SA Agribusiness confidence at 15-year low on drought

24 Jun, 2024 - 19:06 0 Views
SA Agribusiness confidence at 15-year low on drought

eBusiness Weekly

Bloomberg

Confidence among South Africa’s agricultural businesses fell to the lowest level in almost 15 years as an El Niño-induced drought affected grain crops.

A confidence index compiled by the Agricultural Business Chamber, known as Agbiz, and the Industrial Development Corp. dropped to 38 in the three months through June. That’s the lowest level since the third quarter of 2009, Agbiz said in an emailed statement Monday.

Dry and hot weather across much of the country, including the key summer-grain producing areas has slashed the forecast for this year’s harvest. The total corn crop, which includes the white and the yellow varieties, for the 2023-24 season is projected to be 19 percent lower than last year’s, according to the government’s Crop Estimates Committee.

The drought coincided with other long-standing challenges, such as inadequate road infrastructure and municipal service delivery, Agbiz said. Lingering animal disease challenges and heightened geopolitical tensions are also the concerns for the sector, according to the business chamber

While only contributing about 4 percent of South Africa’s gross domestic product, agriculture was the best performing sector in the first quarter of the year. It grew 13.5% due to an increase in horticultural production and the industry employs close to 1 million people, according to the statistics office.

The survey was conducted among businesses operating in all agricultural sub-sectors between June 10 and June 19 and the uncertainty about the formation of the government after during that time may have added to the downbeat mood among the agribusinesses, according to Agbiz.

“While the farming sector may have worried about the political outlook at the time of the survey, the reaction to the newly formed government of national unity has been widely positive, and the financial markets reaction reflects that optimism,” Agbiz chief economist Wandile Sihlobo said.

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