The sustainability of agribusinesses is facing several headwinds, according to the Agricultural Business Chamber (Agbiz).
Challenges to the sector include persistent load-shedding, growing protectionism in key export markets, rising interest rates, intensified geopolitical tensions, ongoing weaknesses of municipality service delivery and network industries (water, rail and ports), as well as the deterioration of rural roads.
In July, the organisation engaged with Agbiz members and sector role-players in various regions of the country. It said the feedback on the near-term outlook was reasonably positive in all engagements, with many attributing their optimism to the favourable 2022/23 summer crop and 2023/24 winter crop seasons.
Wandile Sihlobo, the chief economist at Agbiz, said the summer rainfall, which had supported agricultural production, had also had the downside of exacerbating the damage to neglected rural roads.
"This is not a challenge faced only by large commercial farmers that serve a broader clientele, but all farmers. The emerging or new-entrant black farmers with limited financial resources face this challenge more acutely. The roads across the rural towns of the Eastern Cape, Free State, North West, Limpopo and KwaZulu-Natal, to name a few provinces, are poorly maintained in some instances (are) in an unusable state.
“Compounding this challenge is the reality that South Africa now transports over two-thirds of its agricultural produce by roads, as rail transport has faced its fair share of challenges over the years," Sihlobo said.
This meant that the higher agricultural output without functional roads did not yield full financial benefit to farmers and agribusinesses, as some had to fund private construction at their cost to maintain some roads.
"This happens while the municipalities often have the allocated financial budget to cover their infrastructure needs, but mismanage the funds, as so often reported by the Auditor General."
Sihlobo said the rising protectionism in crucial export markets remained a major challenge, as with the citrus export non-tariff barriers in the EU.
This area required the South African government to take the lead and help engage with the country’s trading partners to resolve this issue.
Agbiz said the need for expanding export opportunities had become even more urgent as the agricultural output consistently improved and the country had limited capacity to absorb new produce.
South Africa already exported half of its produce; hence, the efforts of the Agriculture and Agro-processing Master Plan to boost production had to emphasise the expansion of the export markets. Japan, China, India, Saudi Arabia, Bangladesh, Philippines and South Korea are key markets where South African agriculture and agribusinesses are interested in expanding their presence.
“While working on new markets, we must maintain access to existing markets such as the EU, Africa, the US, and various Asian markets,” Agbiz said.
Biosecurity remained a challenge as seen through various outbreaks of foot-and-mouth disease, African swine fever and Avian influenza, the organisation said.
These outbreaks worsened the operating conditions in industries that have also felt the higher cost of inputs. As a result of these outbreaks, exports of livestock products had also been negatively affected.
Sihlobo said as climate change intensified, animal diseases were likely to be more prevalent, and the Department of Agriculture, Land Reform and Rural Development (Dalrrd) should consider earmarking a share of their annual budgets for emergency purposes to deal with such outbreaks.
These funds should be used under strict rules and in concurrence with the National Treasury only in the case of notifiable animal disease outbreaks.
"This is necessary to control animal movements, buy vaccines, employ additional staff, and compensate producers when animals must be culled, according to the World Organisation for Animal Health (OIE) guidelines. Veterinarians and animal health technicians are critical for continued surveillance, monitoring, and advice to farmers," he said.
Agbiz said another issue that had surfaced in discussions was the challenge of the waning trust between organised agriculture and government. The issue of "trust" and "accountability" were vital to building credibility, Sihlobo said.