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Agbiz is concerned about Land Bank financing woes

Agbiz expected positive growth for the agricultural sector, though much milder than the previous two quarters. Photo: Reuters.

Agbiz expected positive growth for the agricultural sector, though much milder than the previous two quarters. Photo: Reuters.

Published Dec 8, 2020

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DURBAN - WHILE the agricultural sector was optimistic about next year’s prospects of the 2021 year, the potential lack of financing due to Land Bank woes concerned the sector, Agricultural Business Chamber (Agbiz) chief economist Wandile Sihlobo said on yesterday.

This remained an overhanging risk for the sector.

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National Treasury allocated R3 billion to the Land Bank in September. However, R7bn was still sought by the institution as part of its proposed liability solution.

Statistics South Africa will release the third-quarter gross domestic product data on Tuestoday.

Agbiz expected positive growth for the agricultural sector, though much milder than the previous two quarters.

“For the year, we estimate that South Africa’s agricultural gross value-added could expand by 10 percent from the previous year … This is all on the back of a large harvest in all major agricultural sub-sectors, specifically field crops and horticulture.

"The livestock sector did experience challenges of lower demand during various stages of the lockdown, but it is now adjusting well (aside from the rising feed prices),” said Sihlobo.

This year South African farmers intended to increase the area planting for summer crops by 5 percent year-on-year in the 2020/21 production season, since there were prospects for La Niña rains, which some parts of South Africa was already experiencing.

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“The rains have improved soil moisture and supported the planting activity.”

Agbiz said 2020 had been an eventful year, yet with broadly positive results for the agriculture and food sector.

“This is the case except for the wine and tobacco industries … We look to 2021 with an optimistic eye of yet another strong performance for the sector, albeit the growth numbers won’t be double digits, in part because of base effects,” said Sihlobo.

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Agbiz also looked forward to a year of subdued food price inflation, which for the overall year should average at levels not exceeding 5 percent year-on-year.

“Although earlier months of the year could show higher numbers

on the back of elevated grains prices this year. The pass-through could appear earlier next year but soon dissipate due to the expected large grains harvest.”

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At the beginning of the year, it had looked as though 2020 would not be much different from 2019, which saw the sector’s gross value-added contracting by 6.9 percent. At the time, areas in the Eastern Cape, Northern Cape, North West, Limpopo and parts of the Free State were experiencing drought.

About 80 percent of the intended area for maize had been planted in these areas, with farmers hoping for rains that could change the fortunes.

South Africa’s agriculture sector saw record quarterly export earnings of $3.2 billionbn (R48.6bn) in the third quarter of the year, which was an increase of 5 percent on a year-on-year basis.

The country’s agriculture gross value-added expanded by 15.1 percent quarter-on-quarter on a seasonally adjusted and annualised basis in the second quarter of 2020, following an expansion of 27.8 percent in the first quarter.

BUSINESS REPORT

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