The prospect of El Niño looms large for the agriculture sector this year as the industry still has to contend with the same challenges experienced last year, such as load shedding, says Agricultural Business Chamber (Agbiz) CEO Theo Boshoff.
In an interview with Business Report, he said in the past year, they had experienced good agricultural conditions, yet business confidence was low due to extrinsic factors such as logistics, energy, animal diseases and others.
“Agricultural conditions are set for a downturn so it will be a challenging year ahead. Be that as it may, we hope that the work put in by organised business over the past two years to reform our energy and logistics sector will start to yield benefits,” he said.
Describing the sector operations this year, Boshoff said as always in agriculture, there were sectors that struggled and sectors that stood out.
“The horticultural sector experienced a better year than 2022, but all eyes are now 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 brought on by continued biosecurity 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 Niño does create a lot of uncertainty for the coming season though.”
The agricultural organisation said considering that South Africa was a small, open economy that was highly reliant on international trade, it would always be highly impacted by the rest of the world. After a prolonged period of global stability, there was little doubt that the world was now seeing 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 shockwaves 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,” Boshoff said.
South Africa’s rolling blackouts has had an adverse impact on irrigation, cold storage, as well as man-hours lost in agro-processing, amongst others.
“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 cannot pass all of these costs onto the consumer and has actually absorbed a great deal of the costs.
“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.
Boshoff said the sector had managed to weather the energy and logistics storm admirably to date, but it was running out of time to make the structural reforms needed to turn the tide.
Considering that 2024 was an election year, it left precious little time for Parliament and Cabinet to approve and implement the reforms that were necessary.
“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,” he said.
South Africa's agricultural exports amounted to $3.9 billion (R73bn) in the third quarter of this year, up by 4% year on year, 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 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 accompanies 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 currently busy with an ex post facto review into the economic, social and environmental impact of the SADC EU Economic Partnership Agreement. 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.
BUSINESS REPORT