DA leader John Steenhausen. (Delwyn Verasamy/M&G)
aAgricultural economists say they are confident that newly appointed Agriculture Minister John Steenhuisen can boost farming prospects.
Steenhuisen's appointment on Sunday came against the backdrop of the Agricultural Business Chamber of South Africa's (Agbiz) latest confidence index falling to 38 points in the second quarter of 2024, from 40 points in the previous quarter, the lowest since 2009.
Political uncertainty, as well as El Niño-related drought, problems with road infrastructure and municipal service delivery, animal diseases and continuing geopolitical tensions, contributed to low sentiment.
Following national and provincial elections on May 29, there was uncertainty about the direction of South Africa's politics, which had a negative impact on the mood of business leaders interviewed for the survey, said Wandile Silhobo, Agbize's chief economist.
“There's political uncertainty about where the country is going, and then there's the drought, which is driving the country's [grain farmers] And input costs for poultry and livestock have also gone up,” he said.
“Then you add in the third dimension, the long-standing problems with roads and municipalities. It's the combination of these factors that has led to this downturn.”
Steenhuisen is not leading a very difficult portfolio. Agriculture continues to be one of the strong sectors in South Africa. In the first quarter of 2024, agriculture was the largest contributor to the country's gross domestic product, accounting for 13.4%. In terms of employment, it created 21,000 jobs.
Agricultural Association of South Africa (AgriSA) chief economist Kulani Siweya welcomed Steenhausen's appointment and said the association looked forward to a productive relationship to develop the agriculture sector.
He noted that over the past decade, South Africa's agriculture has grown steadily and performed better than other sectors, including mining and manufacturing.
“This speaks to how resilient and robust the agriculture sector has been over the years and how much growth has occurred in the sector, which speaks to resilience, agility and the ability to adapt to challenging environments,” Siweya added.
Grains SA economist Helene Viljoen said the decline in farm confidence was not unjustified and reflected the impact of El Niño on grain and oilseed production.
She said very favorable weather conditions led to a surplus of summer grains when farmers began their planting cycle in December, but a mid-season drought from January through to mid-February hurt crop production.
According to Viljoen, white corn production is about 25 percent lower than the previous season, while yellow corn production is about 11 percent lower.
“This is important to bear in mind as most South Africans eat maize as one of their staple foods,” she said.
In addition to the weather, poor road and rail conditions, power outages and price fluctuations due to the Middle East war also hit business.
“All this is increasing the impact of the drought and making things even worse,” Viljoen said.
She said rail networks are a more efficient option than roads for transporting grains and oilseeds, but poor rail infrastructure means producers rely on more costly road transport.
Viljoen hopes the new government will prioritise infrastructure, particularly roads and rail, to ensure a more efficient value chain for the grain industry.
Agbiz's Shirobo said although the index showed weak sentiment towards ports, ports were experiencing a slight recovery.
“Exports are up 6 percent year-on-year and the trade surplus is up 20 percent year-on-year, which shows that economically there has really been a recovery and it's a pretty strong sector,” he said.
Silhobo expressed optimism about the future of South African agriculture, saying cereal production could recover in the third quarter of this year, adding that the La Niña weather phenomenon will bring more rainfall in 2025.
“The new leadership in the sector, including the minister and those involved in land issues, recognise the economic benefits and potential of the sector and I think they will seise this opportunity to ensure that South African agriculture continues to align with the Inclusive Growth Plan,” he added.
Meanwhile, Siweya said if the new government tackles road construction and improves power supply and ports, sentiment would change dramatically and the index would move back into positive territory.