Page 16 - 21 Cotton SA February 2020
P. 16
/ BEDRYF
by President Ramaphosa, which are hoped to Figure 1: Gross debt-to-GDP outlook.
gather momentum early in 2020. (Source: Department of Agriculture, Forestry
In 2019 the Agbiz/IDC Agribusiness and Fisheries (DAFF))
Confidence Index (ACI) fell slightly from 46
points in the third quarter to 44 in the last quarter
of 2019. A level below the neutral 50-point mark
implies that agribusinesses are still “downbeat”
about business conditions in South Africa. This
has been the case over the past six quarters,
which is the longest period the index has trailed
below 50 points since 2010.
A survey was conducted in November
2019, covering agribusinesses operating in all
agricultural subsectors across South Africa. The
decline in the ACI was mainly brought about by
a low nett income, unemployment, a low volume
of exports, economic and general agricultural
conditions, and a lack of debtor provision for
bad debt sub-indices. South Africa’s highest markets, intervention is needed urgently. Outlined
economic risk currently is the debt burden below are some of the major contributors of
experienced by the agricultural sector measured the agricultural sector to the South African
against gross domestic product (GDP). This is economy.
critical and affects the agricultural value chain. • In 2018/19, agricultural activities added
Current debt is around R440 billion, and most of between 10% and 12% to the GDP, if the
this debt was caused by SOEs, mainly Eskom, entire value chain is considered. This shows
SAA and SABC. The consequences of these that agriculture is very important to the
failing SOEs is the main reason that the South economy and ensures food security.
African economy is on the downgrade (Agbiz, • Contribution made due to exporting increased
2019). by 4,6%, from R104,6 billion in 2017/18 to
The South African GDP has been following the R109,4 billion in 2018/19.
global GDP for years, but since 2010 a different • Only 12% of land can be used for crop
picture has emerged. The South African GDP production, of which only 22% is high-
showed a consistent decline, clearly indicating potential land.
the pressure on the domestic economy. This • The primary sector (this includes the workforce
caused a ripple effect with investment declining, employed by civil services, public sector units,
and consequently declining growth and job government services, multinational/national/
creation. The impact and consequences of poor private companies, schools, colleges, research
investment and the subsequent weakening of the institutes, management, organisations, and
rand have truly been felt in the agricultural sector. banks) employs approximately 842 000
The South African agricultural sector requires people, and a major cost was labour at
a large proportion of agricultural inputs to be approximately R19,8 billion in 2018/19.
imported. This includes fertiliser, agrochemicals, • The agricultural debt level increased to
fuel, and machinery. The weakening of the rand R181 billion. Farmers and agricultural com-
leads to higher input costs, with subsequent panies can still obtain collateral when needed,
lower nett profits. The agricultural sector in South and when investment is taking place.
Africa has managed to create global markets, • Nett farm income increased by approximately
and continues to do so, against all odds. 12%.
Although the agricultural sector is fighting • Cash flow of farmers decreased by approx i-
hard to stay afloat and is still able to create ma tely 11,5%.
16 | Katoen SA \\ Cotton SA