Business confidence in agricultural sector remains positive

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SOUTH AFRICA (The Citizen) – Rainfall has had a more than expected impact on business confidence, while the land issue was a big disruptor to confidence.

Business confidence in South Africa’s agricultural industry remained positive for the second quarter of 2018, according to the Agricultural Business Chamber (Agbiz). But it’s barely hanging on to stay in positive territory, and the land policy question must be answered sooner rather than later.

“Subsequent to an up-tick to 58 index points in the first quarter, the Agbiz/Independent Development Corporation (IDC) Agribusiness Confidence Index declined to 54 in the second quarter,” said head of AgriBusiness Research at Agbiz Wandile Sihlobo.

“With the results still above the neutral 50-point mark, albeit having declined marginally, the agribusiness sector is still optimistic about business conditions in South Africa.”

The survey was conducted between June 4 and June 15 and comprised agribusinesses operating in all agricultural sub-sectors throughout the country.

Rainfall in water-scarce South Africa has had more of an impact on business confidence than one would believe, with confidence rising and falling with rainfall patterns.

“The optimism in this particular subindex was underpinned by prospects of above-normal rainfall in the Western Cape within the next three months, which in turn should support winter crops and horticulture fields, as well as favourable drier conditions for harvest activity in summer crop regions,” Sihlobo said.

“When you’re watching your crops or the farm is not doing well and your business, by virtue of that, not doing well, you will see commensurate rises and falls in the confidence index,” Sihlobo told The Citizen.

“You know there’s going to be drought during some years, but you can’t say, ‘I’m fine, I was expecting this’ – it’s just human nature.”

Meanwhile, turnover, net operating income, market share, employment, capital investment, the volume of exports, economic growth, debtor provision for bad debt and financing costs subindices were the key factors underlying the decline in confidence from the previous quarter.

The other disruptor of business confidence was, of course, the land issue.

“The bottom line is everyone is watching what happens with policy development,” Sihlobo said. “It’s a wait-and-see situation. No one is pulling stuff out and running away and no one is coming in aggressively. The story is really to wait and see what happens.”

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