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IOL News
4 days ago
- Business
- IOL News
What do agriculture experts predict for South Africa's GDP growth in 2025?
There have been mixed reactions from the Agriculture sector and economists on expectations for Tuesday's announcement of the GDP growth for the first quarter of 2025. There have been mixed reactions from the agriculture sector and economists on expectations for Tuesday's announcement of the GDP growth for the first quarter of 2025. Wandile Sihlobo, the chief economist of the Agricultural Business Chamber of South Africa (Agbiz), said, 'One sector that some may be observing is the performance of agriculture, which last year was a significant drag on the economy. The mid-summer drought, delays in harvesting deliveries, and animal diseases were some of the challenges we encountered in 2024.' This year, the conversation should shift somewhat and become more upbeat. 'We have an excellent summer grains and oilseeds season, with the latest production forecasts by the Crop Estimates Committee suggesting a harvest of 17.98 million tonnes, up by 16% from the 2023-24 drought season. Favourable rains and decent area plantings support this,' he said. Sihlobo said South African sugar production for the 2024-25 production season is forecast to recover by 7% year-on-year to 2.09 million tonnes. 'This is also due to favourable weather conditions and the availability of sufficient water for irrigation. We have also received encouraging production data from SA Wine and Vinpro, forecasting South Africa's wine grape harvest at 1.244 million tonnes, an 11% recovery from the exceptionally poor harvest of 2024. We also see encouraging production data from citrus, various fruits, and vegetables. In poultry production, the moderating prices of maize and soybeans should help the industry in its ongoing recovery.' Sihlobo said the one area that remains a concern is the livestock industry, primarily due to the recent outbreak of foot-and-mouth disease. 'We have already seen various trading partners temporarily banning South Africa's beef exports due to the foot-and-mouth disease outbreak. Given the sizable share contribution of the livestock industry to South Africa's agricultural gross value added, its challenges are something worth reflecting on when considering South African agricultural performance.' Francois Rossouw, the CEO of Southern African Agri Initiative (Saai), said the sector is certainly in a recovery period after the excessive rain the country had. 'It was positive to see a healthy jump in our exports in the first quarter of the year, helped a bit by things running smoother at the ports. However, there are big external challenges ahead, especially when it comes to securing good access to important markets like the US and navigating hurdles in promising places like China. So, while there's some positive momentum, the outlook is definitely shaped by these significant trade issues that need sorting out.' Investec economist, Lara Hodes, said that they expect a weak quarter one 2025 reading, following quarter four 2024's 0.6% quarter-on-quarter seasonally adjusted lift, with incoming data readings for the quarter unfavourable. Specifically, industrial production (mining, manufacturing and electricity), which makes up a substantial 19.5% of GDP, declined by -2.9% qqsa in the first quarter, while the trade sector, which makes up around a further 12.5% of GDP, disappointed, she said. Hodes said the outlook is reflective of a still subdued economy, which continues to face a number of challenges, notably on the logistics front. 'Business Confidence is likely to have remained in contractionary territory at around 47, from 45 logged in Q4.24 and Q3.24 respectively. While political uncertainty has eased to an extent and the GNU is expected to endure, domestic growth remains lacklustre while global uncertainty remains elevated, with the tariff situation fluid.' Johann Els, Old Mutual Group Chief economist, said that given the performance of high-frequency data, he expects GDP growth to be negative. 'I project GDP to be - 0.1% in the first quarter of 2025. This compares to a +0.6% growth in the last quarter of 2024. The reason for the negative projection is the severe production performance in the mining and manufacturing sectors. Mining production, with a weight of 4.8% into the economy, was down more than 16% on an annual basis quarter-on-quarter, and similarly, manufacturing production at a bigger weight of 12.5% of the economy was down 9% on an annual basis quarter-on-quarter.' TLU SA general manager, Bennie van Zyl, said that there are so many interchangeables in the Agriculture sector that it is difficult to compare one year to next year. 'This is due to us having late rain, but it could still result in a good harvest. There are also farmers that haven't harvested yield yet due to the late rains. We also have farmers who are not able to sell cattle due to foot-and-mouth disease, so we have to wait and see. I'm cautious to make a prediction on the sector GDP growth.' BUSINESS REPORT Visit:
IOL News
26-05-2025
- Business
- IOL News
Navigating SA's 2025 grain outlook: a delicate balance between abundant harvests and rising food costs
