Agricultural sector on path to recovery after being hit by drought, volatile rand

Following the release, on 7 March 2017, of the GDP figures for the fourth quarter of 2016, Senior Agricultural Economist at Absa, Wessel Lemmer, commented as follows on agriculture’s performance and contribution.

“Agriculture contracted by 0,1%, the eighth consecutive quarter of decline, according to the latest Statistics SA GDP data  for fourth quarter of 2016 released today. The contraction can be largely be attributed to the drought in the 2015/16 production season for summer grain and oilseed crops, a stronger rand and relatively low commodity prices globally. However, the recent recovery of rainfall and increases in the production levels of grain and oilseed commodities are expected to result in a significant recovery in the contribution of agriculture to overall GDP growth in 2017.

We expect to see a positive change going forward, especially in the second and third quarters of 2017.  If the rand continues to maintain its current levels of strength or improves further, we may also experience a limited increase or even a slight decline in agricultural production costs. This should benefit the profitability of the sector quite considerably.

The agricultural sector is export driven, making South Africa a net exporter of agricultural commodities and products. The sector thus makes a valuable contribution to South Africa’s economy. ”