considerable realism in that they are abandoning the principle of cost plus and realizing that they must also take the general economic conditions into account as well as the price of wheat abroad, the price of its importation and the possibility of substituted and so on.
I should also like to point out that over the past year the Wheat Board has made R40 million available to the State out of its reserve fund to help pay the bread price subsidy. In fact this was a donation to the State by the industry as a whole to enable the consumer to obtain the cheapest possible product.
Furthermore I should like to mention four aspects which in my opinion are very important and which I should very much like to bring to the attention of the hon the Minister as well. The first is—and I have already referred to this briefly—that the principle of cost plus both in the wheat industry and in all the other agricultural industries, and elsewhere where a price is determined, ought no longer to be regarded as a sacred cow. We have no choice. The problem is that in the past the principle of cost plus had the effect that it built inflation into prices, as it were. Moreover, it perpetuated inflation. We must take that into account, but we can certainly no longer apply it in an absolute sense.
In the second instance I have a few things to say about the bread price. I am referring now to the standard bread price—that of white and brown bread. In my opinion this price will have to be adjusted on a more regular basis in future, because there are limits to subsidization of the bread price by the State. When the wheat price was increased by 8,7% in October last year and certain adjustments to the middleman’s costs were effected, the bread price was increased by only one cent owing to this additional subsidy of R40 million. However, I believe that at present the bread price is artificially low. I believe that considerable adjustments to this price will have to be effected this year. In the Budget—the hon member for Lichtenburg referred to this—provision was made this year for a bread price subsidy of R200 million. At the present rate, however, that subsidy is going to be finished before the end of the year. Therefore adjustments to the price of bread will have to be effected in good time. I ask whether the price of bread could not perhaps be adjusted on 1 May—in accordance with the maize price—by exactly the same percentage.
The third aspect which in my opinion ought to be considered is the possible increase in the quality of standard bread. Not that there is much wrong with the quality of the bread at the moment, but if we increase the bread price then I believe that we can improve its quality as well. We can do this by cutting the extraction of meal by approximately 4%. The increase in cost that this will entail could in turn be neutralized by reducing the mass of a standard loaf from 900 grams to 850 grams.
One final aspect I want to bring to the attention of the hon the Minister is the following. I believe we must give serious attention to a more effective utilization of the subsidy of R200 million. I pointed out in the second reading debate that I gravely doubted whether that approximately 15% paid as a subsidy on every brown loaf was in fact essential to everyone in the country. A tremendous amount of bread is wasted, too. Could some other method not be devised whereby those who really need the subsidy may be subsidized?
I believe that the functions performed by the Wheat Board have stood the test of time. It has established an orderly winter grain industry and also ensures that bread can be made available to consumers countrywide on a daily basis and at reasonable prices. Control is not in conflict with the free-market mechanism, because both try to achieve the best possible price for the producer, and both also seek to ensure the fairest price for the consumer.
Mr Chairman, the hon member for Paarl made a very interesting speech about the wheat industry. I shall not follow up on what he said; there are certain aspects with which we agree and certain proposals he made which I regard as sound and which the hon the Minister would do well to consider.
In the previous debate on agriculture the hon the Minister tabled the Government’s White Paper on agricultural policy. This document set certain goals—11 altogether. One realizes that this programme of theirs must be carried out over a period of time. Therefore one cannot achieve all these goals immediately. However, one has to ask: What has been done thus far? The most important goal that was set concerned the present poor—I would even call it critical—financial position in agriculture. The goal as formulated in the White Paper is, inter alia:
The question is: What has been done in pursuit of this goal in these financially critical times for agriculture, particularly in the summer rainfall regions? One concludes that little has been done; in any event, far too little to retain the maximum number of financially sound farmers. What is the problem to be considered? Agriculture is sick, and consideration will have to be given to the various problems that have made it so.
