Agribusiness confidence sinks below 50 pts

THE AGBIZ/IDC Agribusiness Confidence Index (ACI) has come out below the crucial 50 basis points mark for the sixth consecutive quarter, declining by two points to 44 points in the fourth quarter of 2019, slightly down from 46 points recorded in the previous period, negatively impacted by an unfavourable policy environment and weather conditions.

This implies that agribusinesses are still downbeat about business conditions in South Africa.

The last time the index recorded a positive sentiment about the sector was at the end of 2018 second quarter with 54 points.

The index has predicted that the unfavourable policy environment and weather conditions could persist going into 2020 and result in further under-performance of South Africa’s agricultural economy.

“While South Africa’s agricultural policy environment, specifically land reform and water regulations, remains unsatisfactory, unfavourable weather conditions and biosecurity are pressing matters that could constrain agricultural economic fortunes.

“The recession that South Africa’s agricultural economy finds itself in is caused by these very same factors, and we fear it might spill over to 2020, other things being equal,” Wandile Sihlobo, the chief economist at Agbiz said.

The index consists of 10 sub-indices, and six of those drove the decline in sentiment in the third quarter of 2019.

The subdued sub-indices include net operating income, employment, the volume of exports, economic conditions, general agricultural conditions and debtor provision for bad debt sub-indices.

The volume of exports sub-index dropped from 50 points to 39 points during the quarter.

The sub-index was negatively impacted by the threat of drought that could lead to poor crop production, which in turn would affect exports.

“In addition, fears that the new foot and mouth disease outbreak could lead to another wide-scale livestock products exports ban also weighed negatively on sentiments about exports,” ACI said.

The four sub-indices that showed positive sentiment includes turnover, market share of agribusinesses, capital investment and financing costs of agribusiness.

The turnover sub-index confidence improved the most among the four, up from 56 points in the third quarter to 75 points, which is the highest level since the first quarter of 2018.

The improvement was pinned on the financial institutions, input suppliers and also horticulture-focused firms that are part of the survey as the ones that expressed optimism in this particular sub-index.