PODCAST: Why did SA agriculture GDP contract by 12.3% in Q1?

The numbers released by Stats SA show that in the first quarter of 2023, agriculture gross value added sharply contracted by -12.3% quarter-on-quarter (seasonally adjusted). There are a few elements that explain this sharp contraction.

First, the field crops had a tough start to the season because of excessive rains, which disrupted and delayed plantings by over a month in some areas.

Second, the cattle industry still feels the adverse effects of foot and mouth disease, leading to a decline in slaughtering activity. We see similar issues of animal disease challenges also in the pork industry.

Lastly, one cannot underestimate the effect of load-shedding disruptions on poultry production. However, the government has since introduced various measures to ease the load-shedding burden on farmers, such as load curtailment, expansion of the diesel rebate to the food value chain, and, most recently, the launch of the Agro-Energy Fund.

Also worth noting is that SA’s agriculture quarterly gross value-added figures tend to be quite volatile; hence our communication always focuses on the annual performance.

Importantly, we expect the coming quarters in the sector to show a robust performance and boost the annual growth figure to about 3% (from a revised 0.9% in 2022).

While the summer crop season started on bad footing, and the planting of some crops was delayed by roughly a month, the weather conditions improved in January and allowed for the completion of the planting.

Moreover, the load-shedding interventions we mentioned above assisted some farming entities. However, the effectiveness of these energy support measures differs across farming enterprises, and the costs are high mainly for those not fully benefiting from the above efforts and have had to rely on diesel generators to maintain production.

We discuss more in this week’s podcast segment.