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Tuesday, 13 June 2017

The Western Cape Is An Exception Sign Of Recovery In Farming

It is often said the macroeconomic standing of the agricultural sector has diminished, an argument supported by the sector's declining share of GDP, which fell from 4.2 percent in 1996 to 2.3 percent in 2015. However, what is not captured in this narrative is that the value of the agricultural sector has grown 40 percent, from R50.5bn to R71.4bn over that period. This translates to a fairly modest average annual growth rate of 2.1 percent over the past two decades, which explains why agriculture's relative share of the economy has been declining. Agriculture is not becoming insignificant -- it is just that other sectors, particularly the services sector, have grown at a faster rate from a lower base. The sector has just come out of one of the worst droughts in history, following two successive years of progressively drier seasons. Consequently, the 2015-16 period resulted in the agricultural sector entering a protracted recession, enduring eight successive quarter-on-quarter GDP declines. The contraction of the sector has been observed through a number of commodities. Maize production declined 30 percent year on year in 2015 and 22 percent more in 2016, to reach 7.8-million tonnes, the lowest output in a decade. Sorghum touched its lowest level on record, while high-value commodities such as peanuts reached their lowest level in seven decades. Overall agricultural exports declined 10 percent year on year in 2015 and 1 percent in 2016 in real terms. The trade balance for the sector remained positive, as agricultural exports continued to trend above imports. Due to the weather's effect, the sector has been in a state of uncertainty, emanating from a lack of clear and consistent policy direction. The country's politics has generally contributed to this policy vagueness and inconsistency, including land-reform policy discussions with mentions of expropriation without compensation and land ceilings, all of which add to uncertainty and affect production and investment decisions. So far in 2017, there have been signs of a strong production recovery across all agricultural commodities in the country excluding the Western Cape, where dry conditions have persisted.

Source: The Huffington Post