Con­fi­dence in agri­cul­ture takes a dip

The Star Early Edition - - NEWS - Sandile Mchunu

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.

PHOTO: SIMPHIWE MBOKAZI

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.

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