Abstract:
Agricultural production measures the performance and efficiency of a country’s
agricultural sector. The state of agricultural production can be assessed through the
value of agricultural production, which is a product of agricultural gross production and
output prices in monetary terms. The study examines the relationship between the
value of agricultural production, government spending on agriculture, and other
selected variables. Annual data for the value of agricultural production, government
expenditure in agriculture, consumer price index, average annual rainfall, food import
value, and population from 1983 to 2019 were collected from different sources and
were used in the analysis for this study.
The Johansen cointegration test was used to determine the existence of a long-run
relationship between the value of agricultural production and selected variables by
using both the trace and eigenvalue tests. The results indicated that there is a long run relationship among the variables. The study further used the Granger causality
test to check the causality between the value of agricultural production and
government expenditure in agriculture. The results show that there is no causal effect
between the two variables. Lastly, the study used a Vector autoregressive (VAR)
model to determine the relationship between the value of agricultural production and
selected variables. The results of the VAR model indicated that government
expenditure on agriculture, average annual rainfall, food import value, and population
positively affect the value of agricultural production. The study also found that the
consumer price index negatively affects the value of agricultural production.
The study recommends that the government increase its spending on the agricultural
sector, which could be in the form of research investment in technologies such as
climate-smart agricultural technologies. Additionally, the study recommends that
policymakers should review the monetary policy of South Africa to ensure price
stability and prevent inflation. Lastly, the study recommends that the South African
government should discourage imports and encourage South African agricultural
producers to produce more major imported food products.
