The Agricultural Business Chamber (Agbiz) and Industrial Development Corporation’s Agribusiness Confidence Index (ACI) has fallen by four points in the fourth quarter to 49, after having remained in positive territory for nearly three years.

Agbiz chief economist Wandile Sihlobo reports the ACI is at below the neutral 50-point mark for the first time since the second quarter of 2020, which implies that agribusinesses are “slightly downbeat” about business conditions in South Africa.

Sihlobo cites the main challenges in the sector as being persistent loadshedding; high input costs such as agrochemicals, fertiliser and fuel; rising protectionist measures in some export markets; animal disease outbreaks; rising interest rates; intensified geopolitical tensions, which disrupt supply chains; and ongoing weaknesses in municipal service delivery.

Of the ACI’s ten subindices, seven declined in the fourth quarter.

The turnover index fell by one point from the third quarter to 78 points – well above the long-term average, signalling that many farmers continue to benefit from strong crop prices, particularly in the grains and oilseeds sector.

The market share of the agribusiness index dropped by five points in the fourth quarter to 69, mainly driven by the horticulture, livestock and agrochemicals industries.

The employment subindex declined by one point to 59, in keeping with the sector’s robust employment level. South Africa’s primary agriculture sector employed 873 000 people during the third quarter, which was a 5% year-on-year improvement on last year’s third quarter. Combined with agroprocessing, the agriculture sector employs about 1.3-million people.

Sihlobo reports that the capital investments index fell by five points in the fourth quarter to 66, which may reflect the current environment of higher input costs and rising interest rates, which some firms consider a reduction in investment. This decline was despite strong tractor and combine harvester sales as witnessed by Agbiz.

The subindex measuring volume of exports sentiment plummeted by 20 points to a level of 50 in the fourth quarter, which Sihlobo says is unsurprising given the prevailing market access challenges for the South African citrus industry in the European Union, a vegetable exports ban in Namibia and Botswana and a reduction in beef exports owing to a foot-and-mouth disease outbreak.

The general agricultural conditions subindex fell by two points to 40, which is the lowest level since the fourth quarter of 2019. Sihlobo attributes the decline to fears by respondents that higher rainfall could delay summer crop plantings, as it did with the prior season.

The general economic conditions subindex improved by one point to 25, which remains far below the neutral mark of 50, owing to persistent energy shortages, inefficiencies in network industries, inflation concerns, rising interest rates and a general slowdown in the global economy.

Positively, the subindices of the debtor provision for bad debt and financing costs declined by five and seven points, respectively, to 34 and four points, respectively, which Sihlobo says is a welcome but unexpected occurrence, since Agbiz expected rising interest rates and input costs to add more pressure on agribusinesses.

“The fourth-quarter ACI reflects a sector that is confronting numerous challenges that threaten growth. The persistent high input costs, friction in export markets and animal disease outbreaks are starting to bite.

“Still, the sector could bounce back if weather conditions prove to be supportive in the coming months and if the South African authorities get a handle on the market access issues in Europe,” Sihlobo concludes.