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South Africa’s agricultural economy in recession — any recovery in sight?


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

If there is anything to learn from these erratic weather conditions is that the levels of risk in farming have risen, making sector output more complex to predict.

The third-quarter 2019 GDP data released by Statistics South Africa this week illuminated what many in SA’s farming towns and villages have been experiencing throughout the year, which is that the farming economy is in recession. Indeed, production in SA’s agricultural sector contracted by 3.6% quarter-on-quarter seasonally adjusted in Q3, which marks the third consecutive quarter of contraction.

Agricultural commodities that have been most challenged in the form of lower output include maize, soybeans and sunflower seeds. Discouragingly, harvests for these commodities declined by double-digit levels in the 2018/19 production year. In addition, the livestock sector didn’t fare well either, as biosecurity challenges in the cattle, wool and pig industries limited trade for the greater part of this year. These have weighed on farmers’ incomes.

In the old days, years of drought would typically be succeeded by a rainy season, which would lead to a quick recovery in farming fortunes. However, in the recent past things have changed somewhat. We are now experiencing more frequent occurrences of drought conditions, which has resulted in relatively longer recovery periods in farming fortunes relative to what we have observed in the past.

In the current production season (2019/20), whose “fruit” will appear in the 2020 agricultural economic data, there is a high probability of yet another drier year. The South African Weather Service and global weather observers such as Group on Earth Observations Global Agricultural Monitoring Initiative (GEOGLAM) indicate a high probability of below-normal rainfall in most parts of the country between December 2019 and February 2020.

This makes one doubt whether there will be a meaningful recovery from the current negative slump in 2020. If there is any recovery, it would be driven by base effects, not a major improvement, all else being equal.

For now, it is not easy to make a strong call about agricultural economic conditions in 2020. It is only at the end of January 2020 where one will have a better sense of weather conditions as well as their impact thereafter. By then, the Crop Estimates Committee would have released an update on the size of area planted in the 2019/20 production season, as well as crop conditions. This should enable us to estimate the farming economy’s performance for 2020.

If there is anything to learn from these erratic weather conditions, it is that the levels of risk in farming have risen, making sector output more complex to predict. The response in the near term would be to encourage technology developers, particularly crop breeders, to explore research on shorter-seed growing varieties, so that farming can still thrive in a climate where rainfall spans have shortened.

Efforts to improve South Africa’s water infrastructure and extend irrigation systems where possible is also one of the ways of coping with this ever-challenging farming environment. DM


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