South Africa

3% of South Africa’s GDP under threat

South Africa’s agricultural sector is facing significant headwinds and will likely contract in 2023.

This is the view of Wandile Sihlobo, the chief economist of the Agricultural Business Chamber of South Africa.

In 2022, the agricultural sector contributed R133.84 billion to the country’s GDP – constituting just under 3% of the economy.

Sihlobo said he has regularly painted a positive picture of South Africa’s agricultural performance this year following 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,” he said.

“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, he said the 2022/23 maize harvest is at 16.4 million tonnes – 6% higher than the 2021/22 season’s harvest and the second-largest harvest on record. 

Despite this and other record harvests, the sector contracted in the third quarter of 2023.

Sihlobo explained that this is because the base effects and headwinds in the livestock and poultry industry weighed on the sector. 

The livestock and poultry industry accounts for nearly half the sector’s value and has been hit by diseases such as foot-and-mouth, avian flu, and African swine fever in 2023.

“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,” he said.

“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.”

Considering the downbeat growth figures of the recent quarters, Sihlobo said he now thinks the sector could face a mild contraction in 2023 rather than the solid growth initially expected.

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

“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.”

Sihlobo urged the government and the private sector to address these issues to support the industry in the long term.


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