Various local challenges have caused the agricultural sector to struggle in the second quarter of 2024. According to the Agbiz/IDC agribusiness confidence index, it has dropped to 38 points from 40 in the previous quarter, marking the lowest level since the third quarter of 2009.
Agbiz senior economist Wandile Sihlobo said the mid-summer El Niño-induced drought’s impact on summer grains and oil-seed production is one of the major factors that weighed on sentiment.
Agricultural sector tested
He said the drought coincided with the long-standing challenges of inadequate road infrastructure and municipal service delivery, the lingering animal disease challenges and heightened geopolitical tensions are also the primary concerns for the sector.
“While the farming community recognises the improvements in Transnet’s operations, they highlight the need for continuous work to address the inefficiencies of the ports and rail network.
“The uncertainty about the formation of the government at the time of the survey may have added to the downbeat mood amongst the agribusinesses. This survey was conducted between June 10 and 19, covering businesses operating in all agricultural sub-sectors across South Africa,” he said.
According to the report, the employment sub-index fell by 12 points from Q1 2024 to 38. “This was a surprise given while the production conditions have been tough for some commodities, the employment conditions held up in the first quarter of the year, supported by robust horticulture production and resilience in some regions,” the report stated.
Sihlobo said there remains some pessimism in the sector, although some sub-sectors have had an impressive start to the year.
“While the farming sector may have worried about the political outlook at the time of the survey, the reaction to the newly formed Government of National Unity has been widely positive, and the financial markets reaction reflects that optimism,” he said.
Meanwhile, the report stated that the capital investments sub-index was down by 4 points from Q1 2024 to 46. The sub-index measuring the volume of export sentiment fell by 14 points to 21 in Q2 2024.
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Mixed sentiments in agriculture
“The market share of the agribusiness sub-index is up 6 points from Q1 2024 to 65 in Q2. Except for the respondents in the inputs, winter crops and some financial services businesses, which showed an improvement, most held a generally unchanged view.
“The general economic conditions sub-index recovered by 9 points to 38 in Q2 2024, still far from the neutral point mark of 50. This slight recovery in the mood about the economic conditions could be linked with expectations of a reduction in load shedding this year, and it is broadly consistent with improvements in various market analysts’ gross domestic product forecasts,” the report stated.
However after a sharp fall at the start of the year, the general agricultural conditions sub-index recovered by 28 points to 46 in Q2 2024. “These sentiment results mirror an end of the intense El Niño cycle and a transition to the expected La Niña later this year and into the 2024/25 summer season.
“This would bring much-needed rains for summer crops. Moreover, the winter crop season, which is currently underway, is experiencing favourable production conditions, and the respondents highlighted this view,” the report stated.
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