After contracting for two-consecutive quarters, South Africa's agricultural gross value added expanded by 19.2% quarter-on-quarter (seasonally adjusted) in the third quarter of this year, Agricultural Business Chamber(Agbiz) chief economist Wandile Sihlobo said on Tuesday.
He said the better yields of some field crops – mainly summer grains and oilseeds – and horticulture, combined with relatively higher prices, specifically grains and oilseeds, underpinned this improvement.
“Also worth noting is that the summer grains harvest, typically in the year's second quarter, was delayed by roughly a month and fell into the third quarter this year. In a slightly more technical sense, the weak growth in the last quarter also created a lower base, setting the ground for a recovery in the third quarter,” Sihlobo said.
Carmen Nel, an economist and macro strategist at Matrix Fund Managers said Agriculture fed the strong third quarter gross domestic product growth as economic growth surprised strongly to the upside in the third quarter, with GDP rising by 1.6% quarter-on-quarter – well ahead of consensus expectations of 0.4%.
She said the strong quarterly print and the low annual base, in part due to the July unrest last year, lifted year-on-year growth to a robust 4.1%.
“The upside surprise was largely due to a strong expansion in agriculture amid another bumper harvest across various grains. In addition, construction, trade, transport, storage and communication, and finance and business services all had a solid quarter. Intensified load shedding likely weighed on small businesses in the services sector, with community and personal services contracting in the third quarter,” Nel said.
Releasing the third quarter GDP data for this year, Statistics South Africa said that eight of the 10 industries recorded an increase in economic output.
It said agriculture, forestry and fishing was the largest positive contributor, increasing by 19.2% which it mainly associated with a rise in the production of field crops and horticulture products.
Agbiz said that notably, South Africa's quarterly gross value-added figures tended to be volatile. As such, the agricultural organisation said it expected a mild contraction in the gross value of the sector this year.
This was mainly because of a decline in some field crop harvests, such as maize, which was down 6% year on year (y/y), estimated at 15.4 million tonnes, possible poor performance in sugar cane, and challenges in the livestock industry which struggled with biosecurity weaknesses.
Moreover, it said the base effects after two years of solid growth, where the sector expanded by 14.9% y/y in 2020 and 8.8% y/y last year, would also be an additional factor to the potential annual contraction.
The Agbiz/IDC Agribusiness Confidence Index (ACI), which was generally viewed as a lead indicator of the sector's performance, fell by 4 points in the fourth quarter of this yea,r to 49. This deterioration below the neutral 50-point implied that agribusinesses were slightly downbeat about business conditions in South Africa.
Sihlobo said that if the gloomy path continued, there could be negative implications for the long-term growth of the sector.
Persistent episodes of load shedding, higher input costs, rising protection in some export markets, animal disease outbreaks, rising interest rates, intensified geopolitical tension, which disrupted supply chains, and weaknesses in municipal service delivery and network industries remained the key factors survey respondents cited as their primary concerns.
Overall, while they were downbeat about South Africa's agriculture growth prospects this year, they did not suggest that the sector was in the doldrums.
“The output in a range of commodities is well above the long-term levels, which speaks to the exceptional performance of the past two years rather than the current production conditions. Notably, the sector can return to the growth path if livestock diseases are controlled, and we get a favourable rainy season in 2022/23 summer,” he said.
Sihlobo said that from the factors mentioned above that weighed on the sentiment, the sector recently launched an Agriculture and Agro-processing Master Plan that should help drive long-term inclusive growth and unlock barriers that constrained performance if implemented fully.
He said that admittedly, some barriers required collaboration with the line departments, especially concerning the efficiency of municipalities and the network industries (roads, rail, ports, water and electricity).
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