Following an estimated 4.8% output contraction in the agriculture sector in 2024, Bureau for Food and Agriculture Policy executive director and commodity markets manager Tracy Davids expects a better growth rate of 3% this year.

She was speaking at the Nedbank Agriculture Roundtable, in Gauteng, on January 28.

However, the key risks of extreme weather events such as drought, hail and flooding; animal disease and lack of biosecurity; the state of critical infrastructure and services; barriers to international trade and rising protectionism; and exchange rate volatility remain.

The agriculture value chain constitutes more than 14% of the country’s GDP, with its total contribution including all value-adding activities linked to agriculture and agroprocessing, rather than the mere 3% of primary agriculture’s contribution to GDP.

The sector has consistently recorded an average trade surplus of $5.1-billion over the past five years, with exports having been $13.2-billion in 2023 against imports of $7.4-billion.

Agricultural Business Chamber of South Africa chief economist Wandile Sihlobo expects exports in 2024 to again break the record at more than $14-billion.

The primary agriculture sector continues to employ 5% of the national workforce, with agroprocessing employing 3% of the national workforce. The agriculture sector recorded a 1.3% increase in employment in 2024.

Davids also points out that the 14% GDP contribution of the agriculture value chain is only the formal sector, with the informal sector’s contribution being difficult to calculate. However, she says households producing for market are already double the number of tax-registered farming units in the country.

Despite the recent volatility in the sector, agriculture has outperformed total GDP growth over the past 20 years.

The main reasons for the 4.8% contraction in 2024 are droughts having affected summer crops, extreme heat in some areas of the country, elevated labour costs, high feed costs, lagging animal disease effects from 2023 and macroeconomic influences such as global economic lags and spending power constraints in South Africa.

Key risks in the sector that impact on production include the state of the country’s water infrastructure, electricity supply and continued reliability thereof, as well as port inefficiencies.

Container exports from South African ports remain constrained, Davids says, with container trade having contracted by 7% in the Western Cape in particular, owing to port inefficiencies in Cape Town. These inefficiencies cost the pome fruit industry R1-billion in additional costs in the value chain and as a result of quality claims.

Horticulture remains the star performer of South Africa’s agriculture exports, notably into the European, Asian and Middle East markets. Export prices increased for most horticultural products in 2024, including pome fruit, berries, stone fruit, grapes, nuts and wine, on the back of strong demand.

For other products world prices were less supportive in 2024, with prices having bottomed out in mid-2024 for sugar, oils, cereals, dairy and meat, before rising again late in the year.

Positively, Davids says food inflation continues to moderate, with it now being within the target band of 2.5%.

Sihlobo, meanwhile, says South Africa’s agriculture output is likely to recover this year on the back of the La Niña rainfall, continued stable electricity supply, increased area plantings for summer grains and controlled spread of animal diseases.

He adds that South Africa’s soil moisture and crop conditions are in fairly good condition across the country, barring certain areas of North West, Free State, Western Cape and the Northern Cape.

Sihlobo says that, because South Africa’s agriculture growth is export-led, rising protectionism is a new challenge, with the EU, for one, becoming increasingly protectionist – even against imports of French produce.

He adds that re-elected US President Donald Trump’s stance on trade policy remains uncertain. Sihlobo says the prices of grain, oilseeds and pork will see the most disruption as a result of geopolitical fragmentation.

The US may impose up to 20% tariffs on all imports and 60% on goods from China. If China retaliates, it could negatively affect farmers through disruptions in global grain and oilseed prices, Sihlobo notes.

He adds that, if US farmers divert their products to South Africa’s traditional markets instead of China, it will create more competition.

There are also problems in the Southern African Customs Union (Sacu), with numerous countries having imposed bans on vegetables from South Africa. Botswana has fortunately lifted its ban, but Nambia’s remain on maize imported from South Africa.

“South Africa has to improve engagements with the Sacu region in a non-antagonistic manner to smoothen trade, particularly as the Sacu market accounts for 20% of South Africa’s export market – the same size as the EU.”

Sihlobo highlights the increasing trade opportunities within BRICS as more countries have joined, but he emphasised the importance of constructive ambiguity not to side with anyone but engaging with everyone on equal footing, lest the country loses support from some existing markets.

Ultimately, South Africa is positioned to deepen agricultural trade this year, especially as it is leading the Group of 20 countries, Sihlobo states.

He says prioritising the theme of trade integration and ensuring that the current policies of relatively open borders on agricultural trade are maintained is vital, as well as that South Africa continues to prioritise discussions about more fertiliser trade in Africa.

Locally, Sihlobo emphasises the importance of increased ports efficiency, resolving backlogs in the Registrar’s office, increasing biosecurity and creating more blended finance initiatives to support emerging farmers.