Agri sector promises green shoots
GDP to get a boost from drought recovery, a record maize harvest and increased confidence
ALTHOUGH South Africa’s national gross domestic product (GDP) has declined, agricultural production is expected to make a positive contribution moving forward.
This is according to Karabo Takadi, an agricultural economist at AgriBusiness and Absa retail and business bank.
Takadi said agricultural production increased, following the drought recovery, which led to expectations of a record maize harvest and saw confidence levels improve in the agri sector. She said indications of a recession, however, might lead to unfavourable unemployment levels due to declines in activity across the economy.
She said maize prices were now much lower. Takadi added that the water shortage in the Western Cape might negatively impact on the GDP.
She said the water shortage might lead to reduction in wheat yields, resulting in increased imports.
“The drought may also have an impact on fruit next year should it persist. Weather forecasts, however, indicate that the month of June is expected to have the highest probability for rainfall over the Western Cape, especially the western and south western parts, which will bring some much anticipated relief.”
Agri SA said as a result of the recession, businesses would not be able to make profit and consequently the government would receive lower corporate tax, while falling income levels will lead to government collecting less income tax.
Agri SA said as a federation of agricultural organisations committed to the development of agriculture in South Africa, it was pleased with the positive performance of the sector.
“The situation could have been far worse had it not been for the agricultural sector’s contribution to GDP and a year-on-year growth rate of 22 percent upwards.
“This speaks volume of the importance of the sector in the economy and therefore as Agri SA we continue in our endeavours to reach out to government to make agriculture development a national priority. Most importantly we appeal for clear policy certainty with regards to land ownership as we are concerned that without security of tenure the South African economy and food security will be compromised further.”
However, Dawie Barnard, the chief executive of Raddix, which specialises in agricultural insurance, said although the drought in most of the country had been broken, the country’s farmers are still under immense pressure.
“Last year there were more than 11 000 agricultural properties on the market. That is the highest number we had for sale in the history of our country.”
Barnard said this was indicative of how uncertain farmers were about the future and that climate change, political risks and competition from the mining sector for land were some issues farmers had to deal with.
He added that following four years of drought, farmers’ debt levels had increased significantly as they continue to fund their capital requirements, but with the good rains this year and the bumper crop being produced, the price of white maize has now fallen from more than R5 000 a ton to under R2 000 a ton. He said farmers had no choice but to sell grain at low prices to reduce their debt.
A farm worker carries firewood on her head as she walks between rows of vegetables at a farm in Eikenhof, south of Johannesburg. The agricultural sector is expected to make a significant contribution to South Africa’s GDP.