Raymond Greig, IFC manufacturing, agribusiness and service adviser with Rong Chen, Task Leader of the Agri-processing Resource Efficiency (APRE) programme of IFC in South Africa.

This year’s annual Agbiz Media Day took place on 5 December at the Grain Auditorium in Pretoria. Dr John Purchase, the CEO of Agbiz, Wandile Sihlobo, Agbiz chief economist and other speakers gave an overview of the South African political economy and the current agricultural economic conditions. Theo Boshoff, Agbiz head of legal intelligence, discussed the country’s policy and legislative outlook.

Economic growth

Wandile shared the current state of economic growth in South Africa and how it will influence future conditions. “The Agbiz/ICD Agribusiness Confidence Index (ACI) fell with two points in the third quarter of 2019, which basically means we are in a depressed stage in agriculture. Perceptions regarding general economic conditions also fell by six points, equaling out to nine points, which is the lowest its been since the second quarter of 2016.

“The ACI has been at levels below the neutral 50-point mark for six consecutive quarters, which is the longest streak of sub-50 since 2010. This has been caused by unfavourable weather conditions and a hostile agricultural policy environment. These factors can possibly continue into 2020 which could drive further underperformance,” commented Wandile.

Political economy

Dr Purchase discussed the political economy and touched on major risks and challenges both in South Africa and on a global scale. “The trade war will have a significant impact on South Africa’s agricultural sector. Major political and economic shifts in China and the US will also affect agricultural exports. For example, the table grapes industry came under a lot of pressure this year because 75 to 80% of the industry’s produce is exported to Europe. America blocked Chilean and Peru table grape exports to the US, which has now landed on the European market. This collapsed table grape prices, which benefited Europe, but sank South Africa’s profitability and competitiveness.

“Global population should also be considered if we want to stay ahead of the curve when it comes to food security. Africa alone equals 17% of the global population but contributes less than 5% of GDP. China and India are growing their economy by 5 to 6% per year, which has been sustained over nearly two decades. Currently, Africa houses about one billion people, which will double in the next 30 years to two billion people and double again to four billion by 2100. If we don’t put procedures in place to feed four billion people, we will be in trouble. As already seen in China, globalisation, interconnectivity and e-commerce are going to be massive drivers in global economic growth,” added John Purchase.

Battling economic decline

In South Africa, our biggest concern is our competitiveness and economic decline. Other concerns include unemployment, land and water reform and crime and security. Government and private institutions are trying to get back to basics when it comes to implementing and following the National Development Plan. “We need social cohesion in South Africa which will only be achieved through establishing the right conditions and opportunities in the public and private sector. Through doing this we can help fuel employment, growth and poverty reduction. However, strong leadership, effective government and active citizenry will have to be established to realise our goals. – Claudi Nortjé, Plaas Media