by Grain S.A.

A bird's eye view

Mining versus agriculture in Mpumalanga

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Agriculture and mining have been the key driving force behind the South African economy for a number of centuries. Although their contribution to GDP has shrunk significantly as the economy has developed over time, these two industries remain at the heart of economic growth and the creation of unskilled job opportunities.

With the sharp rise in the world’s demand for minerals, driven mainly by India and China, the rate of expansion in mining activities over the past 10 to 15 years has been phenomenal.

The areas where the expansion in mining activities has and is taking place, ranges from desolate areas with limited agricultural potential to areas where high potential agricultural land, for example in the Mpumalanga Province, is taken over by mining activities. At the current rate of coal mining in Mpumalanga, it was calculated that approximately 12% of South Africa’s total high potential arable land will be transformed, while a further 13.6% are under prospecting by the mines in Mpumalanga.

For the purpose of this study, a selected pilot area was identified to illustrate the potential impact of mining on agriculture.

The pilot area under consideration

Based on Map 1 below, the pilot area has an approximate total area of 170 763ha, of which 99 518ha is made up of high potential arable land and 38 020ha is classified as moderate potential arable land. Of the 170 763 hectares of land, 84 428 hectares are considered to have high to low cultivation taking place on them and a further 5 956 hectares can be regarded as pivot irrigated land.

The total high, medium and low cultivation hectares influenced by current mining are 27 431, 17 178 and 2 495ha respectively, as well as 3 180ha for pivot irrigation.

Then from the proposed prospecting areas another 13 485, 12 448 and 638ha, within the same field crop boundaries as mentioned and 2 488 for irrigation.

This was calculated by TIMS Consulting, using ARC GIS mapping, with the field crop boundaries data provided by AGIS, 2011.

For the purpose of this study, it was calculated that an approximate total of 79 967ha (Map 1) of the current cultivated land in the Delmas, Ogies and Leandra districts will potentially be taken over by the mines. The time frame for this is uncertain, but the most likely scenario is that this area will be taken up by mining activities over the next ten to twenty years.

Economic impact of mining on agriculture in the pilot study area

Based on the findings illustrated in the above map, further calculations can be made. It is important to note that the data from the map provides an indication of potential hectares to be lost since the actual hectares cannot yet be verified by any of the governmental departments. Evaluating the true economic impact of mining will have to go further than the pilot area, as externalities such as the pollution of the countries scarce water sources and air pollution cannot be left out of consideration.

In order to calculate the loss in maize production, two scenarios have to be taken into consideration. Table 1 illustrates the loss in production, only due to the current mining activities and Table 2 shows the effect if the area under prospecting is also taken into consideration. The tables were compiled based on the average of 75% (Figure 1) maize cropping for Mpumalanga, and a further 16% soybeans, 4% sunflower and 5% sorghum.

Loss in maize production due to current mining

Without taking expected yield improvements into consideration, it is estimated that approximately 447 581 tonnes of maize could be taken out of production from this area over the next 20 years, if all the current and proposed future mining (on prospected areas) takes place.

Consequences due to change in maize area

The partial equilibrium model was used to provide an indication of the projected long-run impacts on maize markets if 447 581 tonnes of maize are taken out of the market.

It is important to note that this shock was analysed under the assumption that the full potential loss in maize production would occur by 2020, which is not necessarily the case. The shock was simulated in the model by gradually introducing a decline in the area under maize production. The total decline in the area under production towards 2020 amounted to 79 343ha.

It is important to note that this is only the impact of the pilot area on the national market price, in other words, the loss of 79 343ha of crop (maize) land.

In a proposed second phase of the research the magnitude of the impact on national maize markets will be significantly larger as preliminary indications are that approximately 400 000ha of high potential land can be lost in total in Mpumalanga. If the anticipated rotational cropping practices brings soybean up to 40% of the total maize area over the long run, it implies that approximately 240 000 ha of high potential land will be lost to maize alone.

At a conservative average yield estimate of 5t/ha, this implies that 1.2 million tonnes of maize will be taken out of the market.

Naturally, other areas in the country that are currently underutilised will potentially be brought back into production as market prices rise significantly to absorb some of the crop losses, however since the potential of the land is lower than the potential that is lost, the average costs of producing one tonne of maize in SA will increase, which will in the end affect food prices.

This study has only provided a high-level view of selected economic effects of mining on agriculture in a pilot study area.

Although the short-run economic impacts on farming level as well as medium impacts on maize markets were illustrated, a significant amount of research still has to be undertaken on the long-run macro-economic, environmental and social impacts.

Both mining and agriculture play a critical role with respect to job creation and contribution to the gross value of the country.

Over the short-run mining’s contribution to the country’s Gross Domestic Product (GDP) exceeds the contribution of agriculture by a significant margin, yet over the long run, agricultural practises are more sustainable. Therefore, the long-run impacts on food security and employment become even more important to understand.

This paper only illustrates the impact of one small pilot area. In reality, the total province has to be taken into consideration.

For reference sourcing please refer to Grain SA

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