Agricultural production is expected to taper off this year after two years of solid growth and significant contributions to GDP.
StatsSA released GDP data this week showing that the agriculture, forestry and fishing sector grew 12.2% in the fourth quarter of 2021 and 8.3% year on year, after 13.4% in 2020.
Wandile Sihlobo, chief economist at the Agricultural Business Chamber, said 2022 might see the brakes applied on two consecutive years of high performance.
“The heavy rains experienced at the start of the season will likely lead to a somewhat lower harvest than the 2020/2021 production season, although still above the long-term growth harvest size. The slight annual decline in yield, combined with a higher base of 2021, will likely contract agriculture gross value-added in 2022.”
Sihlobo said the 2020/2021 agricultural season was one of the best, with maize yielding the second-best harvest in South African history and the soybean harvest setting a record.
Citrus farmers recorded good harvests and the livestock sector benefited from improved grazing despite such challenges as an outbreak of foot and mouth disease.
Favourable weather conditions encouraged farmers to increase the area under crops, he said.
However, the invasion of Ukraine, coupled with load-shedding, has not helped SA's economic growth prospects.
StatsSA reported that the economy expanded 1.2% in the fourth quarter of 2021, resulting in 4.9% growth for the year. The higher-than-expected GDP growth reflected the reopening of the economy, which contracted by 6.4% a year earlier due to Covid lockdowns.
The manufacturing sector grew 2.8% in the fourth quarter, while the petroleum, chemical products, rubber and plastic products category made the largest contribution to the increase in the fourth quarter.
Food and beverages, and textiles, clothing, leather and footwear, also made significant contributions to growth. StatsSA said the trade, accommodation and catering industry grew 2.9% in the fourth quarter.
Load-shedding is a major risk to both the first quarter of 2022’s economic outcome and for the 2022 year as a whole, as well as subsequent years
— Investec chief economist Annabel Bishop
Investec chief economist Annabel Bishop said: “We now anticipate SA's 2022 GDP growth at 1.6% year on year as global growth weakens, along with South Africa-specific factors.
“Load-shedding is a major risk to both the first quarter of 2022’s economic outcome and for the 2022 year as a whole, as well as subsequent years, weakening the growth outlook.”
In his budget speech last month finance minister Enoch Godongwana projected real economic growth of 2.1% in 2022. But this week he said in response to the debate on the 2022 fiscal framework and revenue proposals that the Ukraine war “carries with it significant risks for a world economy that is yet to fully recover from the shock of the Covid-19 pandemic”.
Godongwana said: “The longer the conflict lasts as well as the imposition of further sanctions could lead to widespread global inflation and impede global economic recovery.”
Last week Dondo Mogajane, director-general of the National Treasury, said that due to the Ukraine crisis the assumptions on the global economy contained in the budget have gone “out of the window” and the Treasury would need to relook at projections about oil, borrowings and global financial flows.
The Nedbank Group Economic Unit said this week the worst of the pandemic appears to be over, which will result in looser restrictions on economic activity. However, Russia’s war on Ukraine has created a new source of uncertainty in the global economy.
“The conflict is expected to exacerbate supply chain bottlenecks [and] global inflationary pressures via higher energy and food prices, which will probably result in a more rapid tightening of monetary policy. Therefore, the duration and intensity of the war will weigh on the global and domestic recoveries,” it said.
“From the expenditure side, domestic demand is expected to contribute the most, mainly driven by household spending, which will benefit from some improvements in income, wealth levels, and accumulated savings.”
But mounting inflationary pressures and rising interest rates will hurt discretionary income and could potentially slow consumer spending, Nedbank said.
Professor Raymond Parsons of the North West University Business School said the prime momentum for the economic rebound was now spent and SA had to do much better if it wanted to reduce unemployment and ensure fiscal sustainability in the years ahead.
“South Africa therefore needs to progressively aim for 4%-5% GDP growth and do what is urgently necessary to achieve it through greater collaboration with the private sector,” he said.
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