Agri a bright spot in South Africa recession

South Africa’s agricultural sector grew 5.5 percent in the first quarter of 2017, led by field crops and horticultural products, the South African statistics agency said in a report.

This marks the first time that the sector, which includes forestry and fishing, has shown any signs of growth since the fourth quarter of 2014. “This might be one of the first signs of recovery from one of the toughest droughts in recent history,” the agency said, referring to a drought that has affected the region for the past two years.

“With regard to the factors contributing to the growth of the agricultural sector in [the first quarter] of 2017, this only really comes down to the fact that after the drought, maize and other summer grain crops are recovering from the output slump last year,” Rian Le Roux, chief economist at Old Mutual Investment Group, told Agri Investor.

Le Roux said output from the dominant maize crop is estimated at about 14.5 million tons, the biggest ever after the previous record of about 14 million tons in 1981. “Average annual production over the five years before the drought was 11.5 million tons per annum and last year’s production was about 7 million tons, so output is recovering.”

Le Roux said the near to medium-term outlook for the sector is promising. “We expect to see these kinds of numbers for agriculture over the remainder of the year – although perhaps not as buoyant as in Q1 – so that, when calculated over a full year, total farming output should more or less fully recover the cumulative 16 percent decline in agricultural GDP from Q1 2014 to Q4 2016.”

Old Mutual expects the agricultural sector to add about 0.5 percent to total GDP this year.

Agricultural strength was not enough to keep the South African economy from shrinking 0.7 percent in the first quarter, a further decline from the 0.3 percent contraction it reported in the fourth quarter of 2016, pushing South Africa into its eighth recession since 1961.