Land reform clouds investor confidence in agri sector

THE AGBIZ Agribusiness Confidence Index (ACI) eased to 54 in the second quarter from 58 in the first quarter, and remained above the neutral 50 level.

“The uncertainty regarding land reform policy, particularly expropriation without compensation, remains a key risk that could potentially undermine investment in the agricultural sector. At this point, however, farmers are somewhat in a waitand-see mode. We have not seen a notable dent on investments in the sector,” Wandile Sihlobo, the head of agribusiness research at Agbiz said.

The survey was conducted between June 4 and 15, and was completed by respondents operating in all agricultural sub-sectors across the country.

Among the 10 sub-indices making up the quarterly decline was broad-based, with the exception of the general agricultural conditions sub-index. The optimism in this sub-index was underpinned by prospects of above-normal rainfall in the Western Cape within the next three months, which should support winter crops and horticulture, as well as favourable drier conditions for harvests in summer crop regions.

The ACI reflects the perceptions of decision-makers on the 10 most important aspects influencing a business in the agricultural sector, namely turnover, net operating income, market share, employment, capital investment, export volumes, economic growth, general agricultural conditions, debtor provision for bad debt and financing cost.

Following a 10-index point increase to 78 in the first quarter of this year, confidence regarding the turnover sub-index deteriorated to 64 points in the second quarter of this year, while the net operating income sub-index eased by 9 index points to 58 in the second quarter.