I will use this last column for the year to reflect on an eventful yet positive 2020 for SA’s agriculture and provide a brief outlook for 2021.
At the start of the year I highlighted two threats that were imminent at that time in the agricultural sector, namely drought and bio-insecurity (specifically foot-and-mouth disease). At that time it looked as though 2020 would not be much different from 2019, a challenging year in which the sector’s gross value added contracted by almost 7% due to climatic challenges.
Several areas experienced drier than normal conditions, including the Eastern Cape, Northern Cape, North West, Limpopo and parts of the Free State. In terms of biosecurity, the foot-and-mouth disease outbreak reported at the end of 2019 curtailed exports of animal products and wool.
However, by the end of January the outlook for the sector had turned positive. It had finally rained across the country and crops looked promising, despite most having been planted outside the optimal window.
As the season progressed, with the crops promising to be one of the best in history, Covid-19 concerns intensified in China, and at the start of March we were bitterly reminded how interconnected the globe has become as we worried about possible disruptions to SA’s exports to the Asia region in such a bountiful year. Not long after that SA began recording its first Covid-19 cases and the country went into hard lockdown towards the end of March.
At this juncture one of the key questions troubling policymakers and the public was whether SA could be self-sufficient for a long period as countries went into lockdown and consumers were hoarding food products. Fortunately, it quickly became clear that SA’s formal food supply chains were resilient, and they remained functional throughout, with minimal interruptions other than those caused by the regulations themselves.
Credit for the unhindered operation of the food value chain must be shared by the government, private sector and various research institutions. Importantly, the government’s decision to leave the agricultural and broader food sector fully operational from the onset of the lockdown provided conducive business conditions.
It is through these joint efforts that SA's agricultural gross value added showed a notable expansion at double digits in the first half of the year. Also, the ban on livestock exports was lifted earlier in the year as some regions of the country were cleared of foot-and-mouth disease. This positive picture was, nonetheless, at the aggregate level. The wine and tobacco industries were hard hit by the ban on sales during the various stages of the lockdown.
Large harvests and continuation of the food value chain activities with minimal interruptions also kept food price inflation subdued. In the first 10 months of 2020 SA’s food price inflation averaged 4.5% year on year. This is a notable improvement compared with drought years such as 2016, when food price inflation averaged 10.8%. There were, nonetheless, communities that struggled to get food, but one can argue that such challenges were not primarily caused by rising food prices, rather the lack of buying power as people lost jobs and livelihoods during the lockdown.
In sum, 2020 has been an eventful year, yet with broadly positive results for agriculture — with the exception of the wine and tobacco industries, as previously mentioned. I look to 2021 with hope for yet another strong performance for agriculture, underpinned by a favourable production season, though the growth numbers are unlikely to be double digits in part because of base effects.
Annual food price inflation should also remain contained and probably average no more than 5%, although earlier months of the year could show higher numbers due to elevated grain prices. The pass-through could appear early in 2021 but soon dissipate after the expected large grain harvests in the 2020/2021 season.
• Sihlobo (@WandileSihlobo) is head of economic and agribusiness research at the Agricultural Business Chamber.
