Abstract
South Africa’s agricultural sector is comprised of livestock, field crops and fruit in their order of size, in gross value terms. Agriculture in South Africa accounts for a relatively low share in the economy (3% of gross domestic product - GDP), 6% of employment and about 10% of exports (over R144 billion in 2015). Currently (2015/16), South Africa is experiencing the worst drought in over 100 years, which has resulted in significant effects on agriculture, with eight of the nine provinces being declared disaster areas. The motivation of the study was to understand the severity of drought on agriculture as well the impact on the whole economy (to quantify the economy-wide effects/losses emanating from the drought). To quantify these effects a single-country computable general equilibrium (CGE) model was used. Four scenarios were developed: Impact of field crops losses; impact of livestock losses; impact of aggregated agriculture losses; and impact of aggregated agriculture losses plus drought relief. The analysis shows that all scenarios led to a negative impact on GDP, employment and exports while the drought relief was found to have saved some jobs, albeit not significantly. Key words: Drought, computable general equilibrium (CGE) model, field crops, livestock and fruit, GEMPACK.
Highlights
Based on gross value of production, South Africa’s agricultural sector is comprised of livestock as the biggest subsector, followed by field crops and fruit
The results show that the economy stands to lose or loses because of drought; the impact on macroeconomic variables, including exports, is minimal but negative
In this study we employed the University of Pretoria General Equilibrium Model (UPGEM) model to estimate the impact of drought on the South African economy
Summary
Based on gross value of production, South Africa’s agricultural sector is comprised of livestock (e.g. beef, poultry, game, sheep and others) as the biggest subsector, followed by field crops (e.g. maize, wheat, sugar, beans, barley, sorghum and oilseeds) and fruit (e.g. fruits, nuts, flowers and vegetables). (2015/16), South Africa is experiencing the worst drought in over 100 years, which has resulted in significant effects on agriculture, with eight of the nine provinces being declared disaster areas. This drought has resulted in a number of livestock losses, cereal crop losses and in fruit losses. The rationale of conducting the study is to inform policy makers of the economy-wide effects of drought in South Africa focusing on food security impacts, job losses and value lost due to drought. To better capture the effect of drought on agriculture in the broader economic contexts, a general equilibrium framework is adopted in this study
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