In 1979 the first report of the Jacobs Committee found that the financial position of the farmers had gradually weakened since 1975. In 1983, 4 years later, in its investigation of the economic bottlenecks in agriculture the Jacobs Committee found as follows:
This committee went on to find:
It is clearly evident from some of the investigations that inflation is one of the biggest problems. Another major problem is the cost-price pincer grip in which the farmer finds himself—at the same time, of course as the excessively high interest rates that have to be paid. What has the Government done to alleviate these problems in agriculture? Steps have been taken as far as the economy is concerned to counter inflation—including cost increases. If we analyse this situation carefully what has in fact happened? Interest rates have reached record levels. The object was to stop inflation in this way. What has been done, however? The farmer relies on production credit and his costs have now been increased owing to the tremendous amount he has to pay in interest. Nevertheless we note that it is still being maintained that this is being done to combat cost increases. However, owing to the high interest rates the farmers costs are being boosted sky-high. This also applies to the input suppliers in agriculture. It is no wonder that under such a system farmers are facing serious financial problems.
Let us look at the findings of the scientific report on organized agriculture of the South African Agricultural Union in its own financial survey.
It is so tragic that, owing to a lack of funds the hon the Minister’s Department does not have the necessary work force to give the hon the Minister these statistics itself. The farmers have to provide them themselves; not because the hon the Minister and his department are not capable of doing so, but because they do not have the necessary work force. Their department is being neglected, and attention will have to be given to the situation.
It is found in the report that in 1983 approximately 15 200 farmers—ie 22,4% of all the farmers—were experiencing severe financial problems. On the basis of an expected normal year for 1984 it was found that the farmers facing such problems had increased to 22,700, or 33,5% of all farmers. Note that these figures relate to farmers throughout the country and not only those receiving drought aid. The factual situation is that the farmers cannot pay for their expenditure out of their income, because the interest burden is the biggest problem.
The question arises as to whether the Government is going to permit these farmers all to disappear, with the result that the rural areas will become blacker, or is something going to be done? When we look at the budget which has now been tabled, it is quite clear to us that hopelessly too little is being made available for this department. In the agriculture budget that is now being discussed, the total amount budgeted is R576,95 million, but of this the greater part, viz R497 million—reference has already been made to this this afternoon—goes on food subsidies to the consumer.
How is agriculture going to be helped to help itself? If we look at the agriculture Vote as far as own affairs are concerned we find that the total amount provided is R421,6 million, but of this only R252,8 million is available to the farmers in the form of financial assistance. It is available to the farmers who, last year, had to pay interest of R1 300 billion and will have to pay a great deal more than that this year. That is why I say that these amounts are inadequate.
Since cost increases are proving the downfall of farmers, the question arises as to what is being done to increase the profitability of agriculture and at the same time to reduce costs. Taking everything into account, it does appear if the government is doing nothing about this. There is money for many things, but for the farmer, the provider of food, there is not enough assistance. I think the time has come for it to be realized that at this moment the provision of food to Africa is perhaps more important than the provision of arms.
Mr Chairman, I should like to take a somewhat different tack, but I do want to say in reaction to the hon member for De Aar that it is true that he has pointed out a whole number of faults that do exist and that one must concede and admit. Perhaps the hon member began a little strongly, but what I should have liked to have seen from him was that, once he had expressed his criticism which in his opinion was well founded—I, too, believe that much of it is well founded—he should have said something more positive. We are experiencing a time of criticism at present. Everyone and everything is criticized, and everyone joins in cheerfully, but unfortunately most of this criticism is destructive. It is probably understandable if one takes note of the state of the economy and how all of us feel about it. This spirit of—I want to describe it in this way—thoughtlessly disparaging everything, leads to people’s being stirred up so that half-truths and even lies abound.
Since agriculture is always hit first in a downward phase of the economy, people easily seek scapegoats. During this debate we have heard of a few. One that I want to single out as a particular scapegoat nowadays is the SA Agricultural Union as established in our agricultural organizations.
It is a phenomenon that worries many of us who have been involved in organized agriculture for a number of years. One can say, with great hesitation, that what one hears the public saying sometimes has political undertones. Fortunately this has never been the case in this House and least of all with the SA Agricultural Union. I should like to put it clearly that if it were ever to happen that even a tiny part of this statement about politics being brought in were to become true, we would be digging the grave of not only the SA Agricultural Union, but of agriculture in South Africa. With this warning, I should like to leave the matter at that.
