The AGBIZ/IDC Agribusiness Confidence Index (ACI) lifted in the fourth quarter to 61 points, the highest level in more than six years on increased optimism about the sector’s business conditions in South Africa, despite Covid-19 uncertainty.
The index’s level was above the neutral 50-point mark from the previous quarter’s notable recovery of 51 points.
Agricultural Business Chamber’s (Agbiz) chief executive Wandile Sihlobo said most of South Africa’s agriculture and agribusiness sectors performed relatively well in a year of unusually elevated uncertainty with minimal impact, at an aggregate level, from the Covid-19 crisis and related lockdown restrictions.
He attributed the fourth quarter improvement citing that they reflected two important factors: “Firstly, various high-frequency data show that most of South Africa’s agriculture and agribusiness sectors performed relatively well in a year of unusually elevated uncertainty with minimal impact, at an aggregate level, from the Covid-19 crisis and related lockdown restrictions.
Secondly, there is strong optimism about the 2020/21 production season (with the) higher rainfall across most regions of the country,” said Sihlobo.
This fourth quarter survey was conducted between November 11 and 20 and covered agribusinesses operating in all agricultural sub-sectors across South Africa.
The ACI comprised 10 sub-indices and most showed a notable uptick in the fourth quarter. Confidence regarding the turnover and the net operating income sub-indices soared by 32 and 35 points from the third quarter to 82 points each in the fourth quarter, respectively.
For both these sub-indices, these are the highest levels since the third quarter of 2014. Similar to the previous quarter, the optimism was mainly supported by firms operating within the field crops, horticulture, livestock and financial services owing to a large harvest in 2019/20 and anticipated good season in 2020/21.
The sentiment regarding the employment sub-index rebounded by eight points from the third quarter to 41 points. This was a preliminary indication that agricultural employment could recover somewhat in the coming quarters.
The sub-index measuring the volume of exports sentiment improved by five points from the third quarter to 60 points in the fourth quarter, as exports continued to soar on the back of large supplies and the relatively weaker domestic currency.
Confidence regarding general agricultural conditions jumped by 15 points to 94 points in the fourth quarter. This was also the highest level since the inception of the ACI.
Sihlobo noted the final quarter results of the ACI broadly mirrored the prevailing optimism in South Africa’s agricultural sector, both about the good performance of the 2019/20 production season and the expected good season in the 2020/21 production year with the La Niña-induced rains.
However, the positive story of South Africa’s agriculture was only at the aggregate level.
“The impact of the ban in sales and interrupted exports of wine, tobacco and flori-culture amongst other sub-sectors is beginning to show in the official jobs numbers …in these specific subsectors and provinces where these subsectors are predominant” he said.
Southern African Agri Initiative (Saai) chief executive Francois Rossouw said he was pleased with the positive sentiment in the sector, but warned farmers could have it next year.
“One thing that became clear this year was that while people can go without many things, they could not go without food,” said Rossouw.
He indicated many farmers in the sector would not feel the damage this year, but would certainly do so in the new year.
But he warned: “Farmers of potatoes that sold to restaurants selling chips that closed during lockdown made losses. So did those selling milk and wine. Those selling wine would see the blow between March and June next year. This would be exacerbated by the credit crunch with the Land Bank. We really have to solve issues to finance the farmers who cannot borrow money and have input costs.” -BusinessReport