The Agbiz/IDC Agribusiness Confidence Index (ACI) increased by 10 points from Q3 to 58 in Q4. This is the second consecutive improvement and places the ACI at its highest level since Q2 2022.
This level of the ACI implies that South African agribusinesses remain generally optimistic about business conditions in the country. This optimism is a result of a combination of factors, including favourable weather conditions, with expectations that La Niña rains will be supportive of the 2024-25 agricultural season.
Moreover, the stable energy supply, improvements in port efficiency, and the better political climate following the formation of the Government of National Unity are some of the aspects the respondents cited as key factors underpinning their optimism.
This survey was conducted in the last week of November, covering businesses operating in all agricultural subsectors.
Discussion of the subindices
The ACI comprises ten subindices; five improved notably in Q4 2024, while the rest declined mildly. Here is the detailed view of the subindices.
• The market share of the agribusiness subindex is up by 2 points to 67 in Q4. Most respondents maintained a largely unchanged view, with stakeholders in the winter grains regions signalling an uptick in confidence.
• The capital investments subindex was up 5 points in Q4 to 63. The improvement in sentiment may be due to the easing in the interest rates, which will allow agricultural businesses and farmers to access more capital for investments at relatively better rates.
With that said, high-frequency data, such as tractors and combined harvesters sales, have been poor since the start of the year. Thus, we must watch if this sentiment improvement leads to a favourable investment change.
• The sub-index measuring the volume of export sentiment increased significantly by 69 points to 83 in Q4 2024. This is the highest reading since the first quarter of 2022.
The respondents in the grains and fruit subsectors were the major drivers of the improvements in this subindex. Moreover, the sentiment broadly aligns with what we observe in actual trade activity.
For example, South Africa’s agricultural exports were at $4,12bn in Q3 2024, a 5% increase relative to the same period in 2023. The cumulative export value for the first three quarters of 2024 is up 4% from last year, at $10,55bn. This reflects an uptick in the volume of various agricultural exports and higher prices for some products.
• The general economic conditions subindex lifted by 20 points to 63 in Q4 2024. This recovery in the mood about the economic conditions could be due to the expected effects of the reduced load-shedding this year and the overall implementation of Operation Vulindlela.
Admittedly, recent GDP growth figures have been disappointing, but the various market analysts’ GDP forecasts are generally optimistic going into 2025.
• The general agricultural conditions subindex lifted 17 points to 67 in Q4 2024. This is the highest level since the last quarter of 2021, a year of strong agricultural output. This optimism mirrors the expectations of La Niña rains in the 2024/25 summer season and the positive impact after that on agricultural conditions.
The farmers have already started planting across South Africa and are broadly optimistic about the season. Additionally, the winter crop, whose harvest is in full swing in the Western Cape and other regions, has had a generally better-than-expected harvest.
Declining sentiments
• Unlike the other subindices that increased, the turnover subindex confidence was down by 4 points from Q3 to 46. This partly reflects the poor summer grains and oilseeds harvest of the 2023-24 production season.
The respondents in livestock, summer grains and some in financial services were broadly downbeat. In line with the turnover subindex, the net operating income subindex declined by 5 points from Q3 2024 to 42.
• The employment subindex fell by 5 points from Q3 2024 to 42. Provided that the sector is closing one of the challenging seasons, the decline in sentiment regarding employment is unsurprising.
Still, these figures paint a slightly different picture than we recently saw in employment data. South Africa’s agricultural jobs rose 4% q/q to 935k jobs in Q3 2024.
• The subindices of the debtor provision for bad debt and financing costs are interpreted differently from the abovementioned indices. A decline is viewed as a favourable development, while an increase signals growing financial strain.
In Q4 2024, the debtor provision for bad debt was down by 8 points to 42, which is a favourable development and shows that the sector may be close to its recovery path.
Surprisingly, the financing costs indices increased by 33 points from Q3 to 79. In an environment of easing interest rates, we would have expected to see a decline in this particular subindex.
The ACI results for Q4 2024 show that the mood in the sector is upbeat, reflective of the potential recovery in agricultural conditions following a challenging season of drought and animal diseases.
We should build on this optimism for the sector’s long-term growth. This will require collaborative efforts between business and government to push for the effectiveness of the network industries, better management of the municipalities, further efforts to open new export markets, and managing better biosecurity matters.
