The Accumulation Crisis in Agriculture¶
Michael de Klerk (1990). The Accumulation Crisis in Agriculture. History Workshop, 'Structure and Experience in the Making of Apartheid', University of the Witwatersrand, 6-10 February 1990. University of the Witwatersrand History Workshop.
| Type | conference paper |
| Scope | Economics and economic history of apartheid |
| Method | descriptive quantitative |
| Period studied | 1970–1988 |
| Regions | South Africa (commercial agriculture), Transvaal, Orange Free State, Eastern Cape, Cape |
| Themes | agriculture land, macro fiscal finance debt, business and state, labour markets wages, bantustans removals influx, demography urbanisation, sanctions divestment |
| Citation key | klerk1990 |
Argument¶
Commercial agriculture in the 1980s has been in a prolonged accumulation crisis, shown in low (and negative real) returns, chronic illiquidity and a steady build-up of debt, while the real capital stock has stagnated since 1970. Drought is the only cyclical cause. High nominal interest rates and a long adverse shift in the terms of trade are argued to be more structural. Negative real interest rates, tax concessions, lenient bank lending and state price and protection policy induced uneconomic investment in land and machinery earlier. The state's long-standing policy of keeping white farmers on the land is held ultimately responsible. The author reads the crisis as restructuring rather than catastrophe: slower output growth, farm consolidation, weak farm employment and wages, continued rural outflow, and the emergence of a core of black, coloured and Asian commercial farmers driven by market rather than political forces.
Evidence and method¶
Official aggregate series 1970-1988 from the Department of Agricultural Economics and Marketing, Reserve Bank, Central Statistical Services and IMF, assembled in Tables 1-3. The SA Agricultural Union 1983 financial survey (1984), the State President's Economic Advisory Council report (1986), Stadler et al. (1983) on protection, Potgieter (1987), farming press (Farmer's Weekly, Maize News), court sequestration statistics, and the author's earlier farm-worker studies. Appendix A critiques the capital-stock valuation.
Place in the debates¶
- Causes of the 1980s agricultural financial crisis: drought and cyclical factors vs structural factors (see Agricultural policy, productivity, farm size and land reform). Argues drought is only the short-run cause. Interest rates and above all the terms of trade (47% of the debt increase 1980-85, citing the Economic Advisory Council) are more structural.
- Causes of farm mechanization and labour shedding / over-mechanization (see Farm labour: mechanisation, labour shedding, wages and labour control). Holds that cheap credit, negative real interest rates and the 1977 tax write-off promoted labour-substituting machinery after 1970. Judges that some over-mechanization has probably occurred, and sees little further capital-for-labour substitution ahead.
- State support and protection of white agriculture, and monopoly capital's penetration of farming (see Agricultural policy, productivity, farm size and land reform). Holds that state policy to keep white farmers on the land, not market logic, sustained over-investment. Net protection benefited agriculture. Industrial capital has not moved into farm operation, so 'the age of monopoly capitalism in South African agriculture is not on the doorstep'.
- Deracialization of agriculture: market vs political drivers (see Agricultural policy, productivity, farm size and land reform). Predicts that market forces are creating a core of black commercial farmers (sugar outgrowers, farm managers, covert tenancy). He speculates the state will manage this without repealing the Land Acts.
Findings¶
-
Nominal return on assets was volatile but recovered to a new peak by 1988. (p. 3)
from a 5,5% starting point in 1970, the return climbed to 11,4% in 1981, fell to a low of 5,3% in 1983, and then rose steadily to a new peak of 12,1% in 1988.
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Farmers' debt burden rose sharply from 1975 to 1986, signalling declining capacity to accumulate. (p. 6)
whereas in 1975, debt constituted 11,8 % of the value of farming assets, by 1986 this had risen to 27,1%.
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Agricultural sequestrations more than tripled in the mid-1980s. (p. 10)
whereas between 1980 and 1984 the average number of agricultural sequestrations per year was 75, between 1985 and 1987 the average jumped to 232. In 1987, it was 313
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Direct state aid to farmers was very large in 1981-87. (p. 11)
amounted to more than R2,7 billion between 1981 and 1987
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Drought explains only a minority of the increase in farm debt 1980-85. (p. 12)
has estimated that only 22% of the increase in farming debt between 1980 and 1985 can be directly ascribed to drought
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Negative real interest rates fuelled land speculation, so farm profit came mainly from land appreciation. (p. 13)
it is speculation in land rather than the fundamental profitability of agricultural production that has been the main source of profit in farming.
