Home: Agricultural Economics: MACRO-ECONOMIC ANALYSIS
by Cecilia Punt
A database, known as a social accounting matrix (SAM), has been constructed for the Western Cape. A SAM is a complete and consistent set of economic and social accounts for a country and/or region and can be used as a framework to impose completeness and consistency on the majority of economic and social data collected for a region. The SAM for the Western Cape is for the year 1993 and consists of 291 accounts, of which 94 are production accounts.
A SAM provides information on topics such as the structure of production, the distribution of income, and even trade relationships. An appropriately structured SAM should provide the bulk of data required for whole economy models, which can be used to examine a range of policy questions.
Fixed-price models, e.g. SAM-Leontief models, as well as flex-price models, such as computable general equilibrium (CGE) models, are calibrated with the data contained in SAMs. Both types of models are currently being used for policy analysis. Analysis is based on the process of identifying and quantifying, where possible, the costs and benefits of alternative choices to create "what if" scenarios.
The Department is also associated with the Bureau for Food and Agricultural Policy (BFAP). BFAP was established in 2004 with the purpose of facilitating decision making in the South African agricultural sector as well as training of individuals in order to increase analytical and research skills available to the sector. Since the time of inception, BFAP has facilitated informed decision making by South African agribusiness, policy makers, trade negotiators and farmers through the development and operation of comprehensive analytical systems.
The analysis of world and domestic markets consists of baseline projections and scenario analyses of possible market and policy changes and the possible impacts of these changes on domestic markets and farm profitability and survivability. The baseline and scenario’s are constructed in such a way that the decision maker can form a picture of possible future changes and what their likely effects could be. Pro-active actions can thus flow from the use of these baselines and scenario’s.
A report, the South African Agricultural Baseline, is published annually and contains baseline projections on a wide range of agricultural commodities. Researchers at the Western Cape Department of Agriculture are specifically involved in modelling wine and fruit commodities. For more information contact Sanri Reynolds (SanriR@elsenburg.com) or visit www.bfap.co.za .Trade policy issues that can be analysed using CGE models include SACU trade negotiations, the negotiations of the World Trade Organisation (WTO), and the re-negotiation of the Lome Convention.
With respect to fiscal policies, CGE models can be used to identify the implications of different tax regimes on the economy. It can show how changes in trade taxes will impact the government’s budget, or calculate optimal tax regimes subject to given constraints.
Macro-economic analysis includes global themes such as international competitiveness, market deregulation and trade liberalisation. In addition, themes such as redistribution, employment creation, legislative and environmental issues are also addressed.
Previous research applications include the evaluation of possible implications of the next round of WTO negotiations on the economy of the Western Cape, the estimation of the implications of supply-side constraints on agriculture in the province, and the impact of fuel price increases on the Western Cape economy.
Macro-economic analysis is also carried out as part of the Provincial Decision-Making Enabling (PROVIDE) project at Elsenburg.
