Confidence in South Africa’s agribusiness sector has waned in recent months, with a quarterly index sponsored by advocacy group Agbiz and the Industrial Development Corporation falling to its lowest in nine years.
After declining to 48 points in the third quarter of 2018 from 54 in the previous quarter, the Agbiz/IDC Agribusiness Confidence Index weakened further to 42 in the last quarter of the year, the lowest point since the fourth quarter of 2009.
The Agricultural Business Chamber (Agbiz) said: “The results, which are below the neutral 50-point mark, imply that agribusinesses are downbeat about business conditions in South Africa.”
It said the drier weather conditions which were cited by some respondents as a key challenge could soon change as the South African Weather Service had indicated on November 30 that there was a good chance for above-normal rainfall in the summer crop areas between December 2018 and February 2019.
Wandile Sihlobo, head of agribusiness research at Agbiz, said: “Having said that, we doubt that there will be a meaningful improvement in confidence in the near-term if there is still no clarity regarding the land reform policy in South Africa.
“Any reckless move in policy which might undermine property rights could dent investment and long-run growth prospects in the sector.”
Critics say the government’s plans to amend the Constitution to allow for land expropriation will undermine investor confidence in general and hurt the agriculture sector in particular. The government says the plans are a necessary tool to drive land reforms as ownership remains skewed in favour of white people whose ancestors forced black people off their land centuries ago.
The Agbiz/IDC survey was conducted in November and comprised agribusinesses operating in all agricultural subsectors across South Africa.
It reflects the perceptions of at least 25 agribusiness decisionmakers on the 10 most important aspects influencing a business in the agricultural sector, namely turnover, net operating income, market share, employment, capital investment, export volumes, economic growth, general agricultural conditions, debtor provision for bad debt and financing cost.
The survey is used by agribusiness executives, policymakers, and economists to understand the perceptions of the agribusiness sector, and also serves as a leading indicator of the value of the agricultural output while providing a basis for agribusinesses to support their business decisions.