While agriculture has been hailed as the strongest sector since the Covid-19 pandemic, local and international challenges have weakened and threatened the sector’s sustainability as well as future job creation.
Agricultural economist Karabo Mabuza said possible reasons for the contraction of the agriculture sector in quarter four of 2023 as indicated by Statistics South Africa, include animal diseases that undermined animal production, load shedding, and logistical challenges disrupting production and supply chains.
Bumpy road ahead
Mabuza said all these challenges contributed significantly in driving up costs on the back of lower commodity prices.
“Looking ahead, the sector is likely to be faced with pressure in the short term due to unfavourable operating conditions like continued load shedding, logistical challenges, [and] animal disease outbreaks, which can undermine output and profits.
“Government support through schemes like the Agro-energy Fund could alleviate some of these cost pressures. The industry is also currently faced with dry conditions and excessive heat since February which has been a concern to farmers. And there are fears that it may undermine the summer crop production for the 2023/24 season,” he explained.
Despite the setbacks the industry has encountered, Mabuza believes the sector is resilient and should start recovering once acute shocks like adverse weather conditions normalise.
First National Bank senior agricultural economist Paul Makube said while six other sectors of the economy posted growth, the same cannot be said about agriculture which contracted for the second consecutive quarter.
Not all bad news
Makube said the overall agriculture’s gross value added for 2023 plummeted by 12.2% year-on-year.
“Although our expectations were still for a slowdown on the back of disease-induced production cuts in the livestock sector, particularly poultry, this magnitude of contraction surprised deeper on the downside,” he said.
According to Makube, the agriculture outlook has turned negative following a relatively good start to the 2023/24 crop season with good rains which saw farmers increasing their planted area for summer crops by 1.2% year-on-year to 4.4 million hectares.
“Inclement weather with excessive heat caused a lot of stress and wilting of crops during the critical growth stage thus impacting negatively on potential yields. A lower summer crop harvest will lead to another contraction in agriculture performance in 2024,” he said.
Where to now?
John Hudson, head of agriculture at Nedbank commercial banking, said the extent of the contraction was unexpected, and it is the first time in several years that the sector has recorded a contraction for the full year.
“This is a sobering outcome and, despite agriculture having achieved record exports of $13.2bn in 2023, it was insufficient to keep the sector on a growth path overall.
“But agriculture has a way of surprising us and with its resilience and never-say-die attitude, I expect the sector to continue being a positive contributor to the South African economy and wider society in the years ahead,” he said.
Meanwhile, Agbiz senior agricultural economist Wandile Sihlobo said the path ahead for the sector is even more challenging because of the intensified El-Nino-induced dryness that continues to strain the 2023/24 summer crop production prospects.
“This pessimism emanates from the sector’s numerous challenges, such as intensified delays and inefficiencies at the ports, deteriorating rail and road infrastructure, worsening municipal service delivery, increased geopolitical uncertainty and persistent episodes of load shedding,” he said.
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