The decision by the SA Reserve Bank last week to cut the cost of credit for the first time since 2020 will bring relief to the agriculture sector, saddled with a debt pile of more than R250bn, Nedbank says.
John Hudson, head of agriculture at Nedbank Commercial Banking, said the lender welcomed the interest rate cut that would provide relief to the indebted agriculture sector.
“While the 25-basis point cut in interest rates by the Reserve Bank was expected, it is certainly good news for the agricultural sector. With the combined indebtedness of agriculture rising to about R260bn the impact of the high interest rates was being felt and therefore a cut, though small, is welcome relief,” Hudson said.
The relief comes while second-quarter GDP data showed the sector was retreating. The sector fell 2.1% quarter on quarter, from 13.5% growth in the first quarter.
The poor performance on the sector in the second quarter was not entirely surprising after a severe midsummer drought forced a reduction in harvest estimates for summer crops with SA’s biggest staple, maize, cut 20.5% year on year to 13.06-million tonnes, the national crop estimates committee’s seventh estimate report shows.
“The cumulative total maize delivered to the country’s silos for the 2024/25 season in [the second quarter] showed an almost 6% drop in deliveries relative to the previous year,” said Paul Makube, senior agricultural economist at FNB Commercial.
“For winter crops, total area planted was down by 1.6% [year on year] at 807,250ha with the wheat area, which accounts for almost 63% of the total, declining 5.9% [year on year] at 506,300ha. All these are an indication of reduced activity in the field crop industry,” Makube said.
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