Farming shines as gross domestic product drops

Agriculture was the saving grace of the gross domestic product (GDP), which declined by 1,8% compared to the third quarter of 2008 – the first time in 10 years the GDP lost ground.

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Agriculture was the saving grace of the gross domestic product (GDP), which declined by 1,8% compared to the third quarter of 2008 – the first time in 10 years the GDP lost ground.
The 1,8% decline would’ve been far more substantial had it not been for the positive contribution made by the agricultural sector, said Ernst Janovsky, Absa’s agribusiness general manager.
“If agriculture had been taken out of the GDP equation, the country would’ve experience negative growth. Agriculture is carrying the country to a large extent in terms of growth figures,” he said.
Latest figures by Statistics South Africa indicate that the seasonally adjusted real value added by the agriculture, forestry and fishing industries increased at an annual rate of 16,7% during the fourth quarter of 2008, compared to the previous quarter for the same year.
The manufacturing sector dropped a whopping 21,8% quarter-on-quarter and contributed 3,5 percentage points to the total GDP quarter-on-quarter drop of 1,8%.
After two consecutive quarters of negative growth, the manufacturing sector has sunk into a recession and has reached levels last seen in the 1960s. The electricity, gas and water industry sector also contributed to the slowdown in economic activity for the fourth quarter.
But the construction industry made a positive contribution to the GDP, along with the finance, real estate and business services industries and general government services, the transport, storage and communication industries and the personal services sectors. With much investment being made into infrastructure ahead of the Fifa World Cup next year, it’s no surprise that construction notched up a gear.
But how did agriculture manage to succeed when it receives little assistance from government? Janovsky cited two main drivers. “Firstly, there are a lot of safety nets in place globally to catch people in economic downturns, for example the dole in England and social spending to support the poor in South Africa, which was emphasised in the budget. This supports the demand for food, which always has some elasticity and everyone has to eat. Secondly, agricultural production has grown substantially over the past 10 years, giving farmers the opportunity to perform above the old norms of production. If you combine the two drivers, there’s currently a very stable platform for growth potential in agriculture.”
Janovsky said he’s optimistic agriculture will continue to drive and support the economy for the next year or two when the rest of the economy will take strain, adding that other drivers for the economy will be the gold and oil sectors.
Paul Makube, manager of agri information at First National Bank said the latest GDP figures were a boost to the sector. “The figures were in line with what everyone expected. But what’s worrying is retail has shrunk a bit. The performance of this sector will have an impact on agriculture and the demand for commodities. Although demand for food is not expected to decline, some sectors within agriculture, like meat, are very sensitive to consumer confidence.”
Makube added that since the fourth quarter farmers were already looking at softer prices across all agricultural commodities. – Robyn Joubert