Financial Mail and Business Day

Farming sector buoyed by optimism

Bekezela Phakathi Parliamentary Writer phakathib@businesslive.co.za

Despite policy uncertainty about land reform, SA’s agricultural sector is enjoying its greatest surge in optimism and agribusiness confidence in two decades. Favourable weather conditions and higher commodity prices have boosted farmers’ incomes and sentiment.

Despite policy uncertainty about land reform, SA’s agricultural sector is enjoying its greatest surge in optimism and agribusiness confidence in two decades.

Favourable weather conditions and higher commodity prices have boosted farmers’ incomes and sentiment.

This is set to lift production and increase prospects of a bumper year, as yields rise and demand accelerates in one of the leading sectors of SA’s economy, which contributes about 3% to GDP and is responsible for close to 900,000 jobs.

According to the latest agricultural confidence index, a key survey by industry body Agricultural Business Chamber of SA (Agbiz) and development finance institution the Industrial Development Corporation (IDC) released on Monday, SA’s agricultural sector has not, in the recent past, had a season as good as the current one.

This is evident from the Agbiz/IDC agribusiness confidence index, which in the second quarter of this year reached a record high of 75, from 64 in the first quarter.

A reading above 50 indicates expansion in local agribusiness activity. The second-quarter survey was conducted earlier in June and covered agribusinesses operating in all agricultural subsectors in SA.

The survey results come a week after Stats SA first-quarter GDP data showed agricultural output unexpectedly contracted by 3.2% quarter-on-quarter on a seasonally-adjusted and annualised basis. They also come at a time when the agricultural sector and the investor community at large is on edge as parliament moves closer to introducing an amendment to section 25 of the constitution to make the expropriation of land without compensation explicit.

The ad hoc committee tasked with drafting the amendment is due to complete its report in August as the ANC and EFF try to find common ground on some of the proposed amendments.

The governing party and the EFF differ on the issue of custodianship and the role of the courts. While the ANC backs mixed land ownership — private, state and communal — the EFF wants all land to be placed under state custodianship which critics see as a form of nationalisation.

The EFF also wants reference to the courts to be deleted in the proposed amendment. The ANC says the courts should maintain review powers, meaning they will be involved only when there is a dispute between the property owner and the expropriating authority.

The ANC needs the EFF’s support to pass the controversial constitutional amendment.

Agbiz chief economist Wandile Sihlobo said the confidence results reflect a “nearterm” optimism and farmers are concerned about the long-term impact of expropriation without compensation.

The results reflect favourable conditions for all subsectors of agriculture, with various crops set to reach record output levels, Sihlobo said. Importantly, he said, this comes at a time when commodity prices are at relatively higher levels, mainly supported by growing demand from China, combined with dry conditions in South America.

“Such an environment of large yields and higher prices is not a usual occurrence in SA and has boosted farmers’ incomes and sentiments about business conditions,” Sihlobo said.

The second-quarter results suggest SA’s agricultural sector is set for another year of robust performance, he said. The driver is favourable weather conditions that have allowed farmers to plant on time and increase area plantings for various crops. Higher commodity prices have also improved farmers’ finances, contributing to better sentiment.

“We are in a good year from a production perspective. Our main concern at the moment is about the biosecurity challenges in the livestock and poultry sectors. These are areas that should be addressed to sustain the positive momentum in agriculture,” Sihlobo said.

In an opinion piece last week, Sihlobo said GDP data for the first quarter showing that the country’s agricultural output unexpectedly contracted quarter-on-quarter should not be of lasting concern.

Stats SA attributed the underperformance to “lower production of field crops and animal products”.

“But this is a temporary blip and shouldn’t be regarded as a worse season than the robust 2020. The sector is set for one of the best years on record, and such improvements should be reflected in the data in the coming quarters,” Sihlobo said.

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2021-06-15T07:00:00.0000000Z

2021-06-15T07:00:00.0000000Z

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