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SIMON BROWN: I’m chatting with Wandile Sihlobo, chief economist at the Agricultural Business Chamber of South Africa [Agbiz]. Wandile, I appreciate the time today. Fair to say 2023 has been another decent year for farmers broadly across the various different farming sectors in South Africa.
WANDILE SIHLOBO: Thanks for having me on, Simon. I think you are right in saying that, but I would segment it, and say it’s been a decent year for a majority of sub-sectors, with the exception of one, because you may recall that we could dissect South Africa’s agriculture into three broad sub-sectors.
[There are] field crops – that’s where you include all your grains and oil seeds and sugar cane. And then you have horticulture, our fruits and wine. And then you have livestock and poultry.
I would say on the livestock and poultry [side] there have been a number of challenges. But everything put together, it’s still a reasonably decent year. I would agree on that point.
SIMON BROWN: The poultry is well known, of course, for the avian flu which has swept through the sector with devastating impact. Is that being managed, is the worst behind us? Is it still a challenge for the space?
WANDILE SIHLOBO: I would say, Simon, on that the challenge is still with us, but there are a number of interventions that have been put in place. The first one was to say, look, we now have this outbreak and the spreading, and can we make sure that our biosecurity system is strong? By that I mean the measures that we put in place to control the spread of the disease. I think the government and the private sector were able to do that.
The second part then was to say, look, we are running out of stock. Can we import some fertilised eggs to rebuild our current stock flock? I think that’s something that has been under way and is promising. And the aspect of saying, can we import some of the powder and the fluid eggs, so that we can use those powdered eggs in the baking industries, so that we take a little of some of their whole eggs and put them onto the retail shelf for people? And I think a combination of those measures and the other aspects that the businesses themselves are taking on the private side has somewhat stabilised their supplies.
But of course, on the financials, you yourself have discussed the food company’s financials, particularly those with exposure to poultry – and they’re feeling the impact.
SIMON BROWN: Livestock? What have been the challenges with livestock? We chatted livestock in the middle of the year. It’s a space within agriculture that certainly I think gets overlooked by a lot of investors and the broader South African population.
WANDILE SIHLOBO: Absolutely, Simon, and it’s an important one because, if you think about livestock along with poultry, which makes up about 48% of the gross value added of South Africa’s agriculture. So you could argue and say half of this.
The key challenge there in livestock has also been the animal disease we call foot-and-mouth disease. You may recall at the start of this year you and I had a conversation where we talked about some of the key things, and I mentioned that we had foot-and-mouth disease in about six of our nine provinces in 2022. These challenges continued into this year. Of course, when you have these diseases it means that you are taken out of some of the export markets, and trading in general in livestock is slightly less than what we have seen in the previous years. Also meat prices were under pressure for the first part of the year.
Those are some of the things that I think weighed on the profitability of the livestock. I’ll add there very quickly, Simon, to say even the pig industry had challenges with African swine fever south of Johannesburg, and some provinces also experienced that. So I would say if you think about livestock – piggery as well as poultry – for the first time really we’re seeing South Africa having an intensity of all of these three diseases – African swine fever, foot-and-mouth disease, and avian influenza at the same time. And also [at a time] when feed prices for those that are in poultry and in livestock were just starting to come down and offer them relief from the past two years of higher feed prices.
So those are where the challenges I would say weighed on that sub-sector of our agricultural economy.
SIMON BROWN: You mentioned exports as well there, and ports. We are seeing this story. We’ve had issues with Transnet, with the rail lines. Ports are now also struggling. That must be hurting. I’m thinking particularly of the citrus farmers down in the Western Cape who want to export out of Cape Town.
WANDILE SIHLOBO: Absolutely. Simon, if I were to [come] to you and say, let me rank some of them, maybe the top three problems that South Africa’s agriculture faced this year, the first one would be the one that we just discussed, animal diseases. The second one would be ports. And the third one would be load shedding.
