South Africa has rapidly reduced tradebarriers since the end of Apartheid, yet agriculturalproduction and exports have remained sluggish. Also, povertyand unemployment have risen and become increasinglyconcentrated in rural areas. This paper examines the extentto which remaining price distortions, both domestic andforeign, are contributing to the underperformance of theagricultural sector vis-a-vis the rest of the economy. Theauthor draws on a computable general equilibrium (CGE) andmicro-simulation model of South Africa that is linked to theresults of a global trade model. This framework is used toexamine the effects of eliminating global and domestic pricedistortions. Model results indicate that South Africa'sagricultural sector currently benefits from global pricedistortions, and that removing these will create more jobsfor lower-skilled workers, thereby reducing incomeinequality and poverty. The author also fined that SouthAfrica's own policies are biased against agricultureand that removing domestic distortions will raiseagricultural production. Job losses in nonagriculturalsectors will be outweighed by job creation in agriculture,such that overall employment rises and poverty falls.Overall, the findings suggest that South Africa's ownpolicies are more damaging to its welfare, poverty andinequality than distortionary policies in the rest of theworld. Existing national price distortions may thus explainsome of the poor performance of South Africa'sagricultural sector and rural development.
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