‘Poor service delivery hobbling agriculture’

SOUTH Africa would struggle to develop vibrant agriculture and agribusinesses if poor service delivery by municipalities was not addressed, the Agricultural Business Chamber (Agribiz) warned yesterday.

Agbiz chief economist Wandile Sihlobo said that farming and agribusiness played a crucial role in sustaining local economies and small towns.

“We see a different pattern where the municipalities fail to provide basic services to their communities and businesses,” Sihlobo said.

Agribiz said governance and service delivery failures directly affected the functioning and efficiency of farming and agribusinesses in small towns, and when they reached unsustainable levels, some agribusinesses move out.

Sihlobo said that a case in point was the recent announcement by Clover that it would close its cheese factory in Lichtenburg because of “ongoing poor service delivery” by the local municipality.

He said the consequences of this decision on the sustainability of the town were yet to show.

“Some supplied various input solutions to the company. And the income from these activities would have supported many other businesses in the community, so the multiplier effects are likely to be large. Therefore, the closure of the firm in such a town will likely have negative spillover effects across the local economy,” he said.

In its report, “The impact of municipal infrastructure in basic service delivery in South Africa”, the Development Bank of Southern Africa (DBSA) wrote that poor service delivery and general poor government services led to the decline of resources, zero job opportunities, job losses and overall poor living conditions. It said that service delivery issues in South Africa began with the lack of adequate infrastructure.

“We’ve come to learn that poor economic and social infrastructure delivery is due to poor planning. For example, there have been numerous low-impact projects identified which are implemented but bear no significant results, leaving service delivery challenges to remain,” the DBSA said.

“There are also instances where projects get implemented, but would later become dysfunctional due to lack of supporting infrastructure or due to poor planning.”

Sihlobo said the failures of municipalities were not unique to Lichtenburg

and did not affect only Clover and the community in the town.

“We have also recently learned of the Astral Foods case where the Standerton municipality failed to provide water and electricity service to the firm’s operation. This led to a disruptive impact on Astral’s operations, which subsequently had financial implications. The efficiency and economic sustainability of agribusinesses, which is impacted by the poor service delivery of the municipalities, also affects the level of investment the businesses could continue to make in such towns. Importantly, this may affect even the very sustainability of agribusinesses as some might incur more costs, as they try to self-provide the services that were supposed to be the municipality’s job.”

According to Agbiz, farmers had to contend with a similar challenge, directly and indirectly. It said agribusinesses provided a range of solutions and market access to local farmers, and if the sustainability of agribusinesses was threatened, the farming community also suffered.

More directly, poor roads, and an unreliable electricity and water supply directly impacted the profitability and sustainability of farming operations. Importantly, these were all entities that provided job opportunities to the least skilled South Africans and indirectly sustained the communities around the small towns.