Agricultural growth under threat

While agriculture was the strongest performing sector of South Africa’s economy through 2020 and 2021, growth slowed in 2022 and is expected to remain constrained in 2023.

According to Statistics South Africa, the country’s GDP dropped by 1,3% in the fourth quarter of 2022, with only three out of 10 sectors showing growth, namely transport, storage and communication, construction, and personal services.

Agriculture contracted by 3,3% from the third to fourth quarter of 2022, which was the largest decline among the various sectors, but increased by more than 10% compared with the fourth quarter of 2021. For the full year of 2022, agriculture grew by only 0,3%, which was substantially lower than the previous two years.

The Bureau for Food and Agricultural Policy (BFAP) recently released a report in which it contextualised the drivers of agriculture’s GDP performance.

According to the report, 2022 bought on a “plethora of global and domestic challenges” for the industry, and in particular for export-oriented industries. The fourth quarter also came with the added challenge of increased loadshedding, which affected production processes of the more intensive industries, the irrigation of crops, orchards and vineyards, as well as the operations of packhouses, processing facilities and cold storage facilities.

‘CASH-FLOW CONSTRAINTS AND THE IMPACT OF LOAD-SHEDDING ARE LIKELY TO AFFECT VOLUMES’

BFAP expected agricultural growth to remain under pressure in 2023 because of spiralling costs and ongoing challenges at ports: “Severe cash-flow constraints, together with the far-reaching impact of load-shedding, are likely to affect marketable volumes and consequently also the revenue performance of many agricultural products in 2023.”

Dawie Maree, head of agriculture information and marketing at FNB, agreed: “Agricultural growth probably won’t contract as a whole in 2023, but we won’t see the growth witnessed in 2021 and 2022, mainly due to load-shedding, but also due to growing uncertainty, which is negatively impacting investor confidence, about next year’s elections.”

Along with this, he said that infrastructural and logistical challenges, relating to everything from roads, railways and ports had to be addressed as these were driving up costs.

He said that high interest rates were taking a toll on farmers, but fortunately it looked as if there would not be any hikes in South Africa over the short term, as the US Federal Reserve Bank had shifted its monetary policy stance significantly, resulting in much higher expectations for a rate cut in the US by December 2023. –