The spirit of discontent is even beginning to manifest itself in processions and protest meetings. A protest meeting is everyone’s right, and I believe it can be very fruitful. Having meetings is everyone’s right, on condition—I want to add—that they are controlled. I personally believe, however, that processions are unworthy of our farmers. I believe the reaction of the President of the SA Agricultural Union to this was good and right.
Let us tell one another that those Natal farmers are feeling worried and frustrated with good reason. It is true and they have the fullest right and reason to feel that way. Indeed, we all feel that way, especially at times. Therefore, a meeting of this kind can be very fruitful. A procession is not necessary, in any case, to put the spotlight on the problems of South African agriculture. The only thing this procession really illustrated to the public of South Africa, was the luxury we as farmers indulge ourselves in with the vast number of different makes of tractors.
When a meeting such as this one then expresses dissatisfaction with the SA Agricultural Union, I want to say immediately that one can agree with them, for nothing is perfect. It is our duty, however, to improve it from inside and not to break down everything from outside as a demolisher does.
A second source of criticism is the specialist organizations which are taking a beating. There are people who quite unthinkingly and naively want to play the two off against one another. On looking back, it is clear that the SA Agricultural Union and the specialist organizations together have developed well. It is also true that the modern farmer requires an organization for his particular commodity. It is fit and proper. The farmer who does not want to accept that there are common areas for an umbrella organization, but believes that everything can be done by dozens of separate bodies, has never considered this properly. The farmer who believes that his own specialist organization should deal with everything, and that as a result all other specialist organizations should deal with their affairs separately too, is simply naive. In any case, it is totally unacceptable to any government for 30 or 40 different organizations to consult a Minister or an official separately about the same problem.
There is another fine of thought which, seen superficially, has merit. It is argued that as the co-operative movement is already so strong, it should be extended further to take over the functions of the Agricultural Union. On closer investigation it becomes clear that it will not and cannot work. There are simply too many spheres in South African agriculture in which the co-operatives are not able to operate. Nor does this argument hold water if one remembers how interlaced the SA Agricultural Union and its business arm, the co-operatives, are. After all, the co-operative movement forms an integral part of the umbrella framework of the SA Agricultural Union.
With the better financing of the agricultural organizations these days, it is so that for the first time in history they are providing a good service to the co-operatives. The necessity, and indeed indispensability, of a strong umbrella agricultural organization was confirmed by no less a person than the State President himself in his opening address during the eightieth annual congress of the SA Agricultural Union last year, and I should like to quote him as follows:
That summarizes and confirms exactly what reasonable, right-minded people are asking for. In the process it remains the right of every farmer to have his opinion, for opinions shape opinions and ideas stimulate. Let each of us remember that. Soap-box orators are not honoured by anyone, and that is why we can associate ourselves with the State President when he continues to say:
These men have come a long way, from the time of the late Oom Giepie Rossouw, to that of men such as De la Harpe de Villiers, Albert Basson and Jaap Wilkens, to whom the hon member for Schweizer-Reneke referred, right up to the time of Kobus Jooste and his men who are in control. These are people who, in my honest opinion, are worthy of honour. There are many other names I can mention, but what I want to stress, is that there has never been an agitator amongst them. All of them have sacrificed a great deal through the years for agriculture, for our country and its people. They changed things when it was meaningful to change. They extended and built up, even if sometimes it was not enough, for after all, no one is perfect. Let us then, when we criticize, do so constructively. Let us change, but do not let us change only for the sake of change. Let us be builders and not demolishes. Let us honour those who deserve honour.
Mr Chairman, on the one hand it is a privilege to follow upon the hon member for Wellington, but on the other hand it makes one a bit anxious that one will not be able to maintain the same standard.
I should like to address the hon member for Barberton, who said things today that I agree with almost without exception. He made a very balanced contribution about the real problems that we experience in agriculture. He referred at the beginning of his speech, however, to our election pamphlet in which it was stated that the Government had not withdrawn its hand from the farmers. The question now is simply who, in the first place, had said that the Government had withdrawn its hand from the farmers. That is how simple it i§. Who has actually dragged politics into the debate? I appreciate the fact that the hon member for Barberton is smiling slightly, and shall leave it at that.
