THE BLOG

The Outlook For South African Agricultural Jobs Looks Positive

This is a good year for agricultural production in all areas except in the Western Cape.

20/06/2017 03:58 SAST | Updated 20/06/2017 06:46 SAST
Siphiwe Sibeko/ Reuters
A street vendor waits for customers as she sits in front of her fruit and vegetables stall in Johannesburg, South Africa, May 15, 2017.

Contrary to the market expectation of a mild uptick in SA's GDP in the first quarter of 2017, the country has slipped into a technical recession after two consecutive quarters of negative economic growth. Every sector of the economy, except for mining and agriculture, had a negative effect on GDP. After eight consecutive quarters of contraction, the agricultural sector has rebounded, with the quarter-on-quarter growth reaching a significant 22.2 percent seasonally adjusted and annualised. The sector benefited from a low base effect and a recovery in agricultural output, particularly for summer grains and oilseeds and horticulture.

This increase is largely attributed to good summer rainfall and increased summer grain acreage. The 2017 summer grain and oilseeds production are set to reach 18.03-million tonnes - a 92 percent annual increase. The key contributors to this are maize and soybean, respectively reaching record levels of 15.63-million tonnes and 1.23-million tonnes. Although this improvement is notable, the aforementioned record harvest will most likely only be reflected in the second quarter's agricultural GDP numbers, which will probably be high due to an expected increase in activity. Summer crops are typically harvested between April and August.

Overall, this is a good year for agricultural production in all areas except in the Western Cape, where there is still uncertainty about growing conditions of winter crops and horticulture due to the drought. Farmers have managed to plant 90 percent of the winter wheat and could plant an estimated 325,000ha within the next few weeks. In the near term, however, the recent storm and rainfall have eased concern and improved soil moisture levels in the province. In the longer term, there are still concerns that the El Niño weather pattern, typically associated with hot and dry weather conditions, may return later in 2017 to the detriment of the South African agricultural sector.

Data from the Australian Bureau of Meteorology shows that there is a 50 percent chance of El Niño developing in 2017, which is about twice the normal likelihood. Another important contribution of the South African agricultural economy is employment. Although the GDP data for the first quarter showed a substantial improvement, the sector also shed 44,000 jobs during the period, reducing the sector's total labour force to 875,000 jobs.

Notable job losses were in crops and horticulture, game farming and livestock. However, these job losses came as no surprise, given the challenges in the poultry sector and the tail-end effects of the 2016 drought in the horticulture industry. Livestock industry job losses were in part due to the easing of slaughter activity as farmers restock their herds. Data from the Red Meat Levy Admin shows that South African farmers slaughtered 193,373 head of cattle in April, which is 20 percent lower than March and 19 percent lower than April 2016.

Meanwhile, the other subsectors - such as the animal husbandry, forestry, fisheries, as well as mixed farming (livestock and crops), performed well. Overall, agriculture plays a crucial role in the broader economy, constituting about 5 percent of SA's total labour force. This percentage is double that of mining and almost on par with the transport industry. The outlook for the agricultural jobs market remains positive, particularly in the second quarter of 2017. This is due to increasing optimism for the grains and oilseeds harvest, which could lead to higher activity and opportunities for seasonal jobs.

Although the effects on crop output would show only at a later stage, employment numbers would be negatively affected as early as the fourth quarter of 2017.

Similarly, positive agricultural economic growth could continue for the rest of the year. In the event of another El Niño occurrence later in 2017 (as weather forecasters suggest), the agricultural economy will still show robust growth as summer crops output are already at harvesting stages and will not be affected by dryness. Any negative impact on the winter crops and horticulture would be reflected in GDP data for the first quarter of 2018 - a period where harvesting intensifies for these crops in the Western Cape.

Although the effects on crop output would show only at a later stage, employment numbers would be negatively affected as early as the fourth quarter of 2017, when winter crop farmers begin to harvest. More so as the Western Cape is the largest agricultural employer in SA, contributing 25 percent of total agricultural jobs.

Overall, the weather will be the key factor as to whether the agricultural sector contracts or grows in the near to medium term.

This blog post is an extract from my Business Day Column, published on 08 June 2017