DA leader John Steenhuisen. (Delwyn Verasamy/M&G)
Agri-economists say they are confident that the newly appointed agriculture minister John Steenhuisen will be able to boost the industry’s prospects.
Steenhuisen’s appointment on Sunday comes against the backdrop of the latest Agricultural Business Chamber of South Africa’s (Agbiz) confidence index dropping to 38 points in the second quarter of 2024 from 40 points in the previous quarter, the lowest since 2009.
Sentiment was weighed down by the uncertainty in the political climate, coupled with the drought induced by El Niño and problems with road infrastructure and municipal service delivery, animal diseases and ongoing geopolitical tension.
After the 29 May national and provincial elections there was uncertainty about South Africa’s political direction which negatively influenced the mood of the business leaders interviewed for the survey, Agbiz chief economist Wandile Sihlobo said.
“You had that political uncertainty of not knowing where the country was going and, in addition to that, you had a drought, which had affected the country’s [grain farmers] and then it increased the input costs for those that are in poultry and livestock,” he said.
“Then, the third aspect of it, you add roads and municipalities which have long been an issue … Now, a combination of those things is what led to this downbeat.”
Steenhuisen is not taking leadership of a very difficult portfolio, with agriculture remaining one of South Africa’s better performing sectors. In the first quarter of 2024, it accounted for 13.4% of gross domestic product — the highest contributor — while on the employment front, it added 21 000 jobs.
AgriCulture South Africa (AgriSA) chief economist Kulani Siweya welcomed Steenhuisen’s appointment, saying the organisation looked forward to a productive relationship to advance the sector.
In the past 10 years, agriculture in South Africa has been on a better footing, having grown more consistently than other sectors, including mining and manufacturing, he noted.
“It just tells you how resilient and robust the agricultural sector has remained over the course of the years and how much growth has happened in that sector and this speaks to the resilience, it speaks to the agility and the ability to adapt to the tough environment,” Siweya added.
The slump in the Agbiz confidence index reflected El Niño’s effect on grain and oilseed production, and this was not unwarranted, according to Heleen Viljoen, an economist at GrainSA.
She said when farmers started their planting cycle in December, very favourable weather conditions prevailed, resulting in an excess of summer grains. However, during the January to mid-February period, a mid-season drought led to a deterioration in crop production.
Production of white maize is about 25% less than the previous season, while that of yellow maize is down about 11%, Viljoen said.
“This is important to keep in mind because most South Africans eat maize as one of their staple meals,” she said.
In addition to the climate, other issues such as the poor condition of roads and railways and load-shedding, as well as the price volatility due to the war in the Middle East, also hurt operations.
“All those things add to the impact of the drought and make it so much worse,” Viljoen said.
She said railway networks are a more efficient transport option for grains and oilseeds than roads but the poor rail infrastructure has led to producers using road transport, which is more expensive.
Viljoen would like to see the new administration prioritise infrastructure, especially roads and railways, to ensure a more efficient value chain for the grain industry.
Agbiz’s Sihlobo said although the index indicated subdued sentiment on ports, these have been showing some recovery.
“Exports were up 6% year on year, trade surplus was up 20% year on year. This shows a sector that has actually been, on an economic side, in a recovery and doing reasonably well,” he said.
Sihlobo said there may be recovery in grain outputs in the third quarter of the year, adding that in 2025, the La Nina period would bring good rainfall, making him optimistic about the future of South Africa’s agriculture.
“The new leadership in the sector, which includes the minister and those that are in land affairs, are aware of the economic benefit and potential of the sector. And I think that they will seize the moment to ensure that South Africa’s agriculture continues on its inclusive growth agenda,” he added.
Siweya, on his part, said if the new administration tackled the poor roads and there was an improvement in electricity supply and ports improve, sentiment would shift drastically, nudging the index back into positive territory.