Considering that the livestock industry accounts for nearly half of South Africa's agricultural gross value added, the lingering animal diseases (particularly foot-and-mouth disease) also add to the underperformance this quarter.
The drought that hit South Africa’s summer crops in February and March this year is starting to show on the economic indicators. After a robust expansion of 13.5% quarter-on-quarter (seasonally adjusted) in the first quarter of 2024, South Africa’s agricultural gross value added contracted by 2.1% in the second quarter.
These figures are not surprising. South Africa’s agriculture has gone through the severe effect of the El Niño-induced drought, which weighed on crop yield. For example, the country’s 2024-25 summer crop harvest is down 22% from the previous season, estimated at 1.69 million tonnes. This figure of a crop decline encompasses maize, sunflower seeds, soybeans, groundnuts, sorghum and dry beans.
But drought was not the only problem. We continue to struggle with the lingering effects of animal diseases such as avian influenza in poultry, African swine fever in the piggery industry and foot-and-mouth disease in cattle. Although we have not had a new outbreak of all these, certain Eastern Cape regions continue to battle with foot-and-mouth.
Considering that the livestock industry accounts for nearly half of South Africa’s agricultural gross value added, the lingering animal diseases (particularly foot-and-mouth disease) also add to the underperformance this quarter.
Before we received the macroeconomic data about this sector’s performance, the drought had already weighed on sentiment in the sector. For example, the Agbiz/IDC Agribusiness Confidence Index (ACI) remained depressed in the second quarter of 2024, reaching 38 points from 40 points in the previous quarter. This is the lowest level since 2009, at the time of the global financial crisis.
The effect of the mid-summer El Niño-induced on summer grains and oilseed production is one of the major factors that weighed on the sentiment. The drought coincided with the long-standing problems of inadequate road and rail infrastructure and inept municipal service delivery. This is in addition to the lingering effects of animal disease.
But the mid-summer drought did not severely affect the horticultural industry because it is under irrigation. Dam levels across South Africa had benefited from heavy rains at the end of 2023 and into the start of 2024 before the start of the mid-summer drought. These better dam levels and a more reliable energy supply catalysed the excellent production in the horticulture subsector.
In essence, we are now seeing the impact of the drought on the broader sectoral performance. The current downbeat mode may continue in the coming quarters, because of the generally limited activity in the fields in the third quarter of the year.
With that said, when one looks forward to 2025, there is optimism about the potential recovery. There are prospects of a La Niña weather event, which could bring much-needed rainfall across South Africa and the Southern Africa region, boosting agricultural production across all the subsectors.
Notably, the livestock industry is working with the government to resolve the animal disease problems. More robust surveillance and better management of outbreaks would help minimise the economic effect of future animal diseases on the sector’s fortunes.
Thus, we remain optimistic that South Africa’s agriculture may enter a recovery path in 2025.
This year’s underperformance is due to well-understood challenges currently being addressed (mainly animal diseases), and weather prospects are also looking promising for the year ahead.
Wandile Sihlobo is the chief economist at the Agricultural Business Chamber of South Africa and a senior fellow in Stellenbosch University’s department of agricultural economics. His latest book is A Country of Two Agricultures.