The Long-Term Economic Consequences of Agricultural Marketing Legislation in South Africa¶

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Nick Vink (2012). The Long-Term Economic Consequences of Agricultural Marketing Legislation in South Africa. South African Journal of Economics 80(4). Blackwell Publishing / Economic Society of South Africa.


Type	journal article
Scope	Economics and economic history of apartheid
Method	synthesis review
Period studied	1913–2011
Regions	South Africa, Western Cape, maize-producing interior
Themes	agriculture land, origins segregation, business and state, politics ideology elections, labour markets wages, transition post apartheid
Citation key	`vink2012`

Argument¶

The Marketing Act of 1937 created statutory control boards that governed most agricultural marketing for about 60 years. Vink revisits the 1930s debate and Groenewald's 2000 post-mortem and finds that most of the predicted negative effects materialised. The boards raised prices and distorted the geography of production, and the system was captured by larger commercial farmers and bureaucrats. He then identifies longer-term legacies: concentration in grain processing, misplaced transport and storage infrastructure, growth of informal sales, a shift from red meat to poultry, and neglect of black farmers' market access. He also links the Act to the broader segregationist agricultural policy of the 1910s-1930s and to the National Party's rural political troubles in the 1980s.

Evidence and method¶

Secondary literature, including the 1930s-40s SAJE debate, De Swardt (1983) and Groenewald (2000). The Kassier Committee report (1992) is the main source for ex post outcomes. Also used: Kirsten et al. (2009) on nominal rates of assistance, employment studies (Van Zyl et al. 1987; Liebenberg and Pardey 2011), Competition Commission and Tribunal cases, and Abstract of Agricultural Statistics consumption figures.

Place in the debates¶

Rationale and effects of statutory agricultural marketing control (the 1930s SAJE debate) (see Agricultural policy, productivity, farm size and land reform). Sides with the critics (Frankel, Richards, Tinley, Groenewald, Kassier). Their predictions were largely borne out, and the defenders' claims (De Swardt, Viljoen) were not.
Causes of farm labour shedding and mechanization (see Farm labour: mechanisation, labour shedding, wages and labour control). Argues the post-1970 employment decline after combine harvesters was more probably due to fiscal policies lowering the cost of capital than to the marketing boards. Boards' price support may have raised earlier employment. He calls for more research.
Segregation and suppression of black farmers (see Agrarian transition to capitalism and the fate of the African peasantry). Treats the Land Acts and marketing legislation as complementary instruments that cut out black competition and secured cheap labour for mines and farms (following Bundy).

Findings¶

The Marketing Act was enabling legislation under which producer majorities set up commodity schemes administered by boards. (p. 1)

When a sufﬁcient majority of the producers of a speciﬁc product agreed on intervention, they would establish a scheme consisting of a particular combination of powers of statutory intervention.
Land and marketing legislation worked together to exclude black farmers and supply cheap labour. (p. 4)

The effect of all this social engineering was to cut out competition for the market from black farmers and to ensure a supply of cheap labour to the mines and the commercial farms.
The Land Acts produced a highly unequal land split and drove the 1936 expansion of reserve land. (p. 3)

The cumulative effect of the Land Acts was the eventual 87:13% split in access to land, with many African land owners deprived of ownership during the decades after 1913.
Cost-plus pricing with producer-dominated boards pushed domestic maize prices above world prices, generating surpluses that required government bail-outs. (p. 8)

by the late 1980s the stabilisation fund was heavily in arrears and had to be bailed out by the government to the extent of some R400 million
Pan-territorial pricing subsidised distant producers and pushed production into marginal areas, making the system rigid. (p. 7)

Over time, this resulted in an expansion of production into marginal areas.
After deregulation maize production moved toward higher-rainfall areas and farmers cut input use while raising yields. (p. 9)

the area planted to maize shifted north and east in the interior (i.e. towards the higher rainfall areas), while in the Western Cape the more marginal areas furthest from Cape Town went out of production
The red meat scheme did not raise net producer prices and benefited mainly large producers and speculators. (p. 9)

the price-decreasing effects of frozen meat sales exceeded the price-rising effects of ﬂoor price purchases.
Post-1970 farm employment decline is attributed to capital-cost fiscal policy rather than the boards. (p. 11)

the subsequent decline in employment following the introduction of combine harvesters was more probably the result of ﬁscal policies aimed at lowering the cost of capital
The most important lost opportunity of deregulation was black farmers' market access. (p. 13)

the neglect of market access for black farmers. The latter represents the greatest lost opportunity of the deregulation process.
State withdrawal from agriculture is linked to the National Party's loss of rural support to the Conservative Party. (p. 12)

It is no surprise, therefore, that the process of state withdrawal from agriculture started in the early 1980s in South Africa

