As South Africa nears the end of “a challenging year in agriculture”, the sector’s gross value added would likely show a mild contraction when the data for the entire year gets published by March, says Agricultural Business Chamber (Agbiz) chief economist Wandile Sihlobo.
He said on Monday that this would be a notable shift from two consecutive years of solid growth, with the sector having expanded by 14.9% year on year (y/y) in 2020 and 8.8% y/y in 2021.
Declines in critical crop harvests such as maize, production challenges in the sugar industry, trade friction in fruits, vegetables, beef and wool, as well as widespread foot-and-mouth disease weighed on the sector’s performance this year.
“In a slightly more technical sense, the strong growth in the past two years has created an exceptionally high base, setting the ground for some pull back. Therefore, despite the expected moderate decline in 2022, it is important to note that overall activity has remained strong and the sector maintained its core contribution of improving national food security and job creation,” Sihlobo said.
Export revenue from the sector had remained encouraging, despite the trade frictions South Africa experienced with its citrus in the EU, wool in China and vegetables in Botswana and Namibia.
For example, in the data for the first eight months of this year, South Africa’s agricultural exports amounted to $8.9 billion (R154bn), up by 6% from the first eight months of last year. The generally higher commodity prices had also contributed to this increase in export values.
In these months, Africa and Europe remained vital markets, accounting for roughly two-thirds of total agricultural export earnings. Citrus, maize, nuts, wine, sugar, apples and pears, and grapes were among the key exports, especially in the latter months under consideration, he said.
On the food security front, South Africa’s ranking in The Economist’s Global Food Security Index improved. This index ranks South Africa at 59 out of 113 countries, improving from 70th position in 2021.
Sihlobo said South Africa’s progress in the Global Food Security Index was not merely because other countries have regressed notably since the start of the Russia-Ukraine war, which increased global food prices.
South Africa’s scoring came in at 61.4 for this year, a notable improvement from 57.8 last year. Of the four sub-indices that comprise the Global Food Security Index, food affordability, food availability, food quality and safety and sustainability and adaption, there was a deterioration only in food affordability sub-index, while the rest improved.
Agbiz said there had also been important policy developments and programmes that came into effect this year, which, if implemented effectively could boost long-term growth for the sector.
For example, in May, the industry role players together with the Department of Agriculture, Land Reform and Rural Development (Dalrrd) launched the Agriculture and Agro-processing Master Plan. Meanwhile, the launch of the blended finance instrument between the Dalrrd and the Land Bank was an important step that would support the implementation of the master plan.
The organisation said the one area where there had been minimal progress and where expectations were high at the start of the year, was the launch of the Agricultural Development and Land Reform Agency, which they believed could help to accelerate the redistribution pillar of the land reform programme. The agency was mentioned on various occasions by President Cyril Ramaphosa and Agriculture, Land Reform and Rural Development Minister Thoko Didiza.
“We understand that there has been considerable progress in structuring this agency, and when launched, it could play an important role in land reform. This will be an additional instrument to support the master plan.”
Sihlobo said all this had been achieved while South Africa’s agriculture continued to face a range of exogenous challenges.
Most of these included poorly functioning network industries – roads, rail, ports, water, and electricity – and service delivery problems in municipalities, leading to an increase in business costs.
Moreover, he said there was a need to expand export markets beyond the country’s traditional markets. The priority countries should be China, South Korea, Japan, the US, Vietnam, Taiwan, India, Saudi Arabia, Mexico, the Philippines and Bangladesh as these countries had a sizeable population and large imports of agricultural products, specifically fruit, wine, beef and grains.
Sihlobo said this year presented various challenges to the sector. “Still, the resilience ensured that the core objectives, such as food security and job creation are met amid the intensified geopolitical and rising input costs, largely outside South Africa’s control.”
The 2022/23 summer season presents prospected of a La Niña, which was already evident from the recent heavy rains across South Africa.
Sihlobo said these favourable weather conditions combined with farmers’ drive to increase plantings implied that next year could be a year of recovery from a potential contraction in 2022.
“Importantly, accelerated implementation of the programmes we highlight above in 2023 would be an even more important catalyst for the sector’s long-term growth,” Sihlobo said.
BUSINESS REPORT