Tough agricultural outlook for province

Relentless drought poses challenge for buoyant Western Cape economy

SOUTH Africa’s agricultural outlook since the three-year drought is starting to improve with the exception of the Western Cape which is still being severely impacted, and facing severely declining dam levels.

This was according to FNB agricultural economist Paul Makube presenting the agricultural outlook for South Africa and the Western Cape yesterday.

He said the country’s beef herd took a knock following the country’s drought over the past three years, which resulted in the culling of about 30 000 animal but farmers were now rebuilding their stock.

The Eastern Cape made up the biggest herd number with 24% followed by KwaZulu-Natal 20%, Free State 17%, North West 12%, Western Cape 4% and Gauteng 2%.

In terms of agriculture gross domestic product by province, Gauteng took the greater share, accounting for 30% followed by the Western Cape with 23%, and the rest of the provinces accounting for less than 10% each.

On water levels in dams, he said inland dams were good for most of the provinces except the Western Cape which dropped from 68.3% at the end of November for the Berg-Olifants region to 22.3% this week while the Breede-Gouritz region dropped from 48.7% to 16.2%.

Makube said South Africa had a bumper crop of maize last year, amounting to 15.63 tons while wheat also had a bumper crop last year with 1.7 tons.

However, this year saw a bad start because of the drought in the Western Cape and the province could expect a drop in production which would have an impact on exports as the region was a net exporter.

FNB economist Jason Muscat said for the Western Cape there was very little mining activity, however, shale gas could be a game changer for the province.

Muscat said the Western Cape was poised to outperform the rest of the country, but hurdles to faster growth remained.

“Of all provinces, Western Cape has the highest contributions to GDP by construction, hotels and restaurants, air transport and real estate activities.”

He said the Western Cape is a R650 billion economy, the third largest provincial GDP.

Muscat said its business confidence was slightly higher than the national average. On manufacturing, he said the Western Cape had a well-developed sector with a strong focus on food and beverage manufacturing as well as fuel and refining, while the other provinces remained more exposed to weak domestic demand as opposed to strengthening export markets growth.

He said real disposable income growth was positive but wage growth was under pressure.

Muscat added that finance, real estate and business services remained defensive sectors while asset prices were still appreciating in real terms.

“Demand for business services, consulting and outsourcing is holding up… residential real-estate growth remains robust.”