Comparing agricultural trade dependency and household food expenditure in South Africa

Abstract

The question of food as a basic need has followed the human race for centuries on end in community after community, all of which have had to continuously re-evaluate its state of food security, occasionally restructuring and reorganizing systems of food production and distribution, as well as relationships and processes related to welfare and economics. In more recent decades the elements around food security became more formalised and in 1974, at the World Food Conference in Rome, food security emerged as a concept. At its inception, it was proposed that food security could be attained through ensuring sufficient supply by boosting production and widespread distribution by liberalizing trade. South Africa’s agricultural markets were highly regulated before the 1990s, and by the end of that decade they were completely deregulated and opened to the international market. Since then self-sufficiency has decreased in major goods, and dependency has increased, particularly for secondary food products. Still, South Africa continues to provide, by way of production and imports, an adequate supply of food to feed the country. However, at least 40% of the population is unable to meet its dietary needs because they cannot afford to buy the food made available. This study helps to shed light on the relationship between trade dependency and food security in South Africa by looking at the impact of the former on domestic prices. This it does with the use of a tool introduced in this thesis as the “Trade Dependency and Household Expenditure Share” graph. This graph was developed as follows: on the basis of the Income and Expenditure Surveys (IES) conducted by Stats SA every five years, food items most relevant to the South African population according to expenditure share of household food budgets were selected; in turn trade and consumption data for these food items were collected and on the basis of these, trade dependency figures were calculated; and finally, by mapping these figures against each other on a graph, the aforementioned tool was created. Essentially, the graph represents movement toward or away from food security on account of movement toward or away from self-sufficiency. It can be reasoned to reflect this because of the understanding that shifts in self-sufficiency have certain implications for domestic control over food prices. To test this with the use of scenarios, the impact that shifts in the production levels of certain of these foods have on their commodity prices was tested using the BFAP sector model and the subsequent effect on consumer prices was established using the Error Correction Model (ECM). The tests were conducted on one net exported food item, three net imported food items and two items that are traded under near autarky. Based on the scenarios, it was clear that where markets are connected to global trade, shifts in production had little influence on domestic prices. Albeit, when a nation is producing surpluses, goods are typically traded at export parity levels and are therefore significantly cheaper than goods traded at import parity. Under self-sufficiency, however, prices are determined by local supply and demand forces, and thus the nation has greater control over domestic prices. Although this thesis does not intend to advocate for complete self-sufficiency at all costs, results support the notion that safety nets and some level of protection with regard to the agricultural sector is necessary for attaining and maintaining national and household food security. In the final analysis, what this study demonstrates is that a relationship exists between national self-sufficiency—and thus trade dependency—and household food security through the impact of the former on domestic prices. With this relationship established, the significance of movement toward or away from self-sufficiency of products on the “Trade Dependency and Household Food Expenditure Share” graph can be understood by the reader and policy makers as potential movement toward or away from food security.