Agricultural gross value added experiences significant decline in 2023

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Statistics South Africa recently released figures that indicate that South Africa’s agricultural gross value added fell notably by 12,2% year-on-year (y/y).

According to Wandile Sihlobo, chief economist of Agbiz, South Africa’s agricultural sector faced several challenges in 2023, but Agbiz didn’t anticipate that the overall annual performance would drop sharply. Along with the Bureau for Food and Agricultural Policy (BFAP), Agbiz expected a mild contraction in 2023 because of the animal disease challenges in the livestock and poultry sub-sector.

The headwinds in the livestock and poultry industry weighed on the sector more intensely than we anticipated. The livestock and poultry industry, which accounts for nearly half of the sector’s value, was hit by animal diseases such as foot-and-mouth, avian influenza and African swine fever.

In terms of field crops, the harvest was robust but insufficient to boost the overall sector performance. For example, the 2022/23 maize harvest reached a solid 16,4 million tons, 6% higher than the 2021/22 season’s harvest and the second-largest harvest on record. Soya bean harvest was at a record 2,8 million tons.

Another major field crop, sugar cane of the 2023/24 production season, was at 18,5 million tons, up 3% y/y. Other field crops and fruit harvests were also decent in 2023. Also worth noting is that some agricultural commodity prices were generally down in 2023, which would have also slightly added to the downward performance of the sector.

Furthermore, the Agbiz/IDC Agribusiness Confidence Index (ACI), which we view as a lead indicator of the sector’s performance, deteriorated by ten points to 40 in the last quarter of 2023. This is its lowest level since the second quarter of 2020, at the height of the Covid-19 pandemic’s hard lockdown restrictions.

The ACI, which measures the sentiment of South African agribusinesses, fell below the 50-point threshold in the last quarter of 2023. This indicates that these entities were pessimistic about the country’s business environment. This pessimism emanates from the sector’s numerous challenges, such as intensified delays and inefficiencies at the ports, deteriorating rail and road infrastructure, worsening municipal service delivery, increased geopolitical uncertainty and persistent episodes of loadshedding.

Read more about the Agbiz/IDC Agribusiness Confidence Index (ACI) here.

Performance more volatile

According to John Hudson, head of agriculture at Nedbank Commercial Banking, while it is disappointing to record two successive quarters of contraction in agriculture, one must bear in mind that agricultural performance tends to be considerably more volatile when compared to the general economy. This is due to numerous underlying variables such as climate and timing, which can impact performance.

However, the reality is that on the back of two successive quarters of contraction, the agriculture performance for the full year in 2023 is down 12,2%. The extent of the contraction was unexpected, and it is the first time in several years that the sector has recorded a contraction for the full year.

This is a sobering outcome and, despite agriculture having achieved record exports of US$13,2 billion in 2023, it was insufficient to keep the sector on a growth path overall. Agriculture has experienced a tough two years with 0,3% growth recorded in 2022 and a 12,2% contraction in 2023. Given the many uncertainties in the global and local outlook, the year ahead will be a tough one to navigate.

The persistent challenges faced, such as loadshedding, weak local demand, biosecurity concerns, declining prices, deteriorating infrastructure, logistics challenges, port inefficiency, poor service delivery and climate impact will continue to weigh on the sector. Hudson says: “But agriculture has a way of surprising us and, with its resilience and never-say-die attitude, I expect the sector to continue being a positive contributor to the South African economy and wider society in the years ahead.” – Agbiz and Nedbank  

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