Despite the challenges faced by the agricultural sector, South Africa's economy managed to avoid a recession in the first quarter of this year, experiencing a modest expansion with an estimated gross domestic product (GDP) growth of 0.4%, according to Agri SA.
Christo van der Rheede, Agri SA’s CEO, said the agricultural industry took a significant hit, contracting by 12.3%.
"This decline was primarily driven by decreased production of field crops, which was hampered by excessive rainfall during the planting season. Additionally, the sector continued to grapple with the impact of foot-and-mouth disease on animal products. Load-shedding disruptions further compounded the challenges, significantly impacting agricultural production," Van der Rheede said.
Paul Makube, a senior agricultural economist at FNB Agribusiness, said while eight of the industries recorded growth, agriculture was a major drag on growth as it deteriorated further by double-digit levels.
After contracting by 2.4% year-on-year (y/y) in the fourth quarter of last year, agriculture GDP fell sharply by 12.3% y/y, which reflected a downturn in economic activities in the field crops and animal product industries.
"The weak performance in field crops was expected given the generally slow seasonal activity in the first quarter as well as the decrease in commodity prices. For animal products, the downturn in prices coupled with an 8% reduction in livestock slaughter underpinned the contraction in growth for this sector," Makube said.
"The sector continues to grapple with challenges such as the ongoing debacle of uncompetitive phytosanitary measures on citrus from the EU (new rules on false coddling moth), logistics and infrastructure deterioration, high energy costs, rising interest rates, elevated input costs, as well as disease outbreaks," he added.
Wandile Sihlobo, the chief economist at the Agricultural Business Chamber(Agbiz), said the field crops had a tough start to the season because of excessive rains, which disrupted and delayed plantings by over a month in some areas.
Secondly, he said, the cattle industry still felt the adverse effects of foot-and-mouth disease, leading to a decline in slaughtering activity. They saw similar issues of animal disease challenges also in the pork industry.
"Lastly, one can not underestimate the impact of load-shedding disruptions on poultry production. However, the government has since introduced various measures to ease the load-shedding burden on farmers, such as load curtailment, expansion of the diesel rebate to the food value chain, and, most recently, the launch of the Agro-Energy Fund," Sihlobo said.
He said it was worth noting that South Africa's agriculture quarterly gross value-added figures tended to be quite volatile; hence their communication always focused on the annual performance.
"Importantly, we expect the coming quarters in the sector to show a robust performance and boost the annual growth figure to around 3% (from a revised 0.9% in 2022). While the summer crop season started on a bad footing, and the planting of some crops was delayed by roughly a month, the weather conditions improved in January and allowed for the completion of the planting.
“Moreover, the load-shedding interventions ... assisted some farming entities. However, the effectiveness of these energy support measures differs across farming enterprises, and the costs are high mainly for those not fully benefiting from the above efforts and have had to rely on diesel generators to maintain production.”
According to Agbiz, these good agricultural conditions would support the fortunes of the sector. However, the organisation said possible slow recovery in the livestock sub-sector, which accounted for nearly half of agriculture's gross value added, remained a critical risk to this year's performance.
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