South Africa's ag sector growth holds fast amidst recession
This is the fourth consecutive expansionary reading, indicating that agricultural activity continues to stabilise following the damage of the 2015-16 drought. Amongst other things, the Agbiz/IDC Agribusiness Confidence Index projects how South Africa's agricultural gross domestic product (GDP) could perform in the succeeding quarters.
Broadly, the index covers the 10 most important aspects or sub-indices influencing business activity in the agricultural sector, namely, turnover, net operating income, market share, employment, capital investment, export volumes, economic growth, general agricultural conditions, debtor-provision for bad debt and financing costs.
The perceptions regarding employment in the agricultural sector improved in the second quarter of this year from the previous one. The sub-index reached 59 points, up from 56. This suggests the improved expectation of seasonal employment as some horticulture and summer crop farms begin the harvest period, which requires more labour. All things being equal, we could see a complete reversal of the first quarter, where the sector shed 44,000 jobs, reducing the total labour force to 875,000 jobs.
While each of the aforementioned sub-indexes is supported by its unique drivers, the key underlying factor behind this sustained optimism in the agricultural sector is the improvement in weather conditions, particularly the recent summer rainfall and its positive impact thereafter on crops. This means that this optimism is in actual fact, weather dependent. Luckily, the most recent weather updates suggest that the fears of another the El Niño weather phenomenon have eased.
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