EVALUATING THE EFFICIENCY OF THE WHEAT TARIFF REGIME IN SOUTH AFRICA

A drastic change in the marketing system of wheat in South Africa has taken place over the past decade. For the first time an important tariff on wheat was implemented in the form of a variable import levy. Traditionally, countries have implemented variable import levy schemes in order to protect domestic price guarantees by means of determining a reference price, which was generally above the domestic guaranteed price, below which imports were not allowed into the country. In this paper the efficiency of the Wheat Tariff Regime in South Africa is examined, after it has been operational for the past seven years.Crop Production/Industries, International Relations/Trade,

Modelling the wheat sector in South Africa

In this study, the structure of the South African wheat market is analysed using economic theory and econometric modelling techniques. The model is used to make baseline projections regarding the supply and use of wheat in South Africa and to analyse the impacts of various policy alternatives on the wheat sector for the period 2004–2008. Results indicate that the area harvested in the summer as well as winter region will decrease over time. Domestic consumption will marginally increase over time, which will result in higher levels of imports. The ability of the model to simulate policy shocks is illustrated by means of simulating the impact of the elimination of the wheat import tariff on the wheat sector.Industrial Organization,

Modelling the impacts of macro-economic variables on the South African biofuels industry

The production of biofuels from agricultural commodities has received much attention in recent years. Apart from a few private initiatives, biofuels have not seen a large scale, commercial production in South Africa to date. This article sketches a basic picture of the economic feasibility of biofuel production in South Africa, without any form of government support, at 2006 prices. It then takes the analysis a step further and with the aid of a set of scenarios, different potential outcomes, due to a range of possible policy implementation measures, are discussed and the results documented. The Bureau for Food and Agricultural Policy’s (BFAP) sector model is used to simulate the impact of various options on the potential biofuels industry and other related industries during the course of the 2007 to 2015 period. This study shows that a lack of government support for the local biofuels industry could seriously affect its economic viability, especially in the early stages of the industry’s development. Additional issues, such as the impact on food and feed prices, also need to be taken into consideration.Resource /Energy Economics and Policy,

Modelling the impacts of the industrial biofuels strategy on the South African agricultural and biofuel subsectors

The potential impact of the current South African industrial biofuels strategy on the economic feasibility of biofuel production in South Africa is analysed and discussed. The analysis is then taken a step further by means of a scenario to analyse the potential impacts of higher global prices on the feasibility of a local biofuel industry. The BFAP sector model, a partial equilibrium model, is used to simulate the various impacts over the period 2009 to 2017. This study shows that the incentives and commitments, as presented through the strategy, are not sufficient to get a local biofuel industry up and running and make it sustainable in the long term.Resource /Energy Economics and Policy,

Modelling the impact of the ‘Fast Track’ land reform policy on Zimbabwe’s maize sector

This paper attempts to analyze the impacts of the ‘fast track’ land reform policy on maize production in Zimbabwe through the construction of a partial equilibrium model that depicts what could have happened if no further policy shifts had taken place after 2000. The resimulated baseline model was used to make projections based on the various trends of exogenous variables in 2000. This means that the model generated an artificial data set based on what the maize market would have looked like under a set of the pre-2000 existent policy conditions. The ‘fast track’ land reform policy was thus assessed based on the performance of the baseline model using a range of “what if” assumptions. Commercial area harvested was 39 % less than what could have been harvested in 2001, and declining by negative 80.57 % in 2007. Results showed total maize production was 61.85 % and 43.88 % less than what could have been produced in the 2002 and 2005 droughts, respectively. This may imply that droughts would have been less severe if the ‘fast track’ land reform was not implemented. Therefore, the ‘fast track’ land reform had a negative effect on maize production. Thus, the econometric model system developed provided a basis through which the effects of the FTLRP on the maize market may be analyzed and understood.‘fast track’ land reform programme, partial equilibrium model, maize, Zimbabwe, Crop Production/Industries, Land Economics/Use,

