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Critical infrastructure investment is key to agriculture’s upward economic trajectory and contribution to GDP

Infrastructure investment will be key to building on agriculture’s stellar performance over the past two years as the sector made a significant economic contribution to South Africa’s gross domestic product (GDP) result for the fourth quarter of 2021, according to Agri SA. Picture: Henk Kruger/African News Agency(ANA)

Infrastructure investment will be key to building on agriculture’s stellar performance over the past two years as the sector made a significant economic contribution to South Africa’s gross domestic product (GDP) result for the fourth quarter of 2021, according to Agri SA. Picture: Henk Kruger/African News Agency(ANA)

Published Mar 10, 2022

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INFRASTRUCTURE investment will be key to building on agriculture’s stellar performance over the past two years as the sector made a significant economic contribution to South Africa’s gross domestic product (GDP) result for the fourth quarter of 2021, according to Agri SA.

Kulani Siweya, the agricultural organisation’s chief economist, said that the GDP result, which was announced by Statistics SA yesterday, clearly demonstrated the immense contribution that the agricultural sector made to the South African economy.

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The data also showed agriculture's potential to provide even greater opportunities for job creation and earning of foreign exchange through agricultural exports.

Stats SA announced that the agriculture, forestry and fishing industries increased by 12.2 percent and contributed 0.3 of a percentage point to GDP growth. It attributed the increase mainly due to increased production of animal products.

“Yet the sector’s growth continues to be hindered by declining infrastructure, among many other challenges. Agri SA will, therefore, write to National Treasury to request a briefing for the sector on the plans in place to accelerate infrastructure investment, as announced by Minister (Enoch) Godongwana in his 2022 Budget Speech, and on the implementation of the Public Private Partnership framework,” Siweya said.

Siweya said the data identified agriculture as one of the key drivers of growth. The agricultural sector was the best-performing economic sector.

Agri SA said despite these good results, Stats SA noted that the economy had yet to recover to the levels of the second quarter of last year, before the civil unrest in July and the stricter lockdown measures of the third quarter.

Siweya said the sector’s performance belied the challenges that threatened to derail its continued success.

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“The most important of these challenges is the state of South Africa’s critical infrastructure, especially roads, freight and our failing ports. This is a critical challenge South Africa must address in order to consolidate the gains of the past quarter and accelerate South Africa’s economic recovery,” he said.

Reducing the cost of failed and failing infrastructure was key to building the agricultural sector’s resilience to potential shocks and stressors, while keeping it on an upward trajectory.

“As it stands, the sector’s performance in the current quarter is already under threat. In addition to the sector’s vulnerability to variables including weather and global market trends, the current crisis in Ukraine will undoubtedly have negative consequences. Input costs like petrol have risen significantly, and other input costs like fertiliser, of which Ukraine is an important exporter, are also expected to rise,” Siweya said.

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“While conflict in Europe is beyond government’s control, national infrastructure is not.”

FNB senior agricultural economist Paul Makube said the upbeat outcomes for agriculture were not surprising given the already positive indications of good seasonal rains that boosted activity with heavy lifting in the wheat harvest which rose by 6 percent year‑on‑year (y/y) to a record high of 2.26 million tons amid strong prices averaging R5941/ton (up 6.6 percent quarter on quarter (q/q) and 19.5 percent y/y).

He said the animal product category also came to the party, making an immense contribution to the agriculture GDP outcomes on the back of higher livestock slaughterings, robust domestic demand, and strong meat prices.

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According to Makube, livestock slaughtering increased sharply by 17 percent quarter on quarter in the fourth quarter last year, which increased the availability of animal products for the local markets and exports.

“On international trade, 4th quarter export revenues for agriculture, food, and beverages rose 18 percent y/y to $2.8 billion, which brought the overall 2021 earnings to a record high of $12.4bn. This was underpinned by the increased availability of exportable product, robust external demand, and higher commodity prices in a challenging international market that is yet to recover fully from the Covid-19 scourge.

“The increased collaboration by agricultural industry players, Transnet, and logistics companies played a pivotal role in ensuring limited hurdles to the movement of produce destined for various markets across the globe,” Makube said.

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