Rising input costs for fertilisers, seeds, and machinery add financial strain on farmers, which may lead to higher consumer prices, affecting vulnerable populations. Additionally, global market dynamics, including changes in trade policies and commodity prices, further complicate the situation. Image: Karen Sandison/ Independent Newspapers As South Africa approaches the 2025 agricultural season, the outlook for staples like maize, wheat, and soybeans is complex and critical for food security and consumer prices. Although strong harvests are expected, unpredictable climatic conditions such as droughts and excessive rainfall pose risks to crop yields. Rising input costs for fertilisers, seeds, and machinery add financial strain on farmers, which may lead to higher consumer prices, affecting vulnerable populations. Additionally, global market dynamics, including changes in trade policies and commodity prices, further complicate the situation. While there is optimism about harvest yields, these interconnected factors create uncertainty for agricultural stability and food prices. Stakeholders—including policymakers, farmers, and consumers—must remain adaptable to address the challenges ahead and ensure food A Double-Edged SwordThe Crop Estimates Committee (CEC) forecasts a commercial maize crop of 14.664 million tons for 2025, indicating a 0.72% increase from previous estimates and a 14.12% rise from 2024. This growth is primarily due to favourable weather conditions and an expansion in farming areas. However, the potential benefits of this bumper crop may be diminished by rising production costs. Escalating prices for fertilisers and fuel, driven by global supply chain disruptions and geopolitical tensions, are significantly increasing input costs for farmers. For consumers, especially those in low-income households, maize meal—a staple food—has become less affordable, with prices steadily climbing over the past year. This situation raises concerns about food security for many and Soybeans: Promising Yet VulnerableThe wheat harvest for 2025 is projected at 2.3 million tons, a 26% increase year-over-year, driven by improved yields and consistent planting areas. Similarly, soybeans are expected to yield 2.3 million tons, benefiting from better yields and a stable planting area. These gains are crucial for both human consumption and animal feed, impacting food inflation and livestock production costs. Despite these optimistic projections, the agricultural sector remains vulnerable to climatic fluctuations. The El Niño phenomenon, which has caused prolonged heat stress and adverse rainfall, continues to pose a threat to crop yields and food for Food Security and Consumer PricesIncreased production of staple crops like maize can play a significant role in addressing food price pressures, but it is essential to recognize that the benefits of such production are not always guaranteed. For example, while higher yields can lead to an abundant supply, this abundance does not automatically translate to lower prices for consumers or increased profitability for farmers. In the context of South Africa, several factors intertwine to influence maize prices. Global competition plays a crucial role, as farmers must compete with imported maize, which can fluctuate significantly in price due to international market conditions. Additionally, local challenges such as exchange rate fluctuations can further complicate the pricing landscape. When the South African rand weakens, the cost of imported goods increases, putting additional pressure on local producers to maintain their price points while also managing rising production costs. The anticipated decline in maize prices that may result from increased production can pose challenges for farmers. While consumers may benefit from lower prices, farmers could see their profit margins shrink, leading to potential issues regarding the sustainability of local agriculture. Farmers may struggle to cover their costs, invest in their operations, or make a reasonable living if prices fall too low, which could discourage long-term investment in farming activities. For consumers, particularly those living in rural areas or low-income urban settings, the rising cost of staple foods like maize meal is a pressing concern. Food security is a critical issue, and when prices rise, it can push necessities out of reach for many families. In 2022, approximately 25.8% of the population experienced food insecurity, a figure that was likely exacerbated by ongoing economic pressures and rising inflation rates. As these economic challenges persist, families are often forced to make difficult choices between purchasing food, paying for utilities, or other essential expenses. Policy RecommendationsTo navigate these challenges, a multifaceted approach is essential:Support for Farmers: Implementing subsidies for fertilisers and fuel, as well as providing access to blended finance packages, can help mitigate rising production costs and support farmers' profitability. Strategic Trade Policies: Enhancing trade agreements and resolving regional trade frictions can secure export markets and stabilise prices, benefiting both producers and Protection: Monitoring price trends and implementing short-term interventions, such as zero-rated VAT on basic foodstuffs, can help protect vulnerable households from escalating food costs. Investment in Agricultural Innovation: Encouraging the adoption of drought-resistant GMO seeds and precision agriculture can improve yields and reduce environmental impact, ensuring long-term food security. The 2025 grain outlook for South Africa presents a paradox: abundant harvests shadowed by rising costs and climatic uncertainties. While increased production offers hope, it is not a panacea for the challenges facing food security and consumer prices. A balanced approach, combining support for farmers, strategic policies, and consumer protection, is crucial to ensure that the benefits of a bumper harvest reach all South Africans. Dr Thulasizwe Mkhabela is an Honorary Research Fellow with the African Centre for Food Security and the University of KwaZulu-Natal Image: LinkedIn