Facilitating decision-making in agriculture by using a system of models

This article presents a deterministic farm-level model developed to link to an existing partial equilibrium sector-level model of the grain and livestock sectors of South Africa. The objective is to create a linked system of models consisting of a sector- and farm-level model with the capability to analyse the likely effects of changes in policies and markets at both the sector and representative farm level in South Africa. A representative farm in the Free State Province is used to validate the farm-level model. The farm-level model is used to simulate a baseline as well as two scenarios of the representative farm for the period 2003 to 2010. Results indicate that the farm-level model simulates the representative farm rather accurately compared to historical data. The baseline and scenario results indicate that the linked system of models can be useful for policy and business decision-makers to analyse the impact of change in policies and markets at both the sector- and farm level.Farm Management,

Integrating Agricultural Input Expenditure into a South African Agricultural Sector’s Partial Equilibrium Model

Agricultural inputs expenditure has not been widely incorporated in most partial equilibrium models. Moreover, input costs are treated exogenous and the recursive link between input and output side of the sector is overlooked in few of the models that attempts to incorporate input expenditures. The study has addressed both issues by integrating agricultural input expenditures into the South African sectoral partial equilibrium model by endogenising input costs and recursively linking both input and output side of the agricultural sectors to enhance the results of a standard partial equilibrium model in analysing the effect of policies on agricultural sector.Agricultural Finance, Farm Management,

MODELLING THE MARKET OUTLOOK AND POLICY ALTERNATIVES FOR THE WHEAT SECTOR IN SOUTH AFRICA

In this study, the structure of the South African wheat market is analysed using economic theory and econometric modelling techniques. The developed model is used to make baseline projections regarding the supply and use of wheat in South Africa and to analyse the impacts of various policy alternatives on the wheat sector for the period 2002 2008. Results indicate that after an initial decline in the area harvested in 2003, the area harvested will increase over time. Domestic consumption will gradually decrease over time, which will result in lower levels of imports and higher level of exports. Three policy scenarios are analysed, the elimination of the import tariff for wheat, a twelve percent depreciation in the exchange rate, and the convergence of the elimination of the import tariff and the 12% depreciation in the exchange rate.Agricultural and Food Policy, Crop Production/Industries, Research Methods/ Statistical Methods,

MODELLING LONG-TERM COMMODITIES: THE DEVELOPMENT OF A SIMULATION MODEL FOR THE SOUTH AFRICAN WINE INDUSTRY WITHIN A PARTIAL EQUILIBRIUM FRAMEWORK

Econometric demand and supply models of agricultural commodities and crops have been around for a long time with extensive research and adaptations being made in the grain and livestock sectors. This much attention has, however, not been afforded to long term commodities. This paper presents a partial equilibrium framework for modelling long term commodities using the South African wine industry as an example. The model structure and important assumptions are presented, after which the usefulness of the model is tested in the form of baseline projections and the analysis of a typical “what if” question. The wine model presented in this paper is housed and maintained in the Bureau for Food and Agricultural Policy (BFAP) at the Department of Agriculture, Western Cape and the Universities of Pretoria and Stellenbosch.wine market, South Africa, partial equilibrium model, Crop Production/Industries, Demand and Price Analysis,

Model Closure and Price Formation Under Switching Grain Market Regimes in South Africa

This paper develops the structure and closure of an econometric regime-switching model within a partial equilibrium framework that has the ability to generate reliable estimates and projections of endogenous variables under market switching regimes. Models used in policy evaluation usually either ignore the possibility of regime switching using just a single method of price determination based on average effects, or incorporate highly stylised components that may not reflect the complexities of a particular market. This paper proposes an approach that the authors believe allows the incorporation of features of regime switching in a multisector commodity level model that capture salient features of the South African market and therefore are able to produce more reliable projections of the evolution of the sector under alternative shocks.Agricultural and Food Policy, Crop Production/Industries,