Since the beginning of the year, there has been a number of developments in the South African economy in general, and in particular, developments in the agricultural sector.
There are five pertinent issues worth noting. Firstly, in Q2 of 2018, the South African economy contracted by 0.7% owing to the country’s economy entering technical recession. There are three sectors that contributed heavily on this feat, with the most notable sector being agriculture. The agricultural sector at a micro level contributed a massive decline of 29.2% in total which accounts to a decline of 0.8% of the country’s GDP.
Notwithstanding the fiscal and political uncertainty in the country, the second point worth noting is that the Crop Estimate Committee revised its forecasts for the season, with the expected commercial production of wheat set at 1.85 million tons, which is 2.1% or 37 050 tons more than the previous forecast of 1.81 million tons, whilst the expected yield seats at 3.63 t/ha. On the other hand, the extent of the expected commercial maize crop has been set at 12.93 million tons, which is 2.1% or 276 100 tons less than that recorded in the previous forecast of 13.21 million tons. The area estimate for maize is 2.32 million ha, while the expected yield is 5.58 t/ha.
Long-range seasonal rainfall forecasts indicate a neutral El Nino conditions during early summer, with a possible late El Nino development from mid-summer onwards. If these conditions materializes, there could be some significant negative impact on the summer crop.
On the other hand, surging fuel prices have showed no signs of slowing down. However, in November there is no expected increase on fuel prices. Surging fuel prices have a direct impact on agriculture, with close to 80% of grain and production inputs transported by road. This is likely to push up the cost of production. The months of September and October saw the start of the seedbed preparations in the Eastern Parts of the maize growing areas in the country. Due to fuel hikes, farmers will now have to increase output on diesel, which forms one of the major input cost lines for a grain farmer. In addition, the transport of agricultural inputs such as fertilizers and seed will be negatively impacted.
Lastly, President Cyril Ramaphosa has appointed an inter-ministerial task team supported by a 10 member panel that will advise government on implementation of a fair and equitable land reform process that will stimulate agricultural output, promote economic growth, job creation and national and household food security.
Lunga is a trained Agricultural Economist with experience from the public and private sector. He holds Master of Sciences in the Agricultural Economics qualification and has contributed articles to a widespread of reputable publications with focus on issues relating to agricultural development, policy formulation and international trade.
Views expressed in this article are that of the author and should not be associated with any organisation he has worked or currently works for.