Quickly, on the ports one I would say for the first nine months of this year we did reasonably well on exports. I’m looking at the data now. For the first nine months of this year South Africa exported agricultural products worth $10.2 billion. This is up 1% compared to 2022 levels. Now we worry about reading those numbers for the last quarter of the year.
We’ve already seen the issues in Durban, the issues in Cape Town harbour, which will weigh on the activity for the last quarter going into the first quarter of next year.
As you know, the end of the year is a period of exports of deciduous fruits, table grapes and wine going into January and throughout February. That’s the heavy activity in the Cape Town port side. So when those numbers come, I’ll be curious to look at them and I think that they will show a slight moderation from the good momentum that we saw in the first nine months of the year.
SIMON BROWN: Load shedding? Is that predominantly irrigation, when crops are being irrigated? And then of course I imagine processing as well.
WANDILE SIHLOBO: Absolutely. You will appreciate the fact that all of our fruit and vegetables are under irrigation. When you think about the field crops, 20% of maize is under irrigation, 15% of soybean under irrigation, almost a third of sugar under irrigation – and the other crops.
Now at the start of the year, we were fortunate in the sense that as load shedding intensified and farmers had input all of their own energy-generation sources, we were also in a La Niña period, which really assisted us with good rains.
But I would say from a financial perspective for the farmers, they’ve had to put out a lot of money into [installing] alternative energy sources.
But yes, at the start of the year vegetable farmers did feel the impact, the poultry sector felt the impact, and throughout the food processing and value chain and the abattoirs, they did feel the impact of that. But I think instead of the output, it shows perhaps more on the financials of those who had to invest in these alternative energy sources.
SIMON BROWN: We’ve seen that across the value chain – the extra money being spent. You mentioned La Niña there. Of course, we’re expecting an El Niño period, which is a drier environment. We’ve certainly had some heat waves around the country. Rain’s perhaps been a bit, I don’t know, weird. That’s probably climate change. But it certainly hasn’t been as devastating as the droughts of, what was it, eight or nine years ago.
WANDILE SIHLOBO: Absolutely. We remain fairly optimistic that going into the whole of 2024 we’ll actually continue to see some good rainfall for much of South Africa. The South African Weather Service says there could be good rainfall, more so in central and eastern South Africa until March 2024. From there on we think that El Niño will intensify.
In our eyes it seems like the moisture from the past four consecutive seasons of La Niña has assisted in as far as planting. And these recent rains, of course, have added that much support.
But we are worried about heat waves. In recent weeks we’ve seen stronger heat waves across South Africa. And, if anything, in Europe we saw how devastating these heat waves could be. I think for me, going into March 2024, the one thing that we have to monitor is the heat wave and the impact of it on the crops. That’s the one thing that we will be watching. And if then we assume that it becomes moderate, and we do get the rainfall, we think that the season could be decent. But I think this is a key upside risk we need to keep an eye on.
SIMON BROWN: A recent tweet you just put out around employment in the sector – just short of a million jobs in the agricultural space, which is back to 1990 levels. What our country desperately needs is employment. I’ve got to say I was surprised. I would’ve thought [with] efficiencies and yields, mechanisation, employment would be trending down. But no, it’s actually moving higher.
WANDILE SIHLOBO: It’s very encouraging to see that we have more and more people actually working in agriculture. And I’ll tell you what, Simon, if we can get the 2.5 million hectares of land currently on the government’s land holding account into full production, I still think that we could see a nearly another million jobs being created in agriculture and agro-processing, because that’s what the 2012 National Development Plan said. They said, look, there could be more jobs in agriculture and more in agro-processing – and I think that those jobs will be there.
Some people may have worried, saying with the recent increases in the minimum wage there [will] perhaps [be] job losses in agriculture. But the numbers are coming up saying, yes, the financial pressures are there, yes, the wages are rising, but farmers seem to be understanding of the need for them to create work and pay decent wages – and the numbers are promising.
SIMON BROWN: And of course, if we double the employment we would also significantly increase exports. That would help as well.
Wandile Sihlobo, chief economist at the Agricultural Business Chamber of South Africa, I always appreciate the insights.
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