Western Cape weighs on broader agricultural economy

When it comes to agriculture, the Western Cape is essential — not only because of its production of fine wines, but also because of its contribution to SA’s agricultural labour market and the economy.

The province is a leading employer in primary agriculture, commanding a share of 20% of the country’s labour force in the third quarter of 2017.

It is the second-largest contributor to the agricultural economy in terms of GDP at 22%. As a result, when the province’s agriculture encounters headwinds, a lot is at stake — and the drought is no exception. The latest quarterly labour force survey by Statistics SA confirms this.

Of the 25,000 job cuts in SA’s agricultural sector in the third quarter, about 84% were in the Western Cape.

Combined, the Eastern Cape, Free State, KwaZulu-Natal, North West and Limpopo accounted for 16% of the third quarter’s reduction in employment. However, the balance was also skewed by production seasonality factors — there is reduced agricultural activity in the summer crop production areas at that time of the year.

Worth noting is that employment in SA’s agricultural sector has been on the decline since the beginning of 2017. The combined job losses for the first half of the year were estimated at 84,000, with the Western Cape again accounting for the lion’s share. Overall, SA’s total agricultural labour force was estimated at 810,000 jobs, which is the lowest since the fourth quarter of 2014.

SA’s agricultural labour market was relatively vibrant in the 2015-16 season, despite the El Niño-induced drought in many parts of the country. This is because the Western Cape was not as hard hit as other provinces and was able to continue absorbing labour.

Historically, the third and fourth quarters of each year typically record job gains in the Western Cape due to increased activity in the orchards and fields. This would, of course, include seasonal labour.

Although the summer cropproducing provinces should experience an increase in activity from the fourth quarter this year, there is a limited chance of notable employment growth. Most summer crops are not labour-intensive, particularly grains and oilseeds.

Perhaps KwaZulu-Natal, Limpopo, Mpumalanga and the Eastern Cape, which have notable production of horticulture, might offset the expected job cuts in the Western Cape somewhat.

In terms of the overall agricultural economy, the sector has performed robustly in the past two quarters of 2017. The World Bank estimated that SA’s agricultural sector would grow by 15% year on year in 2017. This strong performance would be largely supported by a recovery in summer crop production after several seasons of drought in some areas, as well as the low-base effect.

With the exception of the Western Cape, there are positive prospects regarding the summer crop season. The South African Weather Service forecasts widespread showers between now and February in the summer crop growing areas. Moreover, farmers intend to increase the total area planted to summer grains and oilseeds by 1% from 2016-17, to 4.03-million hectares.

That said, the horticultural sector’s performance in the Western Cape might not be too good in 2018 due to the effects of 2017’s drought and low dam levels. This could somewhat cloud the expected good performance of other provinces due to the Western Cape’s hefty contribution to the country’s agricultural economy.

Above all, the persistent drought in the province is a cause for concern for all South Africans as its effect will be felt nationally.

Sihlobo (@WandileSihlobo) is head of economic and agribusiness research at the Agricultural Business Chamber.