I should like to come to the hon member for Lichtenburg. In agricultural debates one often deals with the interpretation of agricultural statistics, for the one speaker says this and the other that.
What do you say?
I shall tell the hon member what I say in a minute. I should like to know from the hon member for Lichtenburg what his production target for maize is. He is a good farmer, after all, a learned man, a scientist, who sets certain targets for his farming. Apparently the hon member does not want to tell me.
But the department told you.
It is very clear to me that I am not going to get a production target for his maize harvest from the hon member for Lichtenburg.
I say the department is correct.
Very well, then we shall proceed to what the department says in connection with figures, and the hon member must correct me if perhaps he knows better. During the past ten years the average maize production in the White areas of South Africa was 2,084 ton per hectare. That was during the past ten years. In other words, we took the good harvests and the poor harvests into account. That was the average maize yield in South Africa during the past ten years.
If I took R62 last year—and at my co-operative the same prices apply this year—and bought fertilizer, I could have bought 125 kg 3:2:1 (25%) + 0,5% Zn and 160 kg CAN—that is calcium ammonium nitrate (28%). If I had bought that fertilizer, and these are the figures that the hon member for Prieska …
You cannot buy it at that price.
Let me tell the hon member for Lichtenburg this: I am prepared to wager my salary for this year at Parliament that I am correct, because I telephoned my co-operative to clear these figures with them. I want to go further and tell hon members that I asked the co-operative to calculate what yield I would get from this application of fertilizer …
You must make that co-operative manager MP for Schweizer-Reneke.
Mr Chairman, I do not associate myself with haters! They must hate on their own.
He reminds me of a prolonged drought!
Mr Chairman, I am honestly trying not to involve politics in this discussion, but if they push me towards politics, I shall turn to it if need be. [Interjections.]
Who is squeezing you?
Fortunately not the hon member for Germiston District! [Interjections.]
Mr Chairman, I then telephoned my co-operative and asked them, according to standard practice, to calculate for me the size of the harvest I would be able to realize with this quantity of fertilizer. They then replied—hon members can write this down—that according to the directives for crop production for 1984-85, compiled by area committee no 5 of the Eastern Free State area no 2, in co-operation with our local co-operative and published by the Department of Agricultural Economics, the target for that R62 is not 2,084 tons per hectare. Do hon members know how much it is? It is 3,5 tons per hectare. With the money the hon member for Lichtenburg needs for fertilizer—I based my calculations on his figures and worked on R138 per hectare—I could use 300 kg CAN and 300 kg 3:2:1 on my land. That would have made a surprising target of 6 tons per hectare possible. The House must decide today who made a mistake. Was it the hon member for Prieska? The R62 is his figure. Or was there a problem with the hon member for Lichtenburg? [Interjections.]
Before I proceed, I want to ask the hon the Minister of Agricultural Economics please to give a clear explanation in his speech this afternoon or tomorrow of the subsidy for this year’s maize harvest. It is an amount of R250 million which has been applied for various purposes. I feel it is very important for our maize farmers to know exactly what is going on there.
I agree with the hon member for Schweizer-Reneke. We as farmers will rise from our distress, but we shall not rise because people are bringing politics into our trade. We shall rise because the Government is still protecting the farmers. Since 1982 we have been experiencing a drought situation as never before. [Interjections.] I should like to know from the hon the Minister today what percentage of our farmers have had to leave their farms as a result of the drought. I should also like to know how many small business undertakings which did not suffer from the drought, but simply from inflation, have been lost. The Government of this country is well disposed towards the farming community. The country’s Government knows that the country needs its farming population. The Government will keep the maximum number of farmers it can on the land. In this regard it will do everything in its power. I am convinced of that.
If I talk about this and about our survival, I want to add that the suffering we are experiencing as a farming community today, will simply make us better people. It has already shown the valuable influence it has had on us as a farming community. When have we ever seen better submissions by our farming community and farming organizations than today? When have we seen a better submission by the SA Agricultural Union or by Nampo? I want to say that from our side of the House—and I am sure everyone shares this sentiment with me—we have only the greatest praise for these people.
