Although the rand strengthening against the dollar brings a mixed bag for agriculture, on the whole the effect will be positive and can contribute to what has so far been an excellent growth year for the industry, says Dr. John Purchase, chief executive of the Agricultural Business Chamber (Agbiz).
In the first quarter agriculture grew by 27.8% while the total South African economy contracted by 2%, Statistics South Africa announced this week. Economists are optimistic for continued growth from the agriculture sector through the rest of the year.
South Africa’s currency strengthened to R16.89 to the US dollar at 09:26 this morning, only 1 cent lower than last month’s incline of R16,99 on 3 June, which was its best level since before the covid-19 lockdown began in March.
Purchase says the strength of the rand will see our commodity prices and the import prices of fertiliser, chemicals and machinery going down. However, the prices we get for our exports will be relatively low as a result.
Purchase says that the agriculture sector would ideally like to see a more stable currency to create more certainty in the sector.
“The currency has fluctuated a lot in the past couple of months. It is understandable because of the pandemic, but it is not good for agriculture. We like to see a stable currency, perhaps depreciating slowly in time, but that would be in a perfect world. We are not in a perfect world, so the volatility in the currency is the issue, because it causes a lot of uncertainty,” he says.
Growth off a very low base
Purchase credits the excellent first quarter growth in the sector to good production weather conditions.
“We have come off of a very low base, because the previous season was so incredibly dry and there was an outbreak of foot-and-mouth disease and other related animal and plant diseases, which affected our exports,” he says.
“We will see growth in the second and third quarters as well because of the seasonal effects. This will be because of our big maize harvesting going on at the moment and the good exports of our fruit.”
He says the citrus crop is the best ever and the country also has very good table grape, pear and apple crops for exports. “Also, because the rand has been weak, that has benefitted the income,” he says.
“From Agbiz side from January already we said we expect 10% growth in primary agriculture (this year) and secondary agriculture will be lower.”