Land reform weighs on confidence in agriculture sector
A key agricultural confidence index dipped by four points in the second quarter, weighed down by uncertainty in the land reform debate, particularly the issue of expropriation without compensation.
However, so far there has not been a noticeable dent in investment in the agricultural sector, although the outlook for employment was the biggest casualty, according to the latest survey of the agriculture business chamber (Agbiz) and the Industrial Development Corporation (IDC)
The capital investments confidence declined four points to 64. However, a reading above 50 indicates expansion in local agribusiness activity.
"The uncertainty regarding land reform policy was cited by respondents as one key factor behind the deterioration in confidence," said Wandile Sihlobo, head of agribusiness research at Agbiz.
Parliament is currently exploring the possibility of amending section 25 of the Constitution and other property clauses to pave the way for the government to expropriate land without compensation — a move that has spooked investors.
The EFF appears to be pushing for a blanket approach to land expropriation while the ANC seems more in favour of a case-by-case approach as articulated in the Constitution.
The Agbiz/IDC Agribusiness Confidence shows confidence in employment in the agricultural sector to have retreated by 19 points to 56, which is the lowest level since the first quarter of 2017.
"This is unsurprising following a 3% [year on year] decline in agricultural employment in the first quarter of the year to 847,000 jobs," said Sihlobo. "Moreover, the … decline in agricultural output will translate to reduced activity in the fields, which could limit the chances of increased employment in agriculture in the near term."
Overall, following an uptick to 58 index points in the first quarter of 2018, the Agbiz/IDC Index declined to 54 in the second quarter.
"With the results still above the neutral 50-point mark, albeit having declined marginally, this means that the agribusiness sector is still optimistic about business conditions in SA," said Sihlobo.
He said the forecasts of above-normal rainfall in the Western Cape province bodes well for winter crops and also horticulture industry, following months of persistent dryness in the province. The summer crop harvest activity is also on good footing supported by cool and dry weather conditions across most parts of the country, said Sihlobo.
"The uncertainty regarding land reform policy, particularly expropriation without compensation, remain a key risk that could potentially undermine investment in the agricultural sector. At this point, however, farmers are somewhat in a wait and see mode. We have not seen a notable dent on investments in the sector yet."