South Africa’s credit downgrade by the American credit rating agency, Standard and Poor’s (S&P) to BBB-, otherwise known as junk status, is potentially bad news for South African farmers, but there is a silver lining for exporters of fruit.
According to Wessel Lemmer, senior economist at Absa Agribusiness, the sovereign downgrade by international credit agencies will lead to a further weakening in the South African currency, the rand. As a result, interest rates will likely rise and the current low economic growth environment will worsen.
Lemmer also says a weaker rand increases the cost of fuel, fertiliser, pesticides, machinery and equipment, leading to an overall rise in farming input costs.
The one advantage of the weaker rand for local farmers however is that South Africa’s competitiveness will increase on the global market due to cheaper prices for South African agricultural exports. This will likely become an incentive for more agricultural production, says Kapuya.
According to Willemse, exporting sectors like fruit and wine will benefit.
source: africanfarming.com
