While the South Africa's agricultural gross value 2022 performance was subdued, the sector was expected to recover somewhat this year, says Agricultural Business Chamber(Agbiz).
Agbiz’s chief economist Wandile Sihlobo said early indications suggested that South Africa's 2022/23 summer crop production could amount to 19.3 million tonnes, up 3% from the previous season.
“If the horticulture and the livestock sub-sectors also show a recovery, however marginal, this would lead to positive growth in the sector this year,” Sihlobo said.
After a solid performance of 8.8% year on year (y/y) in 2021, Agbiz thought South Africa's agricultural gross value added would contract mildly in 2022.
“But the data released today by Statistics South Africa paints a slightly positive picture, showing that the sector expanded somewhat by 0.3% y/y. We based our view of a potential contraction on the decline in some vital field crop harvests, such as maize, which is down 5% y/y in the 2021/22 season, estimated at 15.5 million tonnes.
“Moreover, the poor performance in sugar cane production in 2021/22, and the foot-and-mouth disease outbreak in the livestock industry, which spread for the first time in six of South Africa's nine provinces, were additional risks,” it said.
The base effects after two years of solid growth, where the sector expanded by 14.9% year on year (y/y) in 2020 and 8.8% y/y in 2021, was an additional factor to Agbiz’s view of a possible annual contraction in the gross value added in 2022.
This as the Agbiz/IDC Agribusiness Confidence Index (ACI), viewed as a lead indicator of the sector's performance, fell by 4 points in the fourth quarter 2022, to 49. This deterioration below the neutral 50-point implied that agribusinesses were slightly downbeat about business conditions in South Africa.
Agbiz said if this gloomy path continued, (an outcome to be seen next week when it released the quarter one 2023 results), there could be negative implications for the sector's long-term growth.
"Persistent episodes of load-shedding, higher input costs, rising protection in some export markets, rising interest rates, intensified geopolitical tensions which disrupted supply chains, and ongoing weaknesses in municipal service delivery and network industries are some key factors that weighed on sentiments.“
Sihlobo said still, a meagre growth of 0.3% y/y was in line with the employment conditions in primary agriculture, which remained broadly encouraging in the face of all the challenges the sector faced.
For example, in the last quarter of 2022, there were about 860 000 people employed in primary agriculture (down 1% y/y), which was well above the long-term agricultural employment of 780 000.
However, farming businesses were challenged by persistent load-shedding, which had increased input costs as some seek various means of energy generation that required extra capital.
“We remain positive that the interventions that the Department of Agriculture, Land Reform and Rural Development (Dalrrd) seek to make could slightly cushion the sector. The Dalrrd interventions add to the finance minister's recent interventions about diesel rebates for food value-chain role-players and that there could be possible energy curtailment options for heavy users where technical infrastructure permits.
“Other possible options currently being discussed include blended finance to incentivise own generation within agriculture as part of ‘greening’ South Africa's agriculture,” Agbiz said.
The detailed brief of interventions had yet to be released by the Dalrrd through the office of the director general.
John Hudson, Nedbank's Head of Agriculture, said 2020 and 2021 were positive growth years for agriculture, but with 2022 proving far more tricky and a number of sub-sectors experiencing pressure, a flat GDP performance was expected.
He said that at 0.3% growth this was in line with expectations and under the circumstances it was not a bad outcome.
“A positive factor is that agriculture continued to perform well from an export perspective with another record year recorded in 2022. In spite of the subdued GDP performance in 2022 and ongoing challenges related to energy security agriculture remains resilient. Despite high interest rates, domestic challenges and a subdued world economy we are seeing some relief on key input costs and along with a favourable summer rainfall outlook we are expecting a better year in 2023,” Hudson said.
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