PR - MEASURING THE CONTRIBUTION OF AGRICULTURE TO THE ECONOMY OF THE FREE STATE PROVINCE OF SOUTH AFRICA

Abstract:

Economic base, Input-output, semi-input-output and Social Accounting Matrix (SAM) multiplier analysis is often used to capture the contributions of the sector, this paper using a Computable General Equilibrium (CGE) estimates the direct as well as indirect contributions of agricultural growth in the economy of the Free State province (FSP). It also decomposes the effect of agricultural output growth by sources into input and productivity growth. The results confirm that the indirect benefits of agriculture exceed its direct contributions and that the contributions made by enhancing productivity in agriculture are a lion share. A growth in agriculture leads to a 0.7% growth in the Free State provincial total production. A substantial export growth of agriculture and manufacturing sector is observed in provincial economy. FSP can experience a gain in household consumption expenditure, household income and welfare (measured by equivalent variation) as a result of agricultural growth. The analysis further provides empirical support for the development of agriculture, mining, manufacturing and community service based strategies that encourage increased production. The study recommends that a development strategy will require a reorientation of government policies towards the immediate objective of improving productivity in effective sectors.

Key words: SAM; CGE, agricultural growth; direct and indirect contribution, input and productivity growth.