The agricultural sector is bracing itself for a tough year as many of the challenges that impacted it last year remained unresolved while the uncertainties around El Nino loomed large.
In a recent interview with Business Report, Agricultural Business Chamber(Agbiz) CEO, Theo Boshoff said the sector experienced good agricultural conditions in the past year; but business confidence was low due to external factors such as logistics, energy, and animal diseases among others.
“Agricultural conditions are set for a downturn, so it will be a challenging year ahead. Be that as it may, we hope the work put in by organised business over the past two years to reform our energy and logistics sector will start to yield benefits,” Boshoff said.
He said that as always, there were parts of the agricultural sector that struggled and others that stood out.
“The horticultural sector experienced a better year than 2022, but all eyes are on the summer export season given that there are challenges again at the ports. The animal products sub-sector faced severe struggle this year, primarily from bio-security challenges, driven especially by foot-and-mouth disease in livestock and avian influenza in poultry.
The field crops sub-sector had another good year through a combination of high prices and high rainfall.
“El Nino does create a lot of uncertainty for the coming season though,” he said.
The agricultural organisation said considering that South Africa was a small, open economy that was highly reliant on international trade, it would always be impacted by events in the rest of the world.
Agbiz said that after a prolonged period of global stability, there was little doubt that there was now a shift towards more unstable and less predictable times.
Boshoff said South Africa exported 52% of its agricultural products in value terms and imported key inputs such as fertilisers, agro-chemicals, machinery and diesel. He said the instability and global shocks also sent price shock waves that the sector must absorb.
“South Africa can do little to impact the geo-political world around us so the best that we can do is to streamline our own industry, remove unnecessary red tape and improve our local business conditions to make our sector more competitive.
“Despite growing uncertainty in the world, the one consistent theme is that those countries who are most competitive, prosper. We therefore have to focus on all aspects that make our sector competitive, be it tariffs, infrastructure, network industries or regulatory costs,” he said.
The organisation, which helps to ensure agribusiness plays a constructive role in the country's economic growth, development and transformation, said the impact of the rolling blackouts in agro-processing was “huge”.
However, the country was unlikely to see food shortages, since the agricultural sector was dynamic and had emergency plans in place.
However, Agbiz stressed that these plans cost significant amounts of money, which would naturally have a knock-on impact on food prices.
“Burning diesel for generators is expensive. Putting up solar is expensive. With this in mind, the food price inflation we saw in 2023 could have been a lot worse as additional costs were forced onto the sector.
The sector could not pass all of these costs onto the consumer and had to absorb a great deal of the costs itself. “We simply have no choice, as the South African consumers are under a lot of pressure. This is something the sector should receive significantly more credit for than what it has to date,” Boshoff said.
He said the sector had managed to weather the energy and logistics storm admirably, but time was running out to make the structural reforms needed to turn the tide.
The organisation said that considering that 2024 was an election year, there was little time left for Parliament and Cabinet to approve and implement the necessary reforms.
“If I could wave a magic wand, I would wish that the Electricity Regulation Amendment Bill and the Freight Logistics Roadmap be approved before Parliament and Cabinet take a break for the elections. These regulatory changes level the playing field for business to step in and meaningfully participate in energy and logistics.”
South Africa's agricultural exports amounted to $3.9 billion in the third quarter, up by 4% y/y according to data from Trade Map. Overall, South Africa's agricultural exports amounted to $10.2bn in the first nine months of the year, up 1% from the same period in 2022.
For Agbiz itself, the organisation said it’s year was dominated by efforts to position South Africa strategically from a trade point of view, to enable the industry to sustain its export-led growth strategy.
Agbiz chaired the Agribusiness working group within the BRICS Business Council and made significant inroads towards greater opportunities for intra-BRICS trade in agricultural goods.
“The renewal of AGOA and accompanying lobby efforts to ensure South Africa’s continued inclusion was a central focus area and we hope that a favourable announcement will be made early next year. Finally, the EU is busy with an ex post facto review into the economic, social and environmental impact of the SADC EU EPA. This is a vital trade agreement for South Africa’s agricultural sector and must receive the utmost attention. There were several other, important policies and work done throughout the year but the convergence of so many trade conferences and processes in a single year certainly stood out,” the organisation said.