Sector bounces to reverse setback
THE AGRICULTURAL sector bounced in the first quarter after falling in the last quarter of last year, recording the strongest growth since 2009.
The Agbiz/IDC Agribusiness Confidence Index released yesterday rose 4 points to 46 in the first three months of the year, compared to 42 in the prior quarter, but remained below the requisite 50 points margin because of uncertainties about the future of the industry, particularly expropriation of land without compensation.
The Agribusiness Chamber yesterday said sentiment on the turnover sub-index improved by 13 points to 61 during the period in the horticultural, livestock, agrochemicals and wine sub-sectors.
The net operating income sub-index increased by 9 points from the fourth quarter to 46 in the first quarter of this year.
However, sentiment in the general agricultural conditions sub-index fell by 8 points to 32.
FNB agricultural economist Dawie Maree said the sector would continue to grow at a steady pace to make its impact of a 2.5 percent contribution to GDP.
Maree said the export sector had grown in line with expectations.
“There is also the combination of demand for our produce, our quality is sought-after. We are also counter-seasonal to the northern hemisphere,” Marree said. “We also compete favourably with our exchange rate. The exchange rate is the joker in the pack.”
Confidence in the export volumes sub-index increased significantly by 19 to 56 index points from the horticultural and livestock sub-sectors.
The Citrus Growers’ Association recently noted that exports could reach a record level of 137 million boxes this year.
Wandile Sihlobo, the chief economist at Agbiz, said the perception regarding economic conditions improved by 3 points to 21 but still came in well below the long-term average. “Moreover, the renewed power outages across the country and disappointing high-frequency data over the past few months suggest that South Africa’s economic fortunes could remain constrained for the better part of this year,” Sihlobo said, adding: “The improvement is by no means a cause for celebration, as confidence levels in the agricultural sector are still in contraction territory.”
The survey found that the capital investments confidence improved further by 4 points to 62 in the first quarter, partly mirrored by agricultural machinery sales, specifically tractors and combine harvesters, which showed a solid performance in February 2019.
This was a continuation from 2018’s robust sales where total tractor sales amounted to 6 680 units, up by 4 percent from 2017. In terms of combine harvester sales, about 200 units were sold, up by 2 percent from 2017.
“Nonetheless, a number of respondents continue to highlight the ongoing land reform policy discussion as a key issue that they are observing closely, and the outcome of which could influence investment decisions going forward.” Sihlobo said.
BANELE GININDZA