AGRI­CUL­TURE WILL CARRY ECON­OMY

Grains will lead the re­cov­ery in agri­cul­ture. Over­all, the area planted for grains is es­ti­mated at 15% more than the pre­vi­ous year

CityPress - - Business - GOD­FREY MU­TIZWA busi­ness@city­press.co.za

It will take at least two to three years for a full re­cov­ery

South Africa’s agri­cul­tural sec­tor is poised to boost its GDP con­tri­bu­tion this year, pro­vided that im­proved rain pat­terns are main­tained. Absa, one of the coun­try’s big­gest lenders to the sec­tor, sees farm­ing out­put im­prov­ing this sea­son, af­ter grain pro­duc­tion dropped by about a fifth in 2016.

Grain SA, the coun­try’s big­gest grain lobby group, sees an im­prove­ment but re­mains con­cerned by late rains and wind dam­age in the west of the coun­try.

South Africa’s worst drought since records be­gan more than a cen­tury ago slashed farm pro­duc­tion by more than 20%, forc­ing the coun­try to im­port ge­net­i­cally mod­i­fied maize for the first time since 2008.

Com­mer­cial farm­ers were also forced to de­stock, re­sult­ing in an ac­cel­er­a­tion of food prices of about 60%, and a near-zero GDP growth in 2016.

“Agri­cul­ture will carry the econ­omy a bit next year,” Ernst Janovsky, head of Absa AgriBusi­ness, told City Press in an in­ter­view. “Go­ing into next year, vol­umes are go­ing to go up and that will bring the to­tal growth rate to about 2%.”

The Re­serve Bank es­ti­mates growth may tick to about 1.2% in 2017. Apart from the drought, which also hit most of south­ern Africa and as far north as Ethiopia, lower com­mod­ity prices and a poor in­vest­ment en­vi­ron­ment mil­i­tated against faster eco­nomic ex­pan­sion.

With the El Niño weather con­di­tions as­so­ci­ated with drought weak­en­ing and be­ing re­placed by La Niña con­di­tions, above-nor­mal rain­fall was ex­pected, though it might be late in some parts, Janovsky said.

While dam lev­els were ex­pected to im­prove from De­cem­ber, the im­pact of the drought in the past four sea­sons will con­tinue to be felt for some time.

GRAINS

Grains would lead the re­cov­ery in agri­cul­ture, said Wandile Sihlobo, head of eco­nomic and agribusi­ness in­tel­li­gence at the Agri­cul­tural Busi­ness Cham­ber. Over­all, the area planted for grains is es­ti­mated at 15% more than the pre­vi­ous year, which should boost pro­duc­tion by be­tween 20% and 30%.

Maize pro­duc­tion, the big­gest com­po­nent within grains, is es­ti­mated at around 9.2 mil­lion tons af­ter the es­ti­mated 7.16 mil­lion tons for the 2015/16 sea­son. South Africa is tra­di­tion­ally a maize ex­porter to its south­ern African neigh­bours and nor­mally pro­duces 12 mil­lion tons of maize.

Live­stock was dec­i­mated by the drought, with farm­ers slaugh­ter­ing as many as 16 000 cat­tle a week at the peak, com­pared with the av­er­age re­quire­ment of 5 500 a week, Sihlobo said. Stock re­build­ing would push prices up and food in­fla­tion higher in 2017, he said.

“It will take at least two to three years for a full re­cov­ery,” Sihlobo said, with some crops, such as sugar, tak­ing longer.

Cane pro­duc­tion has dropped by 27% since 2013, ac­cord­ing to Absa and will prob­a­bly drop an­other 2% in the 2016/17 sea­son.

Oilseeds such as soya beans, sun­flower and other winter grains were also fore­cast to re­cover, said Dirk Stry­dom, man­ager for the grain econ­omy at Grain SA.

How­ever, this was de­pen­dent on farm­ers in the west of the coun­try be­ing able to plant in the week or so of the optimal plant­ing win­dow that re­mains.

“Cur­rent weather con­di­tions are still in favour of a ... La Niña weather pat­tern,” Stry­dom said. “If the vari­ables fall into place, it is ex­pected that South Africa can again pro­duce close to sur­pluses.”

Other key risks re­mained, in­creas­ing fi­nanc­ing costs, in­clud­ing in­sur­ance, late rains in the west and the volatile rand ex­change rate, he said.

Once sur­pluses were achieved, the big­ger chal­lenge was achiev­ing ex­port com­pet­i­tive­ness, he added.

Both Absa AgriBusi­ness’ Janovsky and Grain SA’s Stry­dom said po­lit­i­cal pos­tur­ing on land re­form, such as the Eco­nomic Free­dom Fighters’ de­mand for com­pul­sory ac­qui­si­tion of land with­out com­pen­sa­tion, risked the coun­try’s food se­cu­rity.

“Grain SA sup­ports land re­form within the con­fines of the South African Con­sti­tu­tion,” Stry­dom said.

Janovsky said agri­cul­ture was be­ing trans­formed by tech­nol­ogy, cre­at­ing a whole value chain much big­ger than the sec­tor’s mea­gre 2.6% GDP con­tri­bu­tion. Fac­tored to­gether, these value chains in the food pro­cess­ing in­dus­tries boosted the sec­tor’s con­tri­bu­tion closer to 30%.

“Tech­nol­ogy is chang­ing the value chain sub­stan­tially,” he said. “Agri­cul­ture is ac­tu­ally food and fi­bre. And if you re­ally look at the whole value chain, it’s the in­put side that’s been more than utilised in agri­cul­ture. On the out­put side are the food man­u­fac­tur­ers; it’s the guys mak­ing the cook­ies, the guys mak­ing the pas­tas and ev­ery­thing else. And then there are the re­tail­ers ac­tu­ally sell­ing the food and de­liv­er­ing the time value for the con­sumer.”

New pro­duc­tion tech­nolo­gies were also re­shap­ing the future of pro­duc­tion with some, such as those for veg­eta­bles, mov­ing into build­ings.

The mi­cro­bi­o­log­i­cal pro­duc­tion of en­ergy prod­ucts and ar­ti­fi­cial pro­duc­tion of meats was also mov­ing farm­ing into ur­ban ar­eas, bring­ing the farmer closer to the con­sumer.

PHOTO: GETTY IMAGES / IS­TOCK­PHOTO

PLACE IN THE SUN Agri­cul­ture will carry the econ­omy a bit next year

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