Agriculture ‘could pull Mzansi through tough 2021’

South Africa’s economy contracted by 7% in 2020, yet the agricultural sector grew by 5.9%. Agri SA economist Kulani Siweya says this should be a wake-up call for government to allocate bigger budgets to the sector

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A leading economist predicts another good year for Mzansi’s vibrant agricultural sector. This, after the sector grew by 5.9% in the fourth quarter of last year despite the Covid-19 battered economy that contracted by 7%.

Paul Makube, senior agricultural economist at FNB Agri-Business, says, “The recent harvest estimates of the country’s biggest staple, maize, point to a potential crop north of 16 million for 2021. Horticulture and livestock conditions are conducive to further stellar growth in agriculture.”

His prediction comes as Statistics South Africa (Stats SA) last week released the latest quarterly and full-year GDP results. This clearly indicated that while the overall economy is stagnant, agriculture remains a beacon of hope.

Favourable weather conditions

Kulani Siweya, Agri SA head of economics. Photo: Supplied/Agri SA
Kulani Siweya, Agri SA head of economics. Photo: Supplied/Agri SA

Kulani Siweya, Agri SA’s agricultural economist, says the sector’s 2020 performance flourished, as expected, coming in at 13,1% in 2020. He attributed the impressive performance to a few known factors.

This include favourable weather conditions, such as the La Niña climatic event, and, to a large degree, the classification of the sector as an essential service during the Covid-19 lockdown.

“That allowed for production to continue as most of the economy came to a halt. Further to this was the good performance across sub-sectors, from the second-largest grain harvest to impressive performance of horticulture, led by citrus exports, and the recovery in the livestock industry.”

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Siweya can, however, attest that there were challenges in some sub-sectors, particularly the alcohol and tobacco sub-sectors. These were battered by the severe restriction on sales and consumption of products at various stages of the lockdown.

The alcohol industry has suffered severe losses as a result of three alcohol bans, showing R36.3 billion in lost revenue. Photo: Supplied/Unsplash
The alcohol industry has suffered severe losses as a result of three alcohol bans, showing R36.3 billion in lost revenue. Photo: Supplied/Unsplash

‘A real-life experiment’

He says while the overall economy remain in the doldrums, the past year presented a real-life experiment on many aspects.

This has now gifted the country with data that shows that, among other things, the agriculture sector remain a glimmer of hope in tackling many of the ailments in the economy.

“The data shows that, with the correct policy regime and collaboration, the sector still remains a low-hanging fruit to kick-start the economy. This should serve as a wakeup call for government to ‘suit the action to the word, the word to the action,’ to quote Hamlet by Shakespeare.”

“One example of this is the limited budget that is allocated to the agricultural sector in the national budget. When compared to other emerging markets, South Africa’s national budget allocation to agriculture has remained well below 2% over a number of years, where other emerging markets spend around 6% on this sector.

“What this has translated to, is those particular markets realising a GDP growth of 3,7% on a 10-year average, whereas South Africa hovers around 1,7% in the same period.”

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Siweya says president Cyril Ramaphosa and some of the ministers have on various platforms alluded to the importance of the agricultural sector.

SONA: President Cyril Ramaphosa delivered his State of the Nation address on Thursday evening, trying his best to inspire South Africans amid economic decline and the aftermath of the Covid-19 pandemic.
President Cyril Ramaphosa. Photo: Supplied/GCIS

“But this should not end as lip service, but should transition into implementation, if there’s serious urgency to revive the overall economy and make a dent in unemployment numbers,” he says.

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He believes that looking forward, much of the risks lie in the speedy implementation of correct policies, which underpin realising the growth potential.

“Favourable weather conditions are still with us and the production outlook remains positive. This lays a good foundation for another positive year for the sector, albeit softer, owing to base effects.”

Animal products production

Paul Makube, senior agricultural economist at FNB. Photo: Supplied
Paul Makube, senior agricultural economist at FNB-Agribusiness. Photo: Supplied/Food For Mzansi

Meanwhile Makube indicates that the strong fourth quarter of 2020 was underpinned by increased production of animal products which account for over 50% of the country’s agriculture gross producer value.

“The animal products defied the seasonal demand pressures during winter as well as the covid-19 disruptions and came out stronger as prices were resilient across most categories.”

Makube adds that favourable production conditions, strong export demand, and the favourable exchange rate also boosted overall agriculture performance in 2020.

“For example, export revenues increased (by) 3% (year-on-year) to a three-year record of US$10.2 billion (above R157 billion) with maize exports for the second half of 2020 increasing by over 200% relative to the 2019 levels.

The citrus industry also recorded a fantastic year with better prices and strong volumes as demand spiked in major export destinations. The 2020/21 La Nina weather further favoured agriculture with good rains across the country,” Makube concludes.

ALSO READ: Agriculture can reset economy for growth

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