The mixed fortunes among various subsectors of South Africa’s agriculture meant that growth, at least in the first quarter of the year could be subdued with a potential recovery later in the year, Agricultural Business Chamber(Agbiz) chief economist Wandile Sihlobo said yesterday.
“The available soft insights suggest that near-term growth prospects of the agricultural economy are weak after subdued growth of 0.3% year on year (y/y) in 2022. For example, the livestock and poultry industries, which account for roughly half of the agricultural sector’s value are under pressure amid relatively muted cattle and beef prices, while farmers also continue to face higher input costs for maize and soybeans,” Sihlobo said.
Ongoing load shedding was particularly challenging for the poultry industry, with the unreliable electricity supply causing significant production interruptions.
“As various energy solutions are explored at some farms, the financial costs will persist in the coming months. Similarly, the red meat industry faces an environment where the consumer is under pressure, and thus there is minimal room for upwards price adjustments,” he said.
Moreover, the tail-end effects of foot-and-mouth disease which interrupted exports, persisted, further weighing down demand as the country still could not access some export markets. This was likely to be the reality for some farmers for much of the first half of this year.
Solutions to load shedding were also crucial for fruit and vegetable farmers who depended on irrigation for their produce. This also meant that the Department of Agriculture, Land Reform and Rural Development needed to launch its blended finance solution for energy, which should help ease the financial burden of renewable solutions. This was an intervention mentioned in the department’s national energy task team, but has yet to be communicated to the sector formally, Sihlobo said.
The fruit industry dominated the export activity of the agricultural sector, which meant that any negative impact on production would lower the export revenue.
Last year, South Africa’s agricultural exports reached $12.8 billion (R233bn), which was up 4% from the previous year.
Positive momentum would mainly be from field crops and some fruits. He said that this assumed that there were no significant downwards revisions on the current crop forecasts and that energy interventions to stabilise the power supply in the sector were quicker.
“Such an environment would also mean that primary agricultural employment remains reasonably stable above the long-term agricultural jobs of 780 000. In the last quarter of 2022, there were about 860 000 people employed in primary agriculture. The one aspect whose impact on the jobs outlook we will also monitor is the recent increase in minimum wages which is a concern, specifically for the fruit industry,” he said.
Agbiz said the field crops sector was a subsector on a much stronger footing. It said for example, South Africa’s sugar-cane crop was projected to recover by 7% y/y to 18.4 million metric tonnes in 2022/23, according to data from the Pretoria office of the United States Department of Agriculture.
Grains and oilseeds production conditions for the 2022/23 season also looked positive with South Africa’s 2022/23 summer grains and oilseeds production expected at 19.3 million tonnes, up 3% from the previous season, according to recent data from the Crop Estimates Committee.
“If we consider the large crops like maize, soybeans and sunflower seed, production is forecast at 15.6 million tonnes (up 1% y/y), 2.7 million tonnes (up 19% y/y), and 775 260 tonnes (down 8% y/y), respectively. The expected improvement in the maize harvest is on the back of expected better yields as the area plantings are down marginally from the 2021/22 season,” Agbiz said.
BUSINESS REPORT