Covid-19 Watch

A good season lie ahead for agriculture despite a negative growth rate in the first quarter of 2021

One of the key concerns that consistently arises amid the corona virus (Covid-19) is the speed in which the country’s economy will be able to bounce back to the levels of pre-pandemic. Statistics South Africa (StatsSA, 2021) released the Gross Domestic Product (GDP) data for the first quarter of 2021 and they are encouraging. The South African economy grew by 1,1% in this quarter and this is being the third consecutive quarter of positive growth. Despite the positive growth, the economy is still 2,7% smaller than it was in the first quarter of 2020. Finance, mining and trade were the driving forces behind the positive growth in the first quarter of 2021. After an impressive display in 2020, the agricultural sector registered a 3.2% decline in the first quarter of 2021.  

What could be attributed to South Africa’s agriculture GDP performance?
Statistics South Africa attributes the underperformance to weaker production of field crops and animal products. The increasing incidences of trade-distorting animal diseases such as the Avian Influenza on poultry and Foot-and-Mouth Disease on beef are impacting the trade potential of South Africa on animals and animal products. The heavy rainfall that occurred in the northern parts of South Africa, early this year also impacted the production of tomato and other vegetables.  Moreover, industries such as wine and tobacco continued to struggle constrained by covid-19 regulations. 

But the aforementioned factors are more of a temporary problem due to harvesting delays and other issues and they shouldn’t be read as though this is a worse season than the robust 2020. The sector is anticipated to have one of the best seasons, and such improvements should show in the coming quarters. For example, citrus is expected to reach 159 million cartons and maize and soybeans production are expected to reach your records.

What to expect in the next coming quarters?
Though the first quarter of this year shows negative figures, the sector is expected to show outstanding performance again this year. To name few positive trends expected in the next coming quarters, the forecasts released by the Crop Estimates Committee (CEC) states that summer and oilseeds crops (maize and soybean) production will increase to 16.2 million tons and 1.9 million tons, respectively. And this is due to the expansion of production hectarage of 6% year on year and expected favourable weather conditions. The Citrus Growers’ Association (CGA) also reported that an expected exports will increase from 146 million cartons in 2020 to 159 million cartons in 2021 due to a good harvest. The expected good agricultural season is reflected in business confidence that is ozzing amongst agricultural players. This is evident from the Agbiz/IDC Agribusiness Confidence Index (ACI), which in the second quarter of this year reached a record high (since its inception in 2001) of 75, from 64 in the first quarter of 2021. These results reflect favourable conditions for all subsectors of agriculture, with various crops set to reach record output levels. Importantly, this comes at a time when commodity prices – domestically and globally – are at relatively higher levels, mainly supported by growing demand from China, combined with dryness in parts of South America. The good sentiments in the sector are also fuelled by policymakers working hand-in-hand with industry captains to drive stable and transparent policy.  South African policymakers are currently at a stage of finalising the Agricultural and Agro-processing Master Plan (AAMP), the focus is to the drive for economic growth both at the national and provincial level through the inclusivity for all, this could increase agricultural output.

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