Drought hampers economic growth
LUYOLO MKENTANE asks Dr John Purchase, CEO of Agbiz, how to kick-start the agricultural economy
LAST YEAR the agricultural sector provided a significant boost to the national economy and assisted it from falling into a protracted technical recession.
This was on the back of exceptionally good rainfall early in 2017 that resulted in record maize (17.4 million tons) and soya bean ( 1.3 million tons) crops, among others, and despite severe drought conditions in the Western Cape.
Agriculture gross domestic product is, however, highly volatile over seasons, as can be seen from the chart, and largely dependent on favourable agricultural conditions.
For 2018 the continuing and now disastrous drought conditions in the Western Cape will impact negatively on the sector’s growth rate as the province contributes approximately 20% to the country’s agricultural economy.
Severe drought conditions have returned over large areas of the summer rainfall region, and especially over the important cropping areas of the Free State and North West provinces.
This does not augur well for the growth of the sector and could put pressure on the country’s growth rate as a whole this year.
The second major factor that will determine investment and growth in the sector is the lack of policy certainty.
Late last year the HighLevel Panel, under the chairmanship of former president Kgalema Motlanthe, released their Report on the Assessment of Key Legislation and the Acceleration of Fundamental Change.
This report clearly outlines many of the policy problem areas in the agricultural sector and provides recommendations as to how these should be addressed.
These recommendations should be implemented as a matter of urgency.
This would drastically improve confidence in the sector and stimulate investment, growth and development.
Unfortunately, land reform remains an issue of great discontent and uncertainty, and this needs to be addressed.
Graph shows year-on-year quarter change and agriculture, gross value added.
John Purchase, executive of Agbiz.