For the first time in many months there’s a palpable sense of optimism among Dolphin Bay’s South African customers who sell agricultural poles. Their markets have improved substantially, and most of their order books are full.
Will this trend last, bringing an enduring uptick to our industry? We spoke to Wandile Sihlobo, Chief Economist of the Agricultural Business Chamber of South Africa (Agbiz), to find out.
First, to give a little background: the country’s general elections on 29 May 2024 did not result in an outright majority of a single party, so – in an historical first – President Cyril Ramaphosa’s National Executive is led by a Government of National Unity (GNU), comprising 11 parties from across the political spectrum. This has encouraged hopes that there will better checks and balances to stamp out corruption, improve governance and introduce more balanced policies that will benefit business and job creation.
The value of the Rand and of South African equities have improved slightly, as have government bonds. Our laggard economy has gained a little strength.
Wandile said it would be “fair to say that the mood has improved somewhat in the country, judging from the financial markets’ indicators, which have remained quite upbeat since the establishment of the GNU.”
He observed a marked change in sentiment compared to the depressed levels of the Agbiz/IDC Agribusiness Confidence Index, which reached 38 points in Q2 2024 – the lowest level since Q3 2009 – during the height of the global financial crisis. That survey was conducted before the formation of the GNU.
“If the ideas of improving the network industries contained in Operation Vulindlela are implemented, there would be an improvement in economic conditions. Improved electricity supply, for example, is one of the areas that has been a focus. ”
Wandile wouldn’t venture an opinion on whether this change in sentiment would translate into growth of the agriculture industry’s GDP. “It is too early to say whether the improved sentiment will result in solid economic benefits,” he said. “But what would be fair to say is that, if the Operation Vulindlela ideas for improving the network industries are continuously adopted – as we expect – there would be improvement… The improvement in electricity supply, for example, is one of the areas that has been a focus of Operation Vulindlela and will result in better economic conditions in the country.”
Operation Vulindlela, a joint initiative of the Presidency and National Treasury, aims to accelerate structural reforms and support economic recovery by modernising and transforming key industries, mostly the network industries of electricity, digital communications, water, and freight transport, along with work permit and visa reforms to enable scarce skills to enter the country. Vulindlela could have a far-reaching impact on agriculture, given its focus on water and energy resources.
Bottom line? “If there is a focused approach to the implementation of Operation Vulindlela, and the Agriculture and Agro-processing Master Plan in the agriculture space, then the optimism we’re seeing in the country now could be long-lasting and could have demonstrable economic outcomes.”
One of the key issues in agriculture and forestry is the government’s plan to start releasing state-owned land for farming. Questions remain, however, about whether those new farmers would have the skills and financial support needed to succeed. “Some will likely be adequately skilled, and some may need incubation or training. Thus, collaboration with commodity associations is vital. As Agbiz, we have stressed this issue in conversations with the authorities,” Wandile said.
As to the financial support, he pointed out that the 2,5 million hectares of state land in question would ideally be linked with blended finance instruments, which aim to commercialise emerging farmers and facilitate meaningful participation of new producers in agricultural value chains. “The selection will also be done through the Beneficiary Selection Criteria, which ensures a fair assessment of the potential beneficiaries.”
Finally, there’s the question of how the GNU itself will function. This is South Africa’s first real experiment with a “party of rivals” model. There are understandable concerns that the people serving in the various ministries – including, of course, the Department of Agriculture, Land Reform and Rural Development, as well as the Department of Forestry, Fisheries and the Environment – might let party rivalries get in the way of helping each other to succeed.
The Dolphin Bay Brief recently published predictions from Nedbank Chief Economist Nicky Weimar that the best possible outcome of the national elections would be for the ANC to receive between 40% and 50% of the vote – as it did – allowing it to retain considerable power but ensuring it would be held to account by smaller parties. The possibility for paralysis remains, however, should the parties not co-operate.
Wandile is not too worried at this stage. “All ministers serve at the pleasure of the President and for the good of South Africa,” he concluded. “We hope that there would be collaboration amongst various ministries to drive growth and job creation in South Africa.”
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