Mzansi’s agricultural sector has had its share of ups and downs, but the tide might finally be turning. Agbiz chief economist Wandile Sihlobo says the sector is slowly regaining its footing, and while challenges persist, there are signs of optimism that cannot be ignored.
Sihlobo points out that the Agbiz/IDC Agribusiness Confidence Index – a sentiment indicator for business conditions in the agriculture sector – has shown a notable improvement, rising by 10 points in the third quarter of 2024.
“While the index still sits below the neutral 50-point mark at 48, the fact that it’s climbed 10 points is huge. It signals a positive shift and shows things are moving in the right direction,” he says.
For Sihlobo, this renewed confidence is significant, particularly for long-term growth and investment in the agriculture sector. He adds that the Agbiz/IDC Agribusiness Confidence Index is often a leading indicator of agricultural growth, meaning we can expect some better news in terms of farming output for the rest of the year.
The power of electricity (literally!)
One of the key drivers behind this shift is the improvement in South Africa’s electricity supply, especially after the nightmare of load-shedding in previous years.
“Horticultural production, like fruits, vegetables, and floriculture, all rely heavily on irrigation, which needs a steady power supply. We’ve seen an increase in the use of renewables and alternative energy, but the more consistent national electricity supply has been a game-changer,” says Sihlobo.
From field crops to livestock, poultry, and even aquaculture like abalone farming, the entire sector has benefited from better access to energy.
“It’s not perfect yet, but it’s much better than where we were,” he adds.
Lower input costs = happier farmers
Another reason for the optimism? Lower input costs. Sihlobo highlights that in September 2024, fertiliser prices had dropped by about 10% compared to the previous year, with herbicide and insecticide prices also seeing significant declines of around 20% and 15%, respectively.
“Fertiliser accounts for about a third of the input costs for grain farmers in South Africa, so this drop is huge for them. It gives farmers breathing room, especially as we head into the 2024-25 summer season,” he explains.
The recent easing in fuel prices during peak planting times has also added to the positive outlook, making operations more manageable for farmers across the board.
Weathering the storm – or lack thereof
Of course, in agriculture, nothing matters more than the weather, and Sihlobo is cautiously optimistic here as well.
“We’re coming out of a rough drought during the 2023-24 season, which saw a 23% drop in summer grain and oilseed production. But now, forecasters are talking about a La Niña event that could bring more rain during the upcoming season,” he notes.
With better rainfall on the horizon, the Agbiz/IDC Agribusiness Confidence Index is clear that the sector might finally get a break.
“La Niña isn’t a guarantee, but if it pans out, we could see a solid recovery in 2024-25. That would be a big win for the entire agricultural value chain, from production to jobs and even food prices,” Sihlobo adds.
But it’s not all sunshine and rainbows
While the sector is showing signs of recovery, Sihlobo remains grounded. He stresses that there are still significant challenges to be addressed.
“We can’t just rely on weather improvements or better input prices. For real long-term growth, the government of national unity needs to get a handle on bigger issues like infrastructure, animal diseases, and opening up new export markets. Without that, we’re only going to see temporary fixes,” he warns.
Despite the remaining hurdles, Sihlobo is optimistic about the future.
“We’re not out of the woods yet, but there are clear signs that things are improving in the sector. It’s just a matter of keeping the momentum going and making sure we address the bigger, structural challenges that have been holding us back,” he concludes.
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