If we want to get out of this crisis, our first field of attack will have to be the question of our debts and the interest we have to pay. That will be the first thing to overcome because it is our farmers’ single greatest problem and expense at present. [Time expired.]
Mr Chairman, I should like to react briefly to a few aspects raised by hon members. Tomorrow I shall try my best to go into those aspects in more detail.
To start with I just want to say that this is the first time I am taking part in proceedings in this House in my capacity as Minister and political head of another very important department too, ie the Department of Water Affairs. In this connection there is a request I want to make to the members of the various political parties here. Next year I should like to have us completely separating the Department of Water Affairs and its Vote from the other proceedings because at this juncture it is a very important department that has to create the infrastructure, not only for agriculture, but also on a very wide front. It will therefore probably be necessary for one to debate about matters concerning this department and its functions on a very specialized basis. Let me also say at once that I get very good help and support from this department. I have found that the people concerned are extremely competent when it comes to performing the various tasks assigned to them and putting into operation the various campaigns with which they are entrusted.
As Minister of Agricultural Economics I have come to realize that water and agriculture are two aspects that virtually cannot be separated. I have also come to realize, in particular, that water, and specifically irrigation schemes, which we shall be discussing in more detail tomorrow, will have to play an increasingly important role in stabilizing agricultural production in South Africa, particularly in the light of the tremendous variations in climatic conditions and the all too familiar drought conditions we are experiencing at present.
The hon member for Albany was quite rightly concerned about the number of farmers we are most probably going to lose in the process. The fact of the matter is that the risks in agriculture as a result of continuous and successive droughts have become virtually incalculable. Last year, with the drought-relief measures we announced, we had the faith to believe that we would at least be in a position to enable existing farmers to get back into production. We have, sad to say, been struck by another drought. It has hit some areas, some summer grain areas, even harder than was the case the previous year. We have reached the stage at which the prevailing risks in agriculture are virtually incalculable.
The hon member quite rightly mentioned—and let me use his own words—that “agricultural aid is spread too thin”. In other words, the risks in agriculture are increasing, the present amount of debt in agriculture being approximately R9 000 million, with the volume of agricultural relief measures provided being to a large extent restricted to the South African economy’s overall capability. The truth of the matter has been, strangely enough, that specifically when recessionary conditions prevailed in the economy as a whole, we were hit by droughts. In other words, the economy’s ability to help agriculture is taxed to the limit. The hon member is right. We could reach a stage when the distribution of this agricultural aid is eventually spread too thin, resulting in our losing farmers in the process. I think the hon member for Barberton also acknowledged that we would be losing farmers in the process. We should have no doubts about that. It is not possible to help everyone in the process.
A very important facet of these various drought relief schemes—the consolidation schemes, the twenty-plus-two-year schemes, the six-year scheme involving agricultural cooperatives, those we announced last year, consolidation schemes under the Directorate: Financial Assistance, agricultural credit, in the form in which it is familiar to all of us, with subsidized interest rates—is that their special value to South African agriculture lies in the fact that land prices in South Africa have been maintained. Our position is therefore different from that of another agricultural country, one of the most progressive in the world, ie the USA, which did not have a drought—although the USA did, in certain respects, experience some problems last year, it did not have a drought nearly comparable to that of South Africa. As a result of the strength of the dollar, people there could not sell their grain. We know that the USA is pre-eminently an export country, particularly an exporter of grain products. More than 60% of its grain the USA sells on the export market. It has begun competing with other grain-producing countries such as Argentinia and even Red China. It could not sell its products. What happened? What happened was that American land prices collapsed. The result was that at this moment the American farming industry is experiencing one of the biggest crises in its history. This did not happen in South Africa because we, by way of our consolidation schemes and other financing, kept the farmer on the land. We gave him a reasonably long period in which to pay off his debt, thus improving his cash flow position and at the same time obviating the necessity of any farmers being compelled to sell.
