SA agri economy grew by 17.7%

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A closer look at the data shows that the agricultural GDP grew by 37.5% quarter to quarter (q/q) in the fourth quarter of 2017, following 41.1% q/q growth in the third quarter. This was against our expectations of a moderate growth pace at levels below 20% q/q, as the last quarter of the year is typically characterised by limited activity in the crop and horticultural sub-sectors (see Chart 1 below).

Following a rebound in South Africa’s agricultural production, the exports also lifted past the $10.0bn for the first time, up 15% year-on-year (y/y), boosted by growth in exports of edible fruits, beverages, spirits, vegetables, grains and other agricultural products (see Chart 2 below).

It is also worth noting that in the past few years, the Agbiz/IDC Agribusiness Confidence Index proved to be a good leading indicator of agricultural GDP performance (see Chart 1). However, the recent notable deterioration in confidence might not be followed by a similar magnitude of a decline in agricultural GDP, as factors driving each variable are quite distinct at the moment.

Confidence is mainly pressured by uncertainty regarding land reform, but this hasn’t had a material impact on agricultural investments yet. The agricultural sector could slow in performance in 2018 owing to a 5% y/y decline in area planted to summer crops to 3.8 million hectares, as well as an expected decline in Western Cape agricultural production (see Chart 3 below).