While South Africa’s agricultural sector faced several challenges last year, it was not expected that the sector’s overall annual performance would drop sharply, the Agricultural Business Chamber (Agbiz) said after the release of data for gross domestic product (GDP) fourth quarter 2023.
But the figures released yesterday by Statistics South Africa (Stats SA) show that the gross value added for agriculture fell notably by 12.2% year-on-year, Agbiz chief economist Wandile Sihlobo said.
This comes as South Africa’s GDP increased by a mere 0.1% in the last quarter of last year.
Headwinds in the livestock and poultry industry weighed on the sector more intensely than anticipated.
This showed that unfortunately the agriculture, forestry and fishing industry decreased by 9.7% in the fourth quarter of 2023, contributing -0.2% of a percentage point to GDP growth. This was primarily attributed to decreased economic activities reported for field crops, animal products and horticulture products.
In the third quarter of last year, South Africa's agricultural gross value added contracted by 9.6%.
Sihlobo said that along with the Bureau for Food and Agricultural Policy (BFAP), they had expected a mild contraction in 2023 because of the animal disease challenges in the livestock and poultry sub-sector.
“The livestock and poultry industry, which accounts for nearly half the sector’s value, was hit by animal diseases such as foot-and-mouth, avian influenza and African swine fever. Regarding the field crops, the harvest was robust but insufficient to boost the overall sector performance.”
Furthermore, some agricultural commodity prices were generally down in 2023, which slightly added to the downward performance of the sector.
“The Agbiz/IDC Agribusiness Confidence Index (ACI), which we view as a lead indicator of the sector’s performance, deteriorated by 10 points to 40 in the last quarter of 2023, reaching its lowest level since the second quarter of 2020, at the height of the Covid-19 pandemic hard lockdown restrictions,” he added.
Looking ahead, Sihlobo said the path ahead for the sector was even more challenging because of the intensified El Niño dryness that continued to strain the 2023/24 summer crop production prospects.
Maxwell Mudhara, a professor of agricultural economics at the University of KwaZulu-Natal, said the negative growth rate in agriculture meant that the sector was bringing down the national GDP performance, albeit in its small way.
“The sector will witness some depressed income levels and shedding-off of employment,” he said.
He added that the El Niño weather pattern in the first quarter was likely to see a continuation of the negative growth of the agricultural sector.
“The electricity disruptions continue to cause havoc to the economy, including agriculture. A strong growth in national GDP would be required to counter the negative effects; however, the persistent electricity challenges dampen such prospects.”
Casey Sprake, an investment analyst at Anchor Capital, said looking ahead, the near-term prospects for growth would remain lacklustre for both the agricultural sector and the greater South African economy.
“Essential rainfall during the critical pollination stage for the 2023/24 summer crop season has failed to materialise, which is raising alarm bells as to the quality and quantity of the upcoming harvest. The decline in domestic production, coupled with escalating fuel prices, will likely lead to upward pressure on inflation, with consumers likely to bear the brunt,” Sprake said.
John Hudson, Nedbank Commercial Banking head of Agriculture, said from a performance perspective agriculture had experienced two tough years with 0.3% growth in 2022 and a contraction of 12.2% in 2023.
“Given the many uncertainties in the global and local outlook along with the persistent challenges faced, such as load shedding, weak local demand, biosecurity concerns, declining prices, deteriorating infrastructure, logistics challenges and port inefficiency and poor service delivery, it does make for a tough year ahead,” Hudson said.
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