Agribusiness confidence in third quarter is off record high but remains strong - ACI
THE LOCAL third quarter Agbiz/IDC Agribusiness Confidence Index (ACI) retracted back to 67 points in the third following a surge to an all-time high of 75 points in the second quarter of this year.
Agricultural Business Chamber (Agbiz) chief economist Wandile Sihlobo, who compiles the index, said yesterday that the current index level still reflected favourable conditions in South Africa's agriculture sector and for agribusinesses as a level above the neutral 50-point mark implied that agribusinesses were optimistic about operating conditions in the country.
“The optimism reflects both the large output and higher commodity prices that have benefited farming businesses in the 2020/21 agricultural production season and the favourable outlook about the upcoming 2021/22 season. The higher commodity prices and the positive weather outlook, which shows prospects of above-normal rain across most regions of South Africa, are supportive factors for agribusinesses,” said Sihlobo.
This third-quarter survey was conducted between the last week of August and the first week of this month covering agribusinesses operating in all agricultural sub sectors across South Africa.
Agris-SA agricultural economist Kulani Siweya said the general decline could be seen as a combination of some technical factors in some of the sub-indices in the index measure as well as concerned opinion being expressed in other aspects, particularly when you considering sub-indices that measure the volume of exports sentiment and economic conditions.
“Here we see a combination of dwindling confidence that's underpinned by the inefficient ports and deteriorating infrastructure that undermines the viability and ability of farming businesses.
“Add on to this the hurdles being faced on the road to economic recovery, which has weighed on the sentiment, notably the recent unrest seen in KwaZulu-Natal and Gauteng, which disrupted business activity at a time when the economy is already in the doldrums that's been further exacerbated by the Covid pandemic,” said Siweya.
Nonetheless, despite the retreat in general confidence, a good season was still expected in the farming community, spurred on by positive weather expectations and supportive prices, amongst other things.
FNB senior agricultural economist Paul Makube said that although having shaved off eight points for the third quarter 2021, the current Agbiz/ IDC Agribusiness Confidence index reading remained the second highest since 2014 and a record high for the quarter since inception.
“Concern is on the three of the four sub-indices with the biggest declines. The ‘economic conditions subindex' (-30 points) posted the biggest decline due to the short-term uncertainty on economic prospects caused by the July unrest.
“Debtor ‘provision for bad debt and financing costs' comes in second with an increase of 18 points, a negative development, and relates to sentiment about the impact of the unrest on the economy. Third is the ‘capital investments' with a decrease of 11 points,” said Makube.