Evidence ledger¶

Sources used¶

Source	Kind	Period	How used
Report of the Committee of Inquiry into the Marketing Act (Kassier Committee), 1992	commission or official report	1992 (covering 1937-1992 operation of the Act)	Main source for ex post evidence on what the Marketing Act schemes actually did (price fixing, monopolies, margins, cooperatives' regional monopolies, informal sales).
Marketing Act (Act 27 of 1937), consolidated Marketing Act (Act 59 of 1968) and Marketing of Agricultural Products Act (Act 47 of 1996)	legislation gazette	1937-1996	Provides the institutional framework (enabling powers, boards, schemes) whose long-term consequences are assessed.
Competition Commission media release of 20 April 2011	newspapers periodicals	2011	Cited for the withdrawal of the dairy companies case.
Food Price Monitoring Committee reports (National Agricultural Marketing Council)	commission or official report	post-1996	Investigation of anti-competitive potential of dominance in grain storage.
Report of the Commission of Inquiry into Co-operation and Agricultural Credit (UG 16 of 1934)	commission or official report	1934	Cited as a 1930s source predicting that price fixing would cause overproduction and domestic prices above world prices.
Abstract of Agricultural Statistics 2010	official statistical series	1970-2009	Provides red meat and poultry consumption totals for 1970 and 2009 supporting the shift to poultry.
Kirsten, Edwards and Vink (2009) Nominal Rate of Assistance estimates for maize and wheat	secondary literature compilation	1960-2005	Shows positive nominal assistance for maize and wheat and the R400 million bail-out of the stabilisation fund.
Van Zyl, Vink and Fényes (1987) and Liebenberg and Pardey (2011) on farm employment trends	secondary literature compilation	1945-late 1980s	Used for structural trends in farm employment (tractors, combine harvesters) when discussing the Act's employment impact.
Groenewald (2000) post-mortem of the Agricultural Marketing Act and Groenewald (1964) welfare estimates	secondary literature compilation	1937-2000	Relied on for the history of the debate and for the estimated welfare loss and the red meat scheme's effects.
Annual Department of Agriculture surveys of production costs	official statistical series	Apartheid era	Described as the basis for setting the maize farm-gate price (cost plus margin); not analysed.
Venter and Van Zyl (1996) study of the floor price scheme in beef	secondary literature compilation	1996	Evidence that the red meat scheme did not raise net producer prices.
Election results and political events 1982-1989 (Conservative Party vote; Gastrow 1983)	election returns	1982-1989	Used to explain political timing of state withdrawal from agriculture.

Inference¶

Quantification: Illustrative figures.

Narrative review and synthesis: compares ex ante 1930s predictions with ex post findings from the Kassier Committee and secondary literature (Tables 1-2), then uses three scheme types as case studies and reasons by inference about long-term legacies. No original data analysis or counterfactual.

Key claims¶

Claim	Basis	Strength
Most negative predictions made in the 1930s about price-fixing, monopoly, rigidity and burdens on the poor were borne out by the ex post evidence. (p. 557)	Tables 1-2 pair 1930s SAJE predictions with Kassier (1992) and later literature; no new data.	Partial data
Pan-territorial and pan-seasonal pricing in the grain schemes expanded production into marginal areas, centralised milling and created rigid infrastructure; deregulation then shifted maize production to higher-rainfall areas. (p. 560)	Descriptive reasoning from scheme design plus Kassier (1992), Troskie et al. (2000) and Kirsten et al. (2009).	Partial data
Boards set prices above world parity and the maize stabilisation fund ran perpetually in arrears, requiring a state bail-out of about R400 million by the late 1980s. (p. 560)	Kirsten et al. (2009) and 1930s predictions; one aggregate figure cited.	Partial data
The red meat scheme did not raise net producer prices and mainly benefited larger producers and speculators. (p. 561)	Groenewald (2000), Venter and Van Zyl (1996), Lubbe (1992).	Partial data
Concentration in grain milling, baking and storage is plausibly a legacy of the Marketing Act, evidenced by recent Competition Act prosecutions. (p. 562)	Competition Commission/Tribunal cases and Bernstein (2004); causal link is inferred, and the author concedes it is unclear.	Illustrative or anecdotal
The schemes neglected black farmers' market access, which is the greatest lost opportunity of deregulation. (p. 564)	Kassier (1992), LAPC (1993), Vink (1998); assertion with no data on black farmers' marketing.	Asserted

The author's caveats¶

The author notes the exercise cannot be exact because of concurrent policy shifts in the early to mid-1990s (trade, land and water reform, labour legislation). He states there has been almost no research on employment effects and that several consequences need further investigation. He also flags that an unknown proportion of agricultural sales goes unrecorded after deregulation.

Gaps in the evidence¶

The argument would need quantitative series on producer and consumer prices against world parity, marketing margins, regional production shifts, and farm employment by scheme, combined with an identification strategy such as before/after comparisons across commodities with different scheme types. Board records and archival data on levies, agent appointments and stabilisation fund accounts, which existed and are partly archived, would test the claims about who gained. Census of Agriculture data and consumption series could test the causal claims on location, employment and poultry substitution; most of this exists now.

Replicability: Data poorly documented.