SA economy not (yet?) in a recession

While the country narrowly missed a recession in the fourth quarter of 2023, the agriculture sector, although hampered by load-shedding, among other factors, has shown limited growth. By Dr Koos Coetzee.

The South African economy barely missed going into a recession in the fourth quarter of 2023. Economists define a recession as two or more quarters of negative growth. According to Stats SA, the economy grew by 0,1% in the fourth quarter after the 0,2% negative growth recorded in the third quarter of 2023. The growth figures quoted by Stats SA are calculated by comparing the seasonally adjusted gross domestic product (GDP) in a quarter with the previous quarter and then converting it into an annual figure. This method overemphasises change in GDP growth. Fortunately, Stats SA also publishes GDP growth figures based on a comparison of the GDP in a quarter with the same quarter in the previous year. According to this comparison, the economy grew in real terms by 1,2% in the fourth quarter of 2023 and by 0,6% in 2023. Growth rates in industry value-added and GDP in 2023 are shown in the table.

It paints a bleak picture for the economy, especially in terms of the primary industries. In spite of the congestion at the export harbours, the mining sector still managed to grow in the third quarter of 2023.

AGRICULTURE IN CRISIS

The agriculture sector is in a recession after two quarters of negative growth. The factors that limited agricultural growth are well known. Load-shedding had a devastating effect on farmers’ productivity. The road infrastructure deteriorated to such an extent that farmers had to repair roads so that they could get products to market. While this is commendable, resources actually needed for production are wasted on filling potholes. Problems at the harbours limited product exports while transport cost increased as trucks wasted days waiting to load or off-load products. Farmers spend millions on infrastructure to prevent crime. Stock theft and recently the theft of farm requisites are serious problems. Farmers battle to cope and comply with more and more government regulations. The recent publication of BEE requirements for exports to the US and the problems with the transfer of water licences are examples of this.

Agriculture needs growing local and export markets to perform. The consumer is under enormous pressure from increased unemployment, high inflation, especially non-food inflation, the cost of coping with load-shedding, high personal debt and especially short-term debt, as well as the sharp increase in administered prices and the cost of communication.

The outlook for the 2024 summer grain crop has deteriorated. The crop estimate committee in its first estimate of the crop at the end of February predicted a 12,6% smaller maize crop and a 13,4% smaller total summer grain crop. The livestock

sector is also struggling. Consumer demand is down and the only factor that supports prices is the decrease in the total supply as farmers still battle to rebuild herds after the recent drought years.

OUTLOOK

The global economy shows signs of recovering from the effects of COVID-19 and the RussianUkraine war. Commodity prices are slowly trending upwards. Economists expect better growth for South Africa in 2024.

IN THE RUN-UP TO THE ELECTIONS, FARMERS CAN EXPECT RENEWED PRESSURE OVER THE LAND ISSUE

Taking part in the Economist of the Year competition, they are predicting growth of 1% in 2024.

Chances of improvement in the factors that limit the performance of the agriculture sectors are slim. Farmers have adjusted to the uncertain electricity supply, at a high cost.

In the run-up to the election, farmers can expect renewed pressure over land for previously disadvantaged people and criticism of commercial farmers by politicians trying to score points with voters. Farmers should ensure they operate within the legal framework and not provide any reason for politicians to criticise them.