SOUTH AFRICA- According to the Agricultural Business Chamber (Agbiz) and Industrial Development Corporation’s Agribusiness Confidence Index (ACI), the market’s confidence in South Africa’s agribusiness sector reached a 15-year low of 38 points in Q2 2024, the lowest level since Q3 2009.
The current index means agribusinesses in South Africa are discouraged by the country’s business environment.
According to the index’s official report, the El Nino-induced drought’s impact on grain harvest and oilseed production are some of the overriding factors that caused this widespread sentiment. IFPRI, an agribusiness analytics firm, revealed that grain production is predicted to decline by 15% in the 2023/2024 season.
Oilseed input costs remain high compared to pre-COVID levels, which also impacts the supply and demand for plant oils.
Five out of ten subindices declined significantly during the reported quarter. The turnover subindex decreased from 22 points in the previous quarter to 31 points in the reported quarter. The net operating income subindex declined by 13 points to 35 in Q2 2024. The employment subindex declined by 12 points to 38 points in the reported quarter.
The capital investments subindice declined by 4 points to 46 points in Q2 2024, linked to a decline in tractor and combine harvester sales in the reported quarter.
The volume exports subindex also significantly decreased by 14 points to 21 points in the reported quarter, signaling a potential decline in agricultural export volumes in 2024.
The report also revealed that the drought’s impacts were exacerbated by existing challenges of poor transport infrastructure, inadequate extension services, animal disease outbreaks, and geopolitical tensions worldwide that have negatively impacted supply chains in the agricultural sector.
However, some indices showed notable improvements compared to previous years, which signaled the resilience of the country’s agribusiness sector. An example is the financial cost subindex, which declined by 4 points in the reported quarter to 23 points, indicating that agribusinesses are increasingly confident that interest rates will soon decline.
The report revealed some optimism over recovery in the future, owing to the 6-point increase in the agribusiness market share to 65 points.
The report said, “This slight recovery in the mood about economic conditions could be linked with expectations of a reduction in load-shedding this year, and it is broadly consistent with improvements in various market analysts’ GDP forecasts.”
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