Confidence in agriculture takes a dip
THE Agricultural Business Chamber (Agbiz) and Industrial Development Corporation’s (IDC) agribusiness confidence index showed a slight decline in the second quarter of 2017 to 56 points, down by 1 point from 57 points recorded in the first quarter of 2017.
Points below 50 are a sign that there is contraction in the agricultural sector, while above 50 represents growth in the sector.
Agbiz agricultural economist Wandile Sihlobo said despite the slight decline in confidence, the sector remained in expansionary territory.
This is the fourth consecutive expansionary reading, indicating that agricultural activity continues to stabilise following the damage of the 2015-16 drought.
Sihlobo said the second quarter 2017 Agbiz/IDC Agribusiness Confidence Index painted an encouraging picture of the South African agricultural sector.
“While many sub-indexes within the index showed different movements, the key underlying factor behind this sustained optimism is the improvement in weather conditions, particularly the recent summer rainfall and its impact thereafter on crops,” he said.
But he cautioned that the Western Cape province remained a key risk that could potentially change this picture altogether.
The sector received a much needed boost when the crop estimate committee (CEC) reported it expected a bumper harvest in maize crop to 15.63 million tons, the largest maize crop to date in the country. Favourable weather conditions enabled farmers to increase the area planted for summer crops, with maize output now expected to be 101 percent more in 2017 than it was in 2016.
Sihlobo also added that among the ten sub-indices making up the Agbiz/IDC Agribusiness Confidence Index, the capital investment, market share, employment, the volume of exports and debtor provision for bad debt sub-indices were the key underlying drivers of the sustained optimism in confidence in the second quarter of 2017.
“The general improvement in these particular sub-indices is partly in line with the robust recovery in agricultural production, particularly summer grains and oilseeds,” he said.
The perceptions regarding employment in the sector improved in the second quarter of this year. The sub-index reached 59 points, up from 56. This suggests the improved expectation of seasonal employment as some horticulture and grain farms begin the harvest period.
“Despite policy uncertainty in the country, the farming community continues to invest in agricultural equipment such as tractors and combine harvesters, among others. This trend is likely to continue with agribusinesses’ perception regarding capital investment up by 6 points from the previous quarter to 62,” added Sihlobo.
Political risk factors will continue to haunt South Africa and muzzle economic growth for this year to 0.8% while its neighbours will likely struggle for growth this year, the IMF said.