The schemes and other financing undertaken, the R7 000 million to which reference has been made, had a very important effect on the total economic situation of South African farmers. Hon members will remember that when we announced the schemes last year there was still a percentage of farmers whom the agricultural co-operatives did not see their way clear to accepting as risks. We also helped them by way of State guarantees so that they could also be placed in a position to plant a crop.
What happened, however, was beyond human intervention. Now we are faced with a new risk, a new problem, that we shall have to examine from scratch. In collaboration with the SA Agricultural Union the economic position is being investigated at present. Let me agree with hon members that the assistance we received—even from individual farmers—in carrying out the analyses and surveys, has been of great assistance to my departments. One of the hon members said the department ought to do all the work.
The department cannot, however, grant all the assistance from the top echelons. It is also essential for the agricultural sector, particularly organized agriculture, to assist as well. There must also be co-operation. When all is said and done the South African agricultural industry does not belong to the Government. It forms part of the private sector, and it is therefore my department’s policy, as far as possible, to co-operate in the respective spheres with the agricultural co-operatives and organized agriculture in an effort to find a solution. In the refined methods applied in agriculture in South Africa at present, I think the time is past for the Government to be telling the agricultural industry exactly what its problem is.
The hon member also raised an important point that I briefly want to refer to. He asked whether assistance was going to be granted on an individual basis. The SA Agricultural Union adopts the standpoint, as far as the financing of individual farmers is concerned, that we shall naturally have to examine the financial positions of such farmers. The agricultural co-operatives, particularly in the grain areas, will have to be in a position to go into the financial status of every farmer in the vicinity. It is also true, of course, that financial assistance cannot continually be granted to people who cannot keep their heads above water. It is a hard thing to say, but it is true. The Government would be in big trouble if it were to use taxpayers’ money to help farmers who are unfortunately no longer solvent. That is a matter that has already been settled with the SA Agricultural Union, and we shall therefore have to be moving in that direction.
I now want to respond briefly to ideas expressed by hon members about the question of food subsidies. The amount of R450 million was mentioned here. This amount, however, represents only the subsidy on wheat and maize. The total amount for food subsidies in this year’s Budget is R497 million, ie almost R500 million.
We have now reached a stage in South Africa of having to examine the methods employed in granting food subsidies. In a developing country such as South Africa there are undoubtedly people—I am now speaking about individual consumers—who do not, in point of fact, need food subsidies. Let me give a simple example in support of my view. The luxury liner, the QE2, recently docked in Table Bay. Only the very rich can afford to travel on that ship. I have heard, however, that thousands of loaves of brown bread were loaded aboard that vessel in Cape Town. Are hon members aware of the fact that at present the South African taxpayer is subsidizing each loaf of brown bread by an amount of 14,2 cents? We cannot subsidize people who live in five-star hotels by paying 14,2 cents on every loaf of brown bread. We have now reached a stage at which the subsidy system should be properly investigated. The social function of the authorities, that of providing the underprivileged with cheaper food, will have to come under close scrutiny. We shall have to find another method of subsidizing food. We are already engaged in what I want to call a food strategy for implementing the various facets more effectively. The approximately R500 million budgeted for food subsidies, for example, should be more effectively applied so that greater assistance is granted to those who really need it. Those hon members and I really do not need our bread subsidized. I think that most of us receive a remuneration sufficient to allow us to pay that 14 cents on a brown bread.
The other argument put forward here—in the time available to me I just want to refer to it briefly—relates to the question of production costs plus, about which a debate has apparently been conducted recently. The hon member for Paarl also referred to it. The hon member for Lichtenburg and the hon member for Prieska were involved in a debate about input costs. The hon member for Lichtenburg says it is not a question of a certain amount of cash per hectare, but that there are also other costs involved. He is right, but in a certain sense the hon member for Prieska is also right. A short while ago the hon member for Lichtenburg said they hoped to come to power soon. [Interjections.] I take it the hon member was not being very serious when he said that. [Interjections.] I do, however, want to ask the hon member whether, if the CP were to come to power and he were to become Minister of Agriculture, he would be able to guarantee all producers in South Africa their production costs plus. If he could do that, he really would be one of my very favourite people. Now I am not speaking about the production costs of pumpkins, but that of the most basic products such as wheat, maize, dairy products and other foodstuffs that South Africa needs. Would the hon member guarantee the production costs plus?
