The economics of spatial reallocation of maize production in South Africa

Abstract

The economics of production and market fundamentals, which drive the competition for arable land, create the expectation of a continuous decline in the South African maize production area. Besides the economic factors affecting maize production, the granting of mining permits in the Mpumalanga province, coupled with the policy objectives spurring agricultural development in South Africa s former homelands, induces a substantial shift in the location of maize production. Furthermore, The Former Homeland Region of the Eastern Cape were identified as being capable of effecting the potential reallocation of land suitable for growing maize. Geographic Information System (GIS) analysis is typically utilised to spatially identify biophysically suitable areas for crop production. However, economic viability or suitability is seldom the focus of multi-criteria spatial analysis. Refinement was therefore necessary to evaluate a field of study where the economics of land use inform the spatial allocation of production. Informed by the South African government s maize reallocation initiatives, this study undertook a spatially explicit assessment of the likely shifts in the location of maize production, analysing biophysical and economic factors in play. Spatial criteria informing production allocation was reviewed based on existing spatial analytical methodologies, of which the Spatial Production Allocation Model (SPAM) is an example of such as production allocation model. The most applicable criteria to determine the economics of spatial allocation were identified as: a) modelling the location of production, b) biophysical cropland suitability, c) modelling land use change, and d) spatial allocation modelling concerned with resource optimisation and profit maximisation. This existing methodology was combined and altered to a South African-based application in the Former Homeland Region of the Eastern Cape. The reviewed outcome informed which criteria to incorporate into spatial economic analysis. The criteria was further adapted to an Economically Suitable Spatial Allocation (ESSA) framework utilising existing South African spatial data and models. It was found that the ESSA framework could provide an additional approach to multi-criteria GIS modelling applied in the field of agricultural land use allocation. This framework addresses the incongruity between the outcomes of land capability, crop suitability and the economic factors determining production in the Former Homeland Region of the Eastern Cape. The key findings indicate that a total area of 298 367 hectares for potential dryland maize could be allocated in the Former Homeland Region of the Eastern Cape, with the production potential estimated at 971 750 tons of maize. However, since local un-milled maize consumption was derived at approximately 260 000 tons, it implies that under a scenario where close to one million tons of maize is produced in the Former Homeland Region of the Eastern Cape, surplus maize will have to be transported out of the region, which will bring new dynamics into the regional markets and the economic realities of smallholder farmers. The farm gate prices will typically decline by a margin linked to the transportation and transaction costs to move the maize. Surplus availability of maize will on the other hand stimulate trade and further downstream activities in the value chain.