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Mechanisation shifted from labour-complementing to labour-substituting after 1970, with probable over-mechanisation. (p. 14)
Post-1970, it seems by and large to have been labour-substituting
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Deteriorating terms of trade were the single most significant cause of the debt increase 1980-85. (p. 15)
it was the most significant single cause of the increase in farming debt between 1980 and 1985, accounting for as much as 47% of the rise
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The terms of trade moved sharply against farmers from 1975 to 1986. (p. 15)
If the average South African farmer had had to exchange 1000 bags of maize for, say, a tractor in 1975, by 1986 he would have had to part with an additional 370 bags.
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The crisis is ultimately attributed to state policy of keeping white farmers on the land. (p. 20)
Ultimately, it is to State policy to keep white farmers on the land - in its many forms - that much of the cause of the present crisis must be ascribed.
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Farm employment declined from the late 1960s through the 1980s. (p. 22)
farm employment has fallen from about 1,6 million in 1968 to about 1,3 million at present
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Emerging black commercial farmers are driven by market rather than political forces. (p. 27)
What is perhaps most significant about these processes is that they are all being driven by market rather than political forces.
Evidence ledger¶
Sources used¶
| Source | Kind | Period | How used |
|---|---|---|---|
| RSA Department of Agricultural Economics and Marketing, Abstract of Agricultural Statistics (1988, 1989), and personal communications with the Department (April 1989) | official statistical series | 1970-1988 | Supplies income, expenditure, asset, debt and capital stock series for Table 1 and the financial indicators in Table 2. |
| South African Agricultural Union (SAAU) 1983 financial survey of farmers, 'Die Finansieele Posisie van Boere in die R.S.A.' (1984) | author survey or fieldwork | 1970-1984 (survey 1983) | Provides liquidity and current ratios, debt-burden and critical-debt thresholds, numbers of farmers in financial distress, non-farm investment and part-time farming shares. |
| Economic Advisory Council of the State President, Report of an Investigation into the Restructuring of Agriculture (1986) | commission or official report | 1980-1985 | Used for the decomposition of the 1980-85 rise in farm debt into drought (22%), interest rates (31%) and terms of trade (47%). |
| Central Statistical Services, South African Statistics (1986) and Bulletin of Statistics (1988b) | official statistical series | 1980-1987 | Court records of agricultural sequestrations used to confirm rising farmer insolvency. |
| Central Statistical Services, Statistical News Release: Agriculture Survey 1987 (P1101, 28 December 1988) | official statistical series | 1987 | Source for farm wages and salaries being about 13% of total costs in 1987. |
| Central Statistical Services, Statistical News Release: Consumer Price Index (P0141.1, 1988, 1989) and SA Reserve Bank Quarterly Bulletin | official statistical series | 1970-1988 | CPI used to deflate nominal returns, net worth, debt and interest rates into real terms. |
| International Monetary Fund, International Financial Statistics (1977-1988) and Supplement on Price Statistics (1986) | international trade or finance data | 1970s-1980s | World maize, wool and manufactured-goods prices used to build the international terms of trade columns of Table 3. |
| South African Reserve Bank, Quarterly Bulletin (1973, 1978, 1980, 1981, 1985, 1988) | official statistical series | 1970-1988 | Supplies national income growth for demand estimates, price and rand data for Table 3, and the capital stock methodology. |
| RSA Commission of Enquiry into Agriculture (Marais Commission), Second Report, RP 84/1970 | commission or official report | 1970 | Cited for early recognition of over-mechanisation in commercial farming. |
| Margo Commission recommendation on tax treatment of machinery write-offs, and 1977 tax legislation change | legislation gazette | 1977-1980s | Establishes that the 1977 tax change allowed full first-year write-off of machinery, encouraging borrowing for mechanisation. |
| Stadler, van den Heever and Lombard (1983), study of protection and agriculture, Bureau for Economic Policy and Analysis, University of Pretoria, Research Report 17 | secondary literature compilation | 1982-1983 | Supplies estimates of the effects of tariff protection on input costs and output prices, and of which exports were profitable. |
| Farmer's Weekly, Maize News and other periodicals (1986-1988) | newspapers periodicals | 1986-1988 | Used for state aid figures, NAMPO estimates of maize farmer liquidation, board pricing announcements and drought outlook. |
| Potgieter (1987), 'Boerdery-finansiering', unpublished paper for the Agricultural Economics Association of South Africa | secondary literature compilation | 1986-1987 | Provides the share of consolidated 'hard-core' debt among crop farmers and the solvency-based bank lending criteria. |
| Fiske (1988, personal communication) | interviews oral history | 1988 | Source for cheap credit to farmers and for sources of undervaluation of agricultural capital in official statistics. |
| Fenyes, van Zyl and Vink (1988), local studies of over-mechanisation, and van Zyl (1986) on factor substitution | secondary literature compilation | 1970s-1980s | Support for the claim that post-1970 mechanisation was labour-substituting and probably excessive. |
| Groenewald (1987a, 1987b) and RSA Department of Agriculture (1989) physical index of food production | secondary literature compilation | 1970-1985 | Income elasticity and growth-rate data used to compare growth of domestic demand (0.79-1.76% p.a.) with growth of food production (2.19% p.a.). |
| Annual agricultural census data used by the Department of Agricultural Economics and Marketing (land valuation) and de Jager (1973) perpetual inventory method | agricultural census | 1970-1988 | Farmers' estimates of land value underpin the capital stock series, with Appendix A analysing breaks in the series. |
| Central Statistical Services index of rural land prices (based on transfers of rural immovable property) | official statistical series | 1980s | Used by the Department to adjust the land valuation after census data quality fell, affecting the real capital stock series. |
New data¶
The author assembled and calculated Tables 1-3 (1970-1988): real and nominal returns on assets and equity, debt burden, real net worth, real capital stock, interest rates, liquidity proxy, capital:output ratio and terms-of-trade indices, mostly derived from official series and SAAU data. No new primary data were collected.
