Agriculture remains resilient as South Africa’s
economy slips into technical recession
by Hamlet Hlomendlini: Chief Economist Agri SA
Enquires: 012 643 3400, [email protected]
South Africa’s real gross domestic product (GDP) shrunk by 0,7% in the first quarter of 2017, following
a decrease of 0,3% in the fourth quarter of 2016, Statistics South Africa (Stats SA) reported recently.
In economics, if an economy shrinks for two straight quarters (a total of six months), that indicates that
economy has fallen into technical recession. The technical indicator of a recession therefore is two
consecutive quarters of negative economic growth as measured by a country's GDP. This is what is
reflected in Chart 1 below as far the South African economy is concerned.
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Chart 1: Growth in GDP (%)1
Infringing on economic growth in South Africa are factors such as unstable political environment,
sizeable contingent liabilities, deteriorating governance, corruption, lack of leadership and inadequate
education amongst others. If growth slips further down into the negative territory in the next quarter that
will then indicate a full recession which could lead to further increase in unemployment as business
activities especially of the primary production side might become stinted. Furthermore, this could
potentially see South Africa losing its status as the largest economy in Africa again.
For ordinary citizen recession can presents hardships as it could potentially lead to increases in prices.
It is equally not good for government either because tough economic times lead to over reliance on the
fiscus. To curb this, governments would react by increases taxes which the South African government
has already proposed in the form of wealth tax which ultimately add more burden on ordinary citizen
and limit productivity, and profitability of sectors that are dependent on land as their major production
factor like agriculture.
Agriculture shows resilience and remains the backbone of the economy
Chart 2 below, shows that mining and agriculture were the only two sectors that landed positive growth,
hence contributed positively in country’s GDP in the first quarter of 2017. Mining contributed 0.9% to
the GDP. Agricultural (including forestry and fisheries) economy grew by more 22% and contributed
0,4% to the country’s GDP. In contrast trade and by manufacturing were largest negative contributors
to the GDP—contributing -0.8% and -0.5% respectively.
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Chart 2: Contributions to growth in GDP, Q1 2017 (% points) 2
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Data Source: Stats SA
Data Source: Stats SA
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Even after the worst drought since 1992, the agricultural sector has shown strong signs reliance and it
continues to play a significant role in South Africa’s economy. Recently, Stats SA released the latest
Quarterly Labour Force Survey results for the first quarter of 2017. The survey results show that
unemployment rate in South Africa increased to 27.7 percent in the first quarter of 2017 from 26.5
percent in the previous period.
Although the agricultural sector shed 44 000 jobs in the period under review, it remains critical for the
country’s labour market, particularly the rural. In 2016, the sector employed almost 900 000 people.
This may appear as a low percentage of the work force in South Africa, but in absolute terms, the
number of people that are employed by the sector is considerable high and it continues to rise although
the will be lumpiness sometimes depending on what season it.
Chart 3 below shows that the number of people working in agriculture had in increased by 29% from
624 000 in 2011 to 881 000 in 2016.
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Chart 3: Employment in the Agriculture sector (2011-2017(Q1)3
In terms growth in the sector, significant contributions came from subsector such as horticulture,
summer grains, and oilseeds – largely attributed to good summer rainfall. Good news for the sector is
that in 2017 the summer grain and oilseeds production are expected to reach a record high—more 18
million tonnes with the key contributors being maize and soybean, which are set to reach record levels
of more than 15 million tonnes and more than 1.2 million tonnes, respectively4. The diagram 1 below
gives more details of individual enterprise contribution to the total summer grain and oilseeds production
for the 2016/17 production season.
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Data Source: Stats SA
Data Source DAFF
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Horticulture remains an area of growth for the sector. Given the growing demand for horticulture
products such fruits in the world’s markets, it is therefore fundamentally important that for strategic
growth in the sector, new entrants be encouraged and incentivised to grow more horticulture products.
In conclusion:
Government must make agriculture development a national priority. There needs to be clear
development framework that will create a clear and feasible road-map for the sector.
For sustainability purposes, young people have a huge role to play in the sector. It is therefore important
that government also develop a strategy for the elevation of young people in agriculture and linked into
the value chain.
The bottom line is that the farming community in South Africa is aging, and although some young people
are making it big in the sector, there is still a lot that want to enter the sector but the current environment
prevents them to do so.
The biggest impediment is land and lack of support. Land ownership is paramount in this instance, as
new entrants cannot collaterise land without it.
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