South Africa’s agriculture industry has declined to its lowest in more than two years as a result of the government’s controversial plans to expropriate land without compensation.
An Agricultural Business Chamber/IDC survey conducted last month showed that the industry’s confidence index fell 6 points to 48 points in the third quarter, the lowest level since the devastating drought of 2016.
Agbiz’s Wandile Sihlobo said the survey showed that the industry was downbeat about business conditions in South Africa.
He said the employment subindex also contracted 3 points from the second quarter to 53 points, the lowest level since the last quarter of 2016, following a 0.4 percent decline to 843 000 jobs during the period.
He said the economic conditions subindex also decreased from 50 to 15 points. “This sharp pullback comes after this subindex had improved notably in recent quarters, reaching a seven-year high of 68 points in Q1 at the height of the so-called ‘Ramaphoria’.”
Last week Statistics South Africa said that the sector, which is the main contributor to the country’s growth domestic product, fell 29.2 percent following a 33.6 percent slump in the first quarter, due to a decrease in the production of field and horticultural crops.
Sihlobo said while the confidence was previously affected by unfavourable weather conditions it was now struggling on policy uncertainty and weak economic growth.
“In our view, the lack of clarity regarding the land reform policy proposal, particularly expropriation without compensation, remains a key risk that could potentially undermine investment and long-run growth prospects in the sector,” Sihlobo said
Last month Ramaphosa announced that the ruling ANC had resolved to embark on a parliamentary process to amend the Constitution to allow for expropriation of land without compensation.
AgriSA deputy executive director Christo van der Rheede said farmers were waiting to see how the policy would be implemented. “People are too scared that they will lose money,” Van der Rheede said. “They don’t want to invest any money in buying farming equipment or preparing for the next yield.”
Wessel Lemmer, senior agricultural economist at Absa AgriBusiness, said the uncertainty about expropriation without compensation deterred farmers from re-investments in their businesses in order to increase productivity.
Lemmer said the public hearings on the policy also added to the drop in confidence.
“If we as South Africans lose our knowledge and expertise to produce cheap food and need to increasingly import food from our competitors abroad we are going to be in trouble. We need to sustain our production capacity,” he said.
“The government and the public need to up the business confidence of the agricultural sector by openly supporting the sector in order to continue to produce cheap affordable and safe food for years to come and to grow employment and the productivity of agriculture even more to keep up with our population growth.”