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Agricultural sector set to show significant growth

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Economists predicting “a recovery year” for the agricultural sector following two consecutive years of declining fortunes

File picture: David Ritchie / African News Agency(ANA)

A COMBINATION of good production conditions, a weaker rand and a rebound in exports has economists predicting “a recovery year” for the agricultural sector.

Data released last week showed that gross value added (GVA) in agriculture expanded by 27.8% quarter on quarter on a seasonally adjusted and annualised basis.

Paul Makube, a senior agricultural economist at FNB Agri-Business, said: “Given the huge harvest outlook and activity in full swing for both the summer and winter grain and oilseed crops, as well as citrus, it is expected that the current stellar performance from the sector will spill over into the subsequent quarters despite the Covid-19 disruptions.

“While the higher contribution of field crops and horticultural products was expected, the performance of animal products came in as a surprise given the foot-and-mouth disease outbreak in November and earlier in January, which resulted in some disruption to trading and auctions.”

Absa economist Miyelani Maluleke added: “Agricultural sector GVA, which can be highly volatile, rose markedly by 27.8% quarter on quarter seasonally adjusted annual rate, adding 0.5% to the final GDP growth rate.

“We had expected the agricultural sector to show strong growth this year in light of the strong crop harvest expectations, but the Q1 print was a lot higher than our assumption.”

Agricultural Business Chamber chief economist Wandile Sihlobo said: “Despite the ongoing challenges presented by the Covid-19 pandemic, South Africa’s recent agricultural economic data have reaffirmed our view that this will be a recovery year for the sector following two consecutive years of declining fortunes.

“From a field crops perspective, South Africa currently expects its second-largest grains harvest on record in 2019/20.

“The latest projections for the 2019/20 maize, sunflower seed and soyabeans harvests point to increases of 38% year on year (y/y), 13% y/y and 8% y/y, which are equivalent to output levels of 15.5 million tons, 765 960 tons and 1.3 million tons, respectively.

“Overall, the round-up of South Africa’s agricultural economic data paints a picture of good economic performance in the first quarter of the year, a theme that will probably prevail throughout 2020.

“Primary agricultural employment increased from the corresponding period last year to 865 000.”

Sihlobo said the pandemic might change the employment trajectory: “The social distancing regulations introduced at the end of March to prevent the spread of the coronavirus could mean that farmers and agribusinesses might not increase employment, especially of seasonal labour.

“Farmworkers may have increased the hours at work to compensate for the reduced workforce in a year where there is a bumper harvest.”