Sihlobo’s “Solid Start” for the SA Agricultural Sector

Sihlobo’s “Solid Start” for the SA Agricultural Sector

In a previous blog post, we reported how Wandile Sihlobo, chief economist at the Agriculture Business Chamber of South Africa (Agbiz), said in a market update that South Africa is likely to escape the food shortages affecting other countries. In this blog post, we’ll go into more detail about his agricultural outlook that was published on his website, “Agricultural Economics Today”, and how it compares to GDP figures released this month. 

Sihlobo holds a Master of Science degree in Agricultural Economics from Stellenbosch University. He is a Commissioner at the International Trade Administration Commission of South Africa (ITAC) and the author of “Finding Common Ground: Land, Equity and Agriculture”. Sihlobo is also a member of the South African Agricultural Economics Association.

Sihlobo’s outlook for South Africa’s agricultural sector is generally positive.

He says that the sector had a “solid start” to 2020. First-quarter gross value-added grew 27.8% quarter on quarter, on a seasonally adjusted and annualised basis. 

Sihlobo notes that succeeding quarters are likely to continue to show strong growth, albeit somewhat milder than the first (more in the range of 20%-25%). 

Key drivers of growth and uptick include:

  • Animal products
  • Field crops (with sugar being the main driver)
  • Horticulture (deciduous fruits the main driver in Q1; citrus in Q2)
  • Summer grains and oilseeds in Q2. 

Sihlobo says: “I am still quite optimistic about the performance of this sector in 2020, maintaining a forecast of about 10% year on year, which is our official view at Agbiz (compared to -6.9% in 2019).”

Some institutions are even more optimistic. The Bureau for Food and Agricultural Policy (BFAP) places its agricultural growth forecast for the year at 13%. 

The reasons behind this include:

  • A “bumper “maize crop of 15.5-million tonnes (the second largest in history)
  • Surging export prices of major fruits
  • The weak exchange rate
  • Strong overall sales of agricultural produce in the first months of the pandemic.

The exceptions to this growth pattern include the wine and tobacco industries, which have been restricted at various stages of the national lockdown. 

Associated industries, such as agricultural machinery, have also benefited from the improved environment of the agricultural sector. The key driver of second-quarter sales has been an improved harvest (which boosted farmers’ finances) as well as farmers’ interest in buying existing machinery stock ahead of price increases that are expected due to the weaker Rand. 

The only aspect that Sihlobo remains “downbeat” about for Q2 is agricultural jobs. Jobs in the sector were cut and the amount of seasonal labour hired was limited due to the enforced regulations to curb the spread of the virus. 

So, how did Sihlobo’s predictions measure up?

Stats SA released second-quarter GDP data on September 8. The statistics indicated a decline of 51% in the second quarter of 2020, due in part to the government’s lockdown regulations. Nevertheless, the agricultural sector expanded by 15,1% due to increased production of horticultural and animal products, and field crops. 

Although this is lower than Sihlobo’s optimistic prediction of 20%, it’s worth noting that the agriculture, forestry and fishing industry was the only positive contributor to South Africa’s GDP, largely because it was declared an essential service.

Unfortunately, however, primary agriculture is a relatively small share of the economy,  contributing only 0,3% to GDP during the second quarter of 2020. Thus, growth in the agricultural sector will do very little to change South Africa’s overall GDP picture. Nevertheless, agriculture plays an important role, as it is deeply interconnected to many other industries and their operations.

On his website, Sihlobo said: “The continued resilience of the agriculture sector is important for the rural economy, boosting foreign earnings and stabilising food security, at least at a national level.”

The future of farming and food security

At Zylem, we are working to help the agricultural sector remain robust and resilient, and secure South Africa’s food security by helping farmers farm more sustainably. 

Get in touch with the Zylem team to find out more about our sustainable farming solutions. Contact us on 033 347 2893 or send your enquiry to admin@zylemsa.co.za.