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This is why South Africa's agricultural sector has rebounded

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This is why South Africa's agricultural sector has rebounded

In these days of constant negative news about the South African economy, one has to shine a spotlight on any positive information. This week, the agricultural sector offered such optimism.

After a sharp contraction of -11,9% quarter-on-quarter (seasonally adjusted) in the first quarter of 2023, the country's agricultural gross value added grew by 4,2% in the second quarter.

This improvement was based on the robust production conditions for various field crops and horticulture, which weren't reflected in the first quarter data because of a delayed start to the 2022/23 production season and the base effects.

Also worth noting is that persistent load-shedding threatened agricultural production at the start of the season. 

Still, various interventions to ease the load-shedding burden on farmers, such as load-curtailment, expansion of the diesel rebate to the food value chain, and private sector investment in alternative energy sources, supported production conditions.

Notably, the rainy summer season cushioned field crops and horticulture from the adverse effects of load-shedding. 

Although small, the recently launched Agro-Energy Fund will be valuable in assisting the sector to install alternative energy sources.

The 2022/23 maize harvest is estimated at 16,4 million, 6% higher than the 2021/22 season's harvest and the second-largest harvest on record. 

The soybean harvest could reach a record 2,8 million tonnes. South Africa's sugar cane crop will probably increase by 3% to 18,5 million tonnes in 2023/24. Other field crops and fruit also show prospects for a decent harvest this season.

Also salient is that South Africa's agricultural quarterly gross value-added figures tend to be volatile, hence, our communication always focuses on the annual performance.

Importantly, we expect the coming quarters in the sector to show a robust performance and boost the annual growth figure to around 3% (from a revised 0,9% in 2022).

There will probably be a solid rebound in the year's third quarter. The delayed harvest will conceivably be reflected in the data for that quarter.

Aside from the quarterly growth figures, the sector's key challenges are rising geopolitical tension; deteriorating infrastructure; inefficient ports and rail networks; weakening municipalities; crime, and energy supply. 

The government, together with the private sector, should address these issues to support investment and long-term growth in the industry.

Also crucial for the outlook of the agricultural sector is that El Niño is forecast in the 2023/24 summer season, although we remain optimistic that it will have a mild impact on the sector and thus keep production at decent levels and, by extension, sustain growth.

The early start of the 2023/24 production season could be reasonably optimistic. 

On 28 August 2023, the South African Weather Service stated that "the multi-model rainfall forecast indicates above-normal rainfall for most of the country during mid-spring (Sep-Oct-Nov) and late-spring (Oct-Nov-Dec). The early summer (Nov-Dec-Jan), however, indicates below-normal rainfall over the central parts of the country and above-normal rainfall for the northeast."

This optimistic statement further underscores our view that El Niño will not be as harsh as what we witnessed in the 2015/16 season and that agriculture could maintain reasonable growth over the medium term.

Wandile Sihlobo is an agricultural economist and the author of A Country of Two Agriculture: The Disparities, The Challenges, The Solutions (Tracey McDonald Publishers, 2023) and Finding Common Ground: Land, Equity, and Agriculture (Pan Macmillan South Africa, 2020).

 

Author Wandile Sihlobo
Published 15 Sep 2023 / Views -
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