By Gilberto Biacuana
The South African agricultural sector had a mixed growth trajectory in 2023. The past year saw the continuation of the post-pandemic recovery. It also saw the reduction in the prices of major agricultural inputs such as fuel and agrochemicals (mainly fertiliser) whose prices have been affected by the shortages induced by the ongoing Ukraine-Russia war.
The output of most major crops such maize, soybeans and wheat remained at record highs. The ninth and final crop estimates from the Crops Estimate Committee (CEC) of the Department of Agriculture, Land Reform and Rural Development indicate that the output for summer crops grew by 7.1% in 2023 to 20.1 million tonnes from 18.7 tonnes in 2022. The fifth CEC’s winter crop production forecast indicates that the output for winter crops will increase by 5.1% to 2.8 million tonnes in 2023 from 2.7 million tonnes in 2022.
Nonetheless, the sector has faced a number of biosafety issues that constrained its growth for most of 2023. The livestock subsector, which accounts for almost half of the agricultural gross value, battled with avian influenza and foot and mouth disease that affected output in the poultry and beef industries and drove prices of poultry products through the roof with dire consequences for the already strained consumer.
These two outbreaks also affected South Africa’s exports of poultry products and beef. The citrus black spot disease that affects citrus fruits has also been a concern for exports to the European Union.
Having grown by 4.2% (quarter-on-quarter, seasonally adjusted and annualised) in quarter two 2023, the agricultural sector contracted by 9.6% (quarter-on-quarter, seasonally adjusted and annualised) in quarter three 2023 (see Figure 1). The contraction in the agricultural sector was influenced by a decline in field crops, animal products and horticulture products.
In the past year, the food security situation in South Africa has been affected by both access and affordability. The biosecurity issues in the livestock sector reduced the supply of meat products which increased prices putting immense pressure on the already strained consumer.
Economic growth has been anaemic affecting employment and household incomes. The South African Reserve Bank (SARB) expects the economy to grow by 1.2% in 2024 and by 1.3% in 2025 influenced in part by a slight reduction in load shedding. This levels of forecast economic growth are still too low to create meaningful employment opportunities that could improve household’s disposable incomes.
Consumers have been affected by the stubbornly high consumer price inflation (CPI) and food inflation for most of 2023 (see Figure 2).
In 2023, CPI averaged 6.0% and food inflation averaged 11% respectively. SARB expects CPI to ease to 5.0% in 2024. The repurchase rate (repo rate) now stands at 8.25%. It has been increasing for most of the post-pandemic period and has affected household disposable income as households credit servicing costs increased.
Looking ahead, the growth of the agricultural sector is likely to be positive. The seasonal outlook has improved a lot and the fears of El Niño have dissipated. There are also positive developments in the export front with new export opportunities for avocado to China and meat to Saudi Arabia. However, major challenges of doing business still persist.
The South African agricultural sector will still be constrained by the same challenges in 2024. The biosafety situation will still remain a major risk to agricultural production with negative effects to farm earnings and food security. South Africa’s veterinary services are in a crisis and this poses a risk to the livestock industry. This requires major attention if the livestock sector is to grow optimally.
Load shedding, logistical challenges at the rails and ports, the deteriorating rural road infrastructure and the ongoing Ukraine Russia war and the Israel Palestine war, will be major challenges for the agricultural economy in 2024.
The poor reading of the Agbiz/IDC Agribusiness Confidence Index (ACI) in the fourth quarter of 2023 is testament to this fact. The ACI fell by 10 points to 40 in the fourth quarter of 2023 – this is at the lowest level since the height of the Covid-19 pandemic, for example, quarter two 2020 and is a sign of the challenges currently faced by the agricultural sector as already stated above.
Gilberto Biacuana is an economist currently serving as a Research Analyst at Land Bank.