Agribusiness confidence down, but still positive
South Africa’s agribusiness sector remains generally optimistic about business conditions in the country, according to the latest data. South Africa’s agribusiness sector remains generally optimistic about business conditions in the country, according to the latest data. Although the Agbiz/IDC Agribusiness Confidence Index (ACI) for the second quarter of 2018 declined by four index points to 54 from the first quarter, an overall ACI reading of 50 index points or above indicates positive sentiment.
According to Agbiz’s head of agribusiness research, Wandile Sihlobo, the marginal reduction in the country’s agribusiness confidence extended across nine of the ten sub-indices of the ACI. Only the General Agricultural Conditions sub-index showed an increase in positive sentiment – from 37 to 42 index points.
“The optimism in this particular sub-index was underpinned by prospects of above-normal rainfall in the Western Cape within the next three months which, in turn, should support winter crops and horticulture, as well as favourable drier conditions for harvest activity in summer crop regions,” he said.
The latest ACI revealed that, between the first and second quarters of 2018, varying degrees of negativity had entered the sub-indices of Turnover (78 to 64 points), Net Operating Income (68 to 58 points), Market Share of the Business (68 to 53), Capital Investments Confidence (68 to 64), Economic Conditions (68 to 50), Employment (75 to 56), and Export Volumes (56 to 39).
Sihlobo said that confidence about Employment in South Africa’s agricultural sector was at its lowest since the first quarter of 2017, but this was “unsurprising”, given the 3% year-on-year decline in agricultural employment in the first quarter of 2018 to 847 000 jobs.
He added that the decline in confidence in the ACI’s Export Volumes sub-index had been largely due to the reduction in horticultural products output, together with regulatory issues affecting export livestock products such as ostrich meat. Also showing some negativity in the latest ACI were increases in the sub-indices of Debtor Provision for Bad Debt (40 to 50) and Financing Costs (30 to 64).
“The uncertainty regarding land reform policy, particularly expropriation without compensation, remains 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’ve not seen a notable dent in investments in the sector yet,” Sihlobo said.