DURBAN - SOUTH African agribusinesses have continued to remain optimistic in the first quarter of 2021 as the Agbiz/IDC Agribusiness Confidence Index (ACI) improved to reach the highest level since the second quarter of 2014.
The ACI improved from 61 points in the fourth quarter of 2020 to 64 in the first quarter of 2021.
Wandile Sihlobo, the Agricultural Business Chamber (Agbiz) chief economist, said that these results likely reflected not only the robust performance of South Africa’s agricultural sector in 2020, where gross value-added expanded by 13.1 year-on-year, but was also positive early signs for another season of large harvests in 2020/21 from most sub-sectors.
This first-quarter survey was conducted in the first two weeks of March 2021 and covered agribusinesses operating in all agricultural sub-sectors across South Africa. A level above the neutral 50-point mark implied that agribusinesses were optimistic about operating conditions in the country.
Most of the ACI’s 10 sub-indices increased in the first quarter of 2021. The turnover and the net operating income sub-indices lifted by 4 and 7 points form the last quarter of 2020 to 86 and 89, respectively. Except for agricultural insurance providers, all other agribusinesses who participated in the survey expressed optimism due to a large harvest in the 2019/20 production season that boosted financial conditions.
The market share of the agribusinesses sub-index improved by 10 points to 71, reaching the highest level since the last quarter of 2016 primarily underpinned by agribusinesses operating in field crops and financial services.
The employment sub index increased by a mere 2 points to 43 in the first quarter of 2021. At this level, this sub-index suggested that agribusiness remained cautious about increasing staffing levels.
After declining in the last quarter of 2020, the capital investments sub-index rebounded by 5 points to 46. There was also evidence of improved sentiment in sales of movable agricultural assets such as tractors, which have been robust since mid-2020 and underpinned by improved farmers’ finances following the large harvest in the 2019/20 production season.
The economic conditions sub-index jumped by 16 points to 39 in the first quarter of 2021, reaching its highest level since the last quarter of 2018. Nevertheless, this specific sub-index was still far off the neutral 50-point mark as the 3.6 percent year-on-year economic growth that the South African Reserve Bank forecasts for 2021 would not be sufficient to lift South Africa’s fortunes back to pre-Covid-19 levels.
Agbiz/IDC said they were surprised to see a slightly weaker sentiment about export conditions, albeit still above the 50-points mark.
The sub-index measuring the volume of exports sentiment declined by 4 points to 56 in the first quarter of 2021. The expected sizeable domestic production could lead to higher volumes of exports in 2021.
“We suspect that the lockdowns in some European countries in the first quarter of 2021 might have contributed to a decline in sentiment in this sub-index.”
Sihlobo said industry-by-industry analysis still showed that the positive growth numbers were only an aggregate story of agriculture. The wine and tobacco industries, which were arguably the hardest hit by the ban on sales in various lockdown stages, remained financially constrained and would take longer to recover.
BUSINESS REPORT