The Agbiz/IDC Agribusiness Confidence Index (ACI) fell by 4 points in the fourth quarter of this year to 49 points after remaining in optimistic territory for nearly three years.
Agricultural Business Chamber (Agbiz) chief economist Wandile Sihlobo, who co-authored the study, said yesterday that the dip below the neutral 50-point since the second quarter of 2020 implied that agribusinesses were slightly downbeat about business conditions in South Africa.
“Persistent episodes of load shedding, higher input costs, rising protection in some export markets, animal disease outbreaks, rising interest rates, intensified geopolitical tensions which disrupted supply chains, and ongoing weaknesses in municipal service delivery and network industries remained the key factors survey respondents cited as their primary concerns,” Sihlobo said.
The survey was conducted in the final two weeks of November, covering businesses operating in all agricultural subsectors across South Africa.
Sihlobo said the Agbiz/IDC ACI's fourth quarter results mirrored a sector that had confronted numerous challenges that could threaten growth.
“The fact that the ACI index dropped below the neutral 50-point mark for the first time in nearly three years suggests that the combination of high input costs, friction in our export markets and persistent animal diseases are starting to bite,” Sihlobo said.
The sector could bounce back if the weather conditions proved supportive in the coming months and the South African authorities got a handle on the market access issues in the EU, he said.
The chief economist said the South African government and industry would need to intensify efforts to combat the spread of foot-and-mouth and strengthen the biosecurity of the country.
Paul Makube, the senior agricultural economist at FNB Commercial, said the recent drop in the agriculture confidence had been expected, given the tough market conditions with the onset on the 2022/23 summer crop beginning with elevated input costs, subdued export growth amid higher freight costs as well as logistics challenges.
He said the rising global domestic inflation and interest rates dampened the consumer sentiment in a record low economic growth.
“Nonetheless, the favourable seasonal conditions bode well for another record crop harvest, which should boost revenues. Now early indications are that the expected total summer crop planted area is at 4.351 million hectares with soybeans being the biggest gainer (+16.2% year on year) and, at a potential average production of 2.5 million tons, this would be a record high for the crop.
“The rest of the crops showed declines in the expected planting area across the board. This, however, is early days, and the situation is likely to change as the season progresses,” Makube said.
Sihlobo said that at 2.59 million hectares, the intended maize crop planted area was still higher than the 10-year and 5-year averages of 2.53ha and 2.57ha, respectively, and likely to yield a sizeable crop of 14.59 million hectares.
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