Rises in global agricultural commodity prices are keeping SA consumer food prices elevated. In addition, according to the Agricultural Business Chamber of SA (Agbiz), excessive rains this year weighed on crop conditions and this affected SA’s agricultural sector performance.
During a recent virtual seminar, Agribiz chief economist Wandile Sihlobo said SA agribusiness sentiment has moderated, with implications for investment.
He said the next planting season will be costly for producers, especially as fertiliser prices are generally higher due to the Russia-Ukraine war and pre-existing output constraints in major fertiliser-producing countries such as China and Canada.
The Agbiz/IDC Agribusiness Confidence Index fell sharply in April due to heavy rain and flooding in KwaZulu-Natal and other parts of the country.
The Russia-Ukraine war raised concern about escalating global food insecurity as these countries are major exporters of grains, oil seeds, fertilisers and crude oil.
Since the war started, the prices of these commodities have risen significantly, and SA, interlinked in the global commodities market, is exposed to these price increases.
The rand has recently been one of the world’s worst-performing currencies. The volatile currency suffered major losses against the US dollar over the past three weeks due largely to a combination of local factors, including the return of Stage 4 load-shedding, the Covid-19 test positivity rate hitting a three-month high, as well as the disruptive effects of flooding in KwaZulu-Natal on economic activity.
Sihlobo said the grain and oil-seed plantings in KwaZulu-Natal also suffered due to the heavy rain, leading to delays in harvesting.
Pre-existing constraints to SA agriculture growth include inefficiencies in state administration, infrastructure issues, security, geopolitics and uncertainty.
Rebuilding KwaZulu-Natal “centres on the need for investment in the network industries, specifically the road, rail, electricity, water and telecommunications infrastructure”, said Sihlobo.
He said that for agriculture the focus on the network industries is also at the heart of expansion and growth of the rural economy.
The investment by agribusinesses in agricultural value chains and linkages of small or emerging farmers, new entrants and commercial farmers in markets require functional road networks and water infrastructure, he said.
By doing this, the agricultural sector will not be the only beneficiary. The manufacturing, mining, tourism and automobile industries are among those that will also benefit from improved basic infrastructure in SA.
“[SA should] focus more on agriculture because growth in this sector is two to three times more effective at reducing poverty than an equivalent amount of growth generated outside agriculture. The advantage of agriculture over non-agriculture in reducing poverty is largest for the poorest individuals in society and extends to other welfare outcomes, including food insecurity and malnutrition,” he said.
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