What underpinned South Africa’s agricultural underperformance in the third quarter?

The regular readers of this column might know that I have consistently painted a positive picture of South Africa’s agricultural performance this year, after favourable rainfall across the country. 

Therefore, I suspect it shocked some to read that, after an encouraging recovery of 2,8% quarter-on-quarter (seasonally adjusted) in the second quarter of 2023, the country’s agricultural gross value added contracted by 9,6% in the third quarter. 

I was equally surprised as I thought the ample field crop, the harvest of which was a month behind the typical schedule, would still be reflected in the third-quarter data. 

For example, the 2022/23 maize harvest is at 16,4 million tonnes, which is 6% higher than the 2021/22 season’s harvest and the second-largest harvest on record. The soybean harvest is at a record 2,8 million tonnes. South Africa’s sugar cane crop is forecast to be 18,5 million tonnes in 2023/24, up 3% y/y. Other field crops and fruit harvests were also decent this year. 

Ultimately, the base effects and headwinds in the livestock and poultry industry weighed on the sector. The livestock and poultry industry, which accounts for nearly half the sector’s value, has been hit by diseases such as foot-and-mouth, avian flu and African swine fever. 

There are weaknesses in the country’s biosecurity system, including the measures in place to reduce the risk of infectious diseases being transmitted to crops, livestock and poultry.

Also worth noting is that South Africa’s agricultural quarterly gross value-added figures tend to be volatile, hence our communication always focuses on the annual performance.

Importantly, with the downbeat growth figures of the recent quarters, I now think the sector could show mild contraction this year instead of the solid growth we initially anticipated.

Aside from the quarterly growth figures, the sector also has a deepening downbeat mood, which could undermine investment and long-term growth prospects. 

The causes of pessimism in the sector are primary challenges such as rising geopolitical tension, deteriorating infrastructure, poor port performance, weakening municipalities, crime and energy supply, all of which influence farm profitability and growth prospects. 

The South African government, together with the private sector, should address these issues to support the sector in the long term. 

Also crucial for the outlook of the agricultural sector, at least in the medium term, is highlighting that El Nino’s impact on the 2023/24 summer season is another aspect to keep an eye on, although we remain optimistic that it will have a mild impact on the sector and thus keep production at decent levels and, by extension, support growth. 

As stated elsewhere, the weather forecasters, including the South African Weather Service, have consistently painted a promising picture that rain could continue until early March 2024, when the El-Nino-induced dryness is slated to begin. These promising production conditions favour broader field crops and the horticulture, livestock and poultry subsectors.

The one aspect worth monitoring is heat levels and temperatures. The South African Weather Service recently signalled that “minimum and maximum temperatures are expected to be mostly above normal countrywide”. 

Given the challenging conditions, and excessive heat predicted for the Northern Hemisphere, this is something livestock and poultry farmers will have to watch and they will have to find ways to minimise animal heat stress.

Wandile Sihlobo is chief economist at the Agricultural Business Chamber of SA and author of A Country of Two Agricultures.

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