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After two difficult years the Bureau for Food and Agricultural Policy (BFAP) expects 2025 to show better growth for the agricultural sector. This is according to Dr Tracy Davids, executive director of BFAP. She was one of the guest speakers during a roundtable event hosted by Nedbank Agriculture in Sandton on Tuesday.
“While the volatile agricultural sector has become even more volatile over the past twenty years, it has on average also outperformed total GDP growth,” Dr Davids said, basing this statement on the fact that agriculture has shown a steady average increase of 3% growth per annum, while the general economy was only able to achieve an average growth rate of 2,1% per annum. The sector was able to maintain this growth rate against the growth rate of ailing support services: Poor port performance, dodgy electricity supply and failing water infrastructure.
Two tough years
John Hudson, Nedbank’s national head of agriculture, said the previous two years (2023 and 2024) were tough years. In 2023, the agricultural sector contracted by 5% and a similar contraction is expected in 2024, although the final figures were still outstanding. “This has shown in Nedbank Agriculture’s figures as well. The demand for credit has declined and we’ve also seen a lot of consolidation. However, this year promises to be better, and this is supported by the IDC/Agbiz Agricultural Business Confidence Index, which increased by ten points and another ten points quarter-on-quarter”,
Dr Davids agreed, adding that 2024’s droughts heavily affected summer crops. The livestock industry also struggled with high feed costs and lagging animal disease effects. However, the horticulture sector performed very well and saw a year-on-year revenue increase of more than 10% for the first three quarters of 2024. The reasons for the increased export prices for most horticultural products, was the fact that other exporters – particularly Peru – reduced their export volumes. There were also low stock volumes in Europe and the Red Sea conflict continued to influence trade routes. “Additionally, the demand for produce improved,” Dr Davids said. However, South Africa’s port inefficiencies continued to place a damper on these exports – especially at the port of Cape Town. “Port inefficiencies cost the pome fruit industry R1 billion through additional cost in the value chain and quality claims, which equates to R26 000/ha.”
Zhann Meyer, Africa head of global commodity finance at Nedbank Capital, said climatic struggles remained one of the biggest challenges for the continent. This was highlighted by the 2024 droughts. “South African farmers lost about 19% of their maize crop last year due to drought, while Zambia lost half of their crop, and they are now importing maize for the first time in 22 years. Zimbabwe didn’t fare any better and they lost two thirds of their maize harvest.” Meyer said it was important to keep in mind that while South African farmers were struggling, they fared better than the country’s neighbours. “This highlights the resilience and uniqueness of South Africa’s agricultural industry.” However, Meyer added that it was clear that the financial sector needed to look at new financial tools to help the industry – especially in terms of insurance tools. “The model of financing is already changing. We can see a movement away from financing a balance statement towards rather financing an income statement. Because in the end, the auctioning of a farm is the last resort, and no bank likes that outcome.”
Brighter new year awaits
Despite challenges of the recent past, Wandile Sihlobo, chief economist of Agbiz, said South African agriculture is set on an upward trajectory over the long term. “Agricultural partnerships between industry organisations and government are delivering on growth. One such example is the inroads that the Red Meat Industry Services (RMIS) and their stakeholders are making with regards to working with government on various issues.” Additionally, the fact that the country can now count on a stable electricity supply was another green shoot. And while the western parts of the country could still do with some rain, the majority of the country’s summer rainfall region has seen good rains in recent months.
While Sihlobo stressed that South African agriculture truly needed every trade partner it could get, the reality was that the United States’ trade policies did not have a major on South Africa now. “However, if US President Donald Trump does interfere in international trade, we could potentially see an influence in our grain, oilseeds and pork markets.” Rather than being overly concerned by US politics, Sihlobo said it was important to keep the trade relations strong with neighbouring countries. “Although the type of produce traded differs, the Southern African Customs Union (SACU) is as large a market as the European Union. In fact, SACU absorbs 20% of South Africa’s agricultural produce.”
Sihlobo said it could also benefit South Africa if the BRICS countries did decide to put a trade agreement in place. “Currently BRICS is only a political forum. If it could become an economic forum, that could be very beneficial as BRICS represents half of global trade.” This would however not mean that current export havens, such as the EU is no longer important. “We need to retain relationships with EUs, the Americas, BRICS, everybody.” – Susan Marais, Plaas Media.
