The Commercial Agricultural Economy Of The East Cape

The East Cape, and in particular the Smaldeel area, is used to exemplify some of the characteristics and problems of commercial farming over a period of about three decades to serve as a backdrop for the broader theme of normalising South African agriculture. The regional economy is dominated by Port Elizabeth-Uitenhage and East London which account for most of the population and threefourths of the Gross Geographic Product (GGP). Agriculture accounts for only 10% of GGP, but is one of the most labour intensive sectors in a region with 24% of its population unemployed. The agricultural economy of the region is very diversified, but livestock farming plays the most important part in all areas contributing 72% of gross income. The chief changes which have occured in East Cape farming, as elsewhere, have been the decline in the number of farms and increase in farm size, greater capital investment, increased specialisation and declining employment. There are also indications, though based on limited information, of an apparent decline in the real returns to capital investment from livestock farming in the Smaldeel area. The causes are, inter alia, rising interest rates, inflation and a decade of below average rainfall. The implications for prospective commercial farmers is that the industry will continue to be difficult to enter because of the relatively large capital requirements and low short-term returns. Several possibilities, especially in direct sales and alternative labour arrangements may nevertheless enable successful competition.