Janovksy first told farmers that South Africa cannot compete in a market where China and the dollar contend head-to-head in a battle that will directly affect our exchange rate negatively.
“Farmers are working in a changing world economy where they will become more well-off in rand terms but poorer if compared to other countries,” said Janovsky.
He also warned farmers not to underestimate the effect of the drought on their psyche. But, he added, “agriculture as a whole is not in trouble”.
Absa has taken farmers through droughts before and will do it again. “The effect of the drought is there, and is difficult for the individuals’ psyche, but to restructure books isn’t hard for a bank. No one is walking away from farmers. Agricultures turnover still is growing,” Janovsky said.
Janovsky said this is true even for the red meat industry, which is seemingly in trouble.
“South Africa is slaughtering 11% more meat than last year and the price remains high. There is more money in the cattle industry than ever before. Chinese consumers are becoming well off and will consume more protein, opening to our export market.”
With European consumers under pressure EU prices will remain the same as 2015, added Janovsky.
Four things were needed to draw investors to South Africa:
- A good transactional base, and “we are rated as the second best financial system in the world,” said Janovsky.
- A good fiscal policy. “It’s Gordhan’s responsibility to balance the income he receives. He achieved this before.”
- A good monetary policy – and, according to Janovsky, the Reserve Bank is managing this well.
“The problem lies with political policies that create uncertainty, especially in matters like expropriation,” said Janovsky.
He advised farmers not to wait too long to invest in imported goods such as tractors as prices will increase.
“Because of the drought we expect consolidation where a lot of farmers will buy others out, that’s a big opportunity,” he said.