THE BLOG

Why South Africa's Major Employer, Agriculture, Is Poised For A Better Year

Armyworm in certain provinces remains a key risk that could change this optimistic view. However, the country is well positioned to control this pest.

21/02/2017 04:59 SAST
Mike Hutchings / Reuters

Agriculture plays a crucial role in the broader economy, constituting about 6 percent of South Africa's total labour force. This is double that of the noisiest industry, mining, and almost at par with the transport industry. The recent Quarterly Labour Force Survey from Statistics South Africa revealed that employment in the agricultural sector grew 4 percent, or 38,000 jobs, in the fourth quarter of 2016, from the previous quarter, putting the sector's total labour force at 919,000.

The areas that showed significant job growth were livestock (mainly driven by increased red meat slaughter), horticulture, crop farming, game farming and ocean and coastal fishing. Livestock, horticulture and crop farming are the largest contributors to agriculture's total labour force, employing 64 percent.

Collectively, livestock, horticulture and crop farming saw a 12 percent quarterly growth in labour participation. In addition to increased red meat slaughter, there was increased harvest activity and increased activity in summer crop areas. This comes after the area planted to summer crops grew 19 percent year on year to 3.88-million hectares.

South Africa slaughtered close to 300,000 head of cattle in December 2016, according to data from Red Meat Levy Admin, a 22 percent increase on the previous month. It underscores the demand for meat during the festive season as well as higher feed costs, which made it difficult for some farmers to maintain their herds. These figures for cattle slaughter are only for the formal market and a similar trend is generally observed in informal markets.

Typically, African cultures in South Africa slaughter cattle for different celebrations during the festive season, such as weddings and Thanksgiving. Some households, particularly the royal ones, slaughter as many as ten cows during the festive season in areas such as the Eastern Cape. The unaccounted-for figures for informal market slaughter underscore the contribution of the agricultural sector to the South African economy and the labour market.

There were some sub-sectors that recorded job losses, such as forestry, logging services and fisheries (fish hatcheries and fish farms). To some extent, this shows the aftermath of the 2015-16 drought. Worth acknowledging, however, is that the optimism in the labour market could be short-lived, particularly in horticulture, as some participants might have been seasonal labour.

Consistent with the job growth developments and also a key driver is the forecast of favourable weather conditions across the production areas of the country.

Consistent with the job growth developments and also a key driver is the forecast of favourable weather conditions across the production areas of the country. As a result, crops such as maize are set to record a significant rebound in 2017. Recent estimates from the Agricultural Business Chamber show that South Africa's 2016-17 total maize production could reach 11.9-million tonnes, a 53 percent annual increase. This is on the assumption the country will receive consistent rainfall through the summer season.

The armyworm outbreak in certain provinces remains a key risk that could potentially change this optimistic view. However, there is cause for optimism that the country is well positioned to control this pest, since South Africa's maize crop is roughly 85 percent genetically modified, pesticides are available and adequate technical assistance is available from the Department of Agriculture, Forestry and Fisheries and organised agriculture groups.

What could potentially add pressure on maize supply is an uptick in regional demand. In my Business Day column of January 19, I spelt out the production dynamics of the Southern African Development Community, stating that South Africa produces 42 percent of the region's average 30-million tonnes of maize. Tanzania trails with an 18 percent share, Malawi with 12 percent and Zambia with 9 percent.

Two of the key regional maize producers are at risk due to armyworm: Zambia and Malawi. Both produce maize that is not genetically modified, which puts them in a more precarious position than SA. In addition, a considerable volume of maize is produced by smallholder farmers in remote areas, which could slow pesticide distribution. This will unfold over the coming months.

Against this background, the results in March of the Agbiz/IDC Agribusiness Confidence Index for the first quarter will give us a sense of whether agricultural firms share the optimistic outlook. The fourth-quarter 2016 index survey showed they were still relatively optimistic, with the overall index at fifty-five points.

The agricultural sector is in a better position than in 2016 in terms of production and the labour market. With policy certainty and investment, the sector should continue to show improvements for the foreseeable future.

This blogpost is an extract from my Business Day Column, published on 16 February 2016.