South Africa’s GDP up, but agriculture still in recession

The 2016 second quarter gross domestic product (GDP) figures, released by Statistics South Africa, show that the economy grew by a seasonally adjusted annualised rate of 3,3% quarter-on-quarter.

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This follows a contraction of 1,2% in the first quarter of the year. Overall, economic growth was above market expectations of 2,6% quarter-on-quarter.

However, Wandile Sihlobo, head: economic and agribusiness intelligence at Agbiz, said the agriculture sector remained in a recession. The sector recorded negative growth of 0,8% quarter-on-quarter, after having contracted by 6,5% in the previous one.

Dawie Maree, head of information and marketing at First National Bank Agriculture, told Farmer’s Weekly that he expected a bigger decline in the sector’s growth.

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“I was surprised by the 0,8% decrease because I thought it might be more, given the bad season we had. However, given this small decline, my feeling is that we might have positive growth from the third quarter,” Maree said.

Sihlobo thinks that the sector’s negative growth cycle may be bottoming out. However, uncertainty around weather patterns is a concern for the industry.

“Some [weather forecasters] have revised down their estimated La Niña occurrence to levels around 50%, from earlier estimates of 75%. Weather will be the key determinant of whether South Africa’s agriculture sector escapes the current mediocre growth path,” he said.

According to Maree, policy uncertainty is having a negative impact on the sector’s growth.

“[It is the] elephant in the room. We need an enabling policy environment within agriculture to instil confidence and investment, which will result in growth in the sector,” he said.

Digital editor for South Africa's oldest and most read farming magazine.