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February 19, 2009

Number of South African farms in use falls by 13%

by Tom Robbins

The number of farms in active production in South Africa fell by 12.7 percent to fewer than 40 000 in the five years to 2007, Statistics SA said yesterday. Agriculture experts attributed the decline to consolidation while discounting a government view that food producing land was being bought up for golf courses and game farms.

The reduction in active farming units by 5 836 between financial 2002 and 2007 continued a trend in the R79.5 billion commercial farming sector, the agricultural census showed. In 1993 there were 57 980 farms.

John Purchase, the chief executive of the National Agricultural Business Chamber, said small farms were generally less financially viable. There was a tendency for farmers with bigger land holdings to buy up smaller farms. The move to better economies of scale was a way to improve productivity in a country struggling to compete globally.

Purchase did not necessarily accept that game farms were less economically productive.

Johan Willemse, a University of Free State agricultural economist, said the 2002 census had shown that revenue for each rand of capital invested was higher on bigger farms, and profit margins were higher. Local farmers had to scale up as they were fully exposed to the free market, while their rivals in the US and EU were subsidised by governments.

Willemse said a second reason for the reduction was that much land bought out by the government for restitution was not commercially farmed.

He said it was difficult to say which factor was the main cause "but my guess is that they carry the same weight."

Johan Pienaar, the deputy executive director of commercial farming lobby AgriSA, said economies of scale was the main reason. Pienaar said land earmarked for land reform and land restitution was lying idle but this was harder to quantify.

Last November the department of agriculture and land affairs said it would examine the use of prime agricultural land for leisure activities, which was threatening food security and reducing rural employment.

Agriculture minister Lulu Xingwana added at the time that new legislation would empower the state to regulate golf courses and game farms.

Stats SA said the census was done on commercial farms or entities, whether adjacent or not, that were registered for value-added tax or income tax.

In 2007 South Africa became a net importer of agricultural products for the first time in more than 20 years as local food output failed to keep pace with a growing population, according to the National Agricultural Marketing Council.

The Stats SA census confirms that the trend of job shedding has continued in commercial farming. From the 2002 financial year to 2007, more than 144 000 jobs were lost to leave employment at 797 000.

Farmers continued to deleverage over the period. The ratio between farming debt and gross income was reduced to 46.6 percent from 57.9 percent. Over the period the financially strapped Land Bank cut lending to commercial farmers.

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