https://www.engineeringnews.co.za
Africa|Business|Environment|Export|Financial|Industrial|Infrastructure|Logistics|Ports|rail|Road|Roads|Service|Equipment|Infrastructure
Africa|Business|Environment|Export|Financial|Industrial|Infrastructure|Logistics|Ports|rail|Road|Roads|Service|Equipment|Infrastructure
africa|business|environment|export|financial|industrial|infrastructure|logistics|ports|rail|road|roads|service|equipment|infrastructure

ACI dips to levels last seen at start of Covid-19 as industry buckles under challenges

11th December 2023

By: Marleny Arnoldi

Deputy Editor Online

     

Font size: - +

The Agricultural Business Chamber (Agbiz)/Industrial Development Corporation Agribusiness Confidence Index (ACI) deteriorated by ten points to 40 in the fourth quarter of the year.

Notably, Agbiz chief economist Wandile Sihlobo says, this is its lowest level since the second quarter of 2020, which was at the height of the Covid-19 pandemic hard lockdown restrictions.

The 40-point level of the fourth quarter of the year compares with ACI levels of 50 and 44 in the earlier quarters of the year, and a level of 49 in the same quarter of last year.

Critically, the reading for the fourth quarter this year is below the neutral 50-point mark, implying that South African agribusinesses are downbeat about business conditions in the country.

This pessimism emanates from the numerous challenges facing the sector such as intensified delays and inefficiencies at the ports, deteriorating rail and road infrastructure, worsening municipal service delivery, increased geopolitical uncertainty and persistent episodes of loadshedding, Sihlobo explains.  

This survey was conducted between the last week of November and the first week of December, covering businesses operating in all agricultural subsectors across South Africa.

The turnover and the net operating income subindices were down by seven and 12 points, respectively, to 67 and 47 compared with the preceding quarter. This downbeat mood mirrors the prevailing concern that while El Niño could be mild, the agricultural output will likely be lower than the previous bumper season, weighing on incomes.

The market share of the agribusiness subindex is down by five points to 53 compared with the third quarter. Except for the respondents in the summer crop regions, most held a generally unchanged view from the previous quarter. Still, this was overshadowed by the concerns about summer crops, thus causing the deterioration in market share sentiments.

The employment subindex fell by 12 points to 47 in the fourth quarter. This is unsurprising in an environment with concerns about the sector's outlook. Still, the sentiment shows a stark disconnect from the recent robust jobs data in the sector. For example, in the third quarter of the year, about 956 000 people were employed in primary agriculture, which is a 10% year-on-year increase.

The capital investments subindex dropped by 30 points to 43 in the fourth quarter, compared with the third quarter, which reflects the declining spending pattern on agricultural equipment and machinery that Agbiz has observed over the past few months.

Following a sharp decline in the third quarter of the year, the subindex measuring the volume of export sentiment fell further, by a point, to 42 in the fourth quarter. This deterioration in sentiment signals the expected decline in export volumes this year from the robust levels of 2022, although the harvest is reasonably decent in all major crops and fruits.

Moreover, the ongoing worries about underperforming ports also added to the prevailing pessimism.

Unsurprisingly, the general economic conditions subindex is down by 16 points to a level of 10 in the fourth quarter. This mirrors the general macroeconomic underperformance of South Africa.

While the worries of a potentially harsh El Niño have eased, and there is growing comfort that rainfall could continue into early next year with dryness starting to deepen around March, the general agricultural conditions subindex fell by 16 points to a level of 40 in the fourth quarter.

The subindices of the debtor provision for bad debt and financing costs are interpreted differently from the other indices. A decline is viewed as a favourable development, while an uptick signals growing financial strain.

In the fourth quarter of the year, the debtor provision for bad debt was down by five points to 37, which is a favourable development.

Meanwhile, the financing costs indices increased by seven points to a level of 13, signalling that agricultural firms are still worried by the elevated interest rate in an industry where farm debt is hovering at about R200-billion.

Sihlobo explains that, while South Africa's agricultural sector had a generally good season this year, with gains illustrated by robust employment conditions and export volumes in the first three quarters, the outlook is worrying.

The ACI results for the fourth quarter indicate that more work is needed to improve the operational conditions in the farming and agribusiness sector.

"The key constraining issues to South Africa's agricultural growth potential include the weakening municipalities, deteriorating roads, rising crime, inefficient logistics, and persistent loadshedding.

"The government and private sector should collaboratively work to resolve these constraints to attract investments and boost long-term growth," Sihlobo concludes.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

Comments

Showroom

Rio-Carb
Rio-Carb

Our Easy Access Chute concept was developed to reduce the risks related to liner maintenance. Currently, replacing wear liners require that...

VISIT SHOWROOM 
AutoX
AutoX

We are dedicated to business excellence and innovation.

VISIT SHOWROOM 

Latest Multimedia

sponsored by

Photo of Terence Creamer
The NTCSA officially launched
11th October 2024 By: Creamer Media Reporter
Magazine round up | 11 October 2024
Magazine round up | 11 October 2024
11th October 2024

Option 1 (equivalent of R125 a month):

Receive a weekly copy of Creamer Media's Engineering News & Mining Weekly magazine
(print copy for those in South Africa and e-magazine for those outside of South Africa)
Receive daily email newsletters
Access to full search results
Access archive of magazine back copies
Access to Projects in Progress
Access to ONE Research Report of your choice in PDF format

Option 2 (equivalent of R375 a month):

All benefits from Option 1
PLUS
Access to Creamer Media's Research Channel Africa for ALL Research Reports, in PDF format, on various industrial and mining sectors including Electricity; Water; Energy Transition; Hydrogen; Roads, Rail and Ports; Coal; Gold; Platinum; Battery Metals; etc.

Already a subscriber?

Forgotten your password?

MAGAZINE & ONLINE

SUBSCRIBE

RESEARCH CHANNEL AFRICA

SUBSCRIBE

CORPORATE PACKAGES

CLICK FOR A QUOTATION







sq:0.098 0.152s - 209pq - 2rq
Subscribe Now