For price-controlled products.
The hon member says he would. Let me now put another question to the hon member. If he says that we should guarantee production costs, what would the production costs of a ton of maize have been last year? It would have been more than R400 per ton. Striving to achieve price stability, as we are in South Africa, if the price of a product is R400 per ton one year and R250 or R280 per ton the next, we are not going to succeed in achieving our objective. One cannot only plant maize; one also has to sell it. [Interjections.] In selling it one has to recover those production costs plus on the market.
The next question is why certain products are discriminated against. Deciduous fruit farmers do not get production costs plus. They must recover their production costs and their profit on the market. This also applies to wool farmers, and to a very large extent to the other single-channel pool commodities such as sunflower seed, for which an advance price is determined, the rest of the costs having to be recovered from the selling price on the market. What is important is that when there is a shortfall, after the pools have closed, the law provides that the losses are recoverable from the farmers. The hon member for Zeerust was therefore correct in saying that we should start moving towards a more realistic system of price-determination in South Africa. Has the hon member for Lichtenburg ever thought what would happen were we to adhere to the actual costs, in line with his argument, if we again produce 14,2 million tons of maize in any specific year? Let me ask the hon member whether he works on the basis of the actual production costs for any specific year or whether he agrees with the idea of normalized production costs. If not, the price would have to decrease when 14 million tons are produced, just as the price would have to increase in a bad year. In a country such as South Africa one surely could not, by way of such a policy, incorporate proper price stability. That is why I have said at public congresses—and the majority of farmers in South Africa agree with me—that we shall have to move in the direction of greater market-orientated production.
We also try to regulate agriculture in this way. A conference for the discussion of the prospects in agriculture was held in Pretoria this year—the hon the Deputy Minister of Agricultural Economics opened it—in order to make a proper study of the prospects of the various agricultural commodities in the marketing process. In my view we shall have to extend such conferences to specific regions where specific commodities are produced, so that a farmer can know whether he can produce effectively by purchasing a certain fertilizer or a tractor. This is becoming very important. In the postwar years the truth of the matter is that the production of certain agricultural products was encouraged, particularly basic agricultural products such as maize and wheat. Then we adopted a cost-plus policy, in other words one guarantees the producer a price and determines a selling price by way of a single-channel, fixed-price system whereby these various costs can be recovered, so that farmers can be sure of not losing out when they produces a certain commodity. What is more, however, it is a determination of average production costs. If farmers produce at less than production cost, they make a profit, but if production costs are more, they suffer losses. These days, however, there is such a wide variety of production costs that for the majority of the summer grain crops it is extremely difficult to determine a figure for production costs that would be absolutely correct. It is a broad average. The hon member for Lichtenburg, who is a producer and a farmer, knows that from one piece of land to another one’s production costs vary. He says it varies from farm to farm. It would also vary, however, depending on what the producer’s aim was, as the hon member over there has said. It depends on whether one is aiming at two or three tons per hectare or should, according to the hon member for Lichtenburg’s calculations, aim at approximately six tons per hectare, as that hon member has said.
Those are the department’s calculations, not mine.
Those are the department’s calculations, but they have nothing to do with production costs in terms of which prices should be determined. That is the point. [Interjections.] The Jacobs Committee investigated the situation and made it very clear that the determination of prices in terms of production costs no longer applied. There is a whole string of other factors that need to be borne in mind, one of them being that one should ensure that the price one determines for a particular product, whether maize or wheat, is in proportion to that of all other agricultural products in South Africa. One cannot elevate one agricultural product above all the others. There must be a proper balance. It is the task of the National Marketing Council to investigate the situation, because a particular control board is inclined to give preference to its particular product. It is the task of the National Marketing Council to investigate the possibility of properly balanced prices.
Business interrupted in accordance with Standing Order No 19.
Progress reported and leave granted to sit again.
The House adjourned at