Inference¶
Quantification: Descriptive tables.
Financial-ratio analysis of aggregate time series (1970-1988) from official and industry data, supplemented by decomposition of causes using Economic Advisory Council estimates, a rough supply-demand comparison, and qualitative and speculative projections of implications and future trends.
Key claims¶
| Claim | Basis | Strength |
|---|---|---|
| Commercial agriculture's capacity to accumulate capital weakened sharply, with real returns negative and the real capital stock stagnant over about two decades. (p. 6) | Tables 1 and 2, built from Department of Agricultural Economics and Marketing series deflated by CPI, with Appendix A adjustments for valuation breaks. | Systematic data |
| Farm debt and illiquidity rose dramatically in the 1980s, leaving a large share of farmers near insolvency. (p. 10) | SAAU 1983 survey for liquidity, current ratios and critical debt burdens, together with the debt series in Table 1 and court sequestration counts. | Systematic data |
| Rising sequestrations and large state aid (over R2.7 billion, 1981-87) show the crisis was real but cushioned by the state. (p. 11) | Central Statistical Services sequestration data and Farmer's Weekly reports of state aid amounts. | Partial data |
| The crisis was caused by drought (22% of debt rise), high interest rates (31%) and above all the deteriorating terms of trade (47%), the latter two being structural. (p. 15) | Economic Advisory Council (1986) decomposition, Table 3 price indices and Stadler et al. protection estimates. | Partial data |
| Persistently negative real interest rates encouraged borrowing, land-price speculation and over-mechanisation rather than productive investment. (p. 13) | Real interest rate series in Table 2, a theoretical discount-rate argument, Janse van Rensburg, SAAU machinery data and the Marais Commission. | Illustrative or anecdotal |
| Supply has grown faster than demand for agricultural goods, so the terms of trade will continue to worsen structurally. (p. 19) | Crude comparison of demand growth (national income growth times income elasticity) with the food production index, plus world market commentary. | Illustrative or anecdotal |
| Farm employment is falling and the crisis will hold down farm wages, push farm leavers to towns, and create openings for black commercial or part-time farmers. (p. 27) | Department employment figures (1.6 to 1.3 million), SAAU data on part-time farmers, and the author's own earlier studies; the black farmer channels are inferred without direct evidence. | Asserted |
The author's caveats¶
The author notes that sub-sectoral and regional data are seldom available and that reliable, comparable employment data are hard to find. Appendix A documents breaks in the capital stock series (livestock in the independent states excluded from 1978, land valuation switched to mail census and price indices, and a 35% implausible fall in land value in 1979-81), and says it is hard to tell which part of the series is more reliable. The demand-supply comparison is called very rough and the liquidity ratio is only a proxy.
Gaps in the evidence¶
The argument rests on aggregate national series with known valuation breaks, with little disaggregation by region, sub-sector or farm size; farm-level financial records or the SAAU survey microdata would test heterogeneity in distress. The claims about emergent black commercial farmers, covert tenancy and farm-worker outcomes have no direct evidence and would need field surveys, deeds registry and Group Areas records, or farm-labour surveys. Causal attribution relies on one Economic Advisory Council decomposition rather than an econometric model of debt determinants, though the underlying annual data existed and could support one.
Replicability: Data described but not public.