COMMODITY CORNER
There can be noquestion
about it: South Africa’s
economy has fortoo
long been stuckin
a low-growth cycle.
But for those whoare
willing to be innovative
and embrace the
opportunities offeredby
new technologies,there
is still much potential
for business growth.
Keep looking for the
growth potential
T
herearemanyunansweredquestions
abouttheeconomicandpolitical
situationinSouthAfricathatlimita
farmer’sbusinessconfidence.Asa farmer,
youmightevenbehesitantabouttaking
investmentdecisionsneededtoimprove
thecompetitivenessofyourbusiness.
Whiletherearereasonsforconcern,
manyofthefactorsinfluencingthe
economicoutlookarenotlimitedto
SouthAfrica’sbusinessenvironment.
Ourcountrydoesnotfunctionin
isolationfromtherestoftheworldand
wesometimestendtobeoverlynegative
aboutlocalprospects,whenthedrivers
ofeconomicgrowth(ordownturn)
are,toa largeextent,linkedtoglobal
developmentsratherthanlocalfactors.
Someofthesefactors,oftenlistedas
inhibitinginvestment,includepoor
economicgrowth,drought,lackof
infrastructuredevelopment,andglobal
marketaccessconstraints.However,a look
atcertaineconomicindicatorsrevealsthat
thetruthis perhapsmoreencouraging
thanourperceptionsleadustobelieve.
Weneedtostepbackandview
developmentsovertime,ratherthanon
a dailybasis,andverifyourperceptions
withfacts.Businessconfidencemight
belowwhileeconomicindicators
suggestit shouldbeotherwise.SIMILARGROWTHTRENDS
AccordingtoGraph1, it is not
onlySouthAfrica’seconomicgrowth
thathasbeenshowinga downwardtrend.
Since2016,SouthAfrica’sgrowthtrend
hasbeenverysimilartothatoftheEU.BY WESSEL LEMMER
Wessel Lemmer is a senioreconomist
at Absa AgriBusiness. Emailhim
at [email protected].
Of the five countries listed in Graph
1, only the US achieved significant
economic growth over this period.
When comparing South Africa’s share
prices with those of its trading partners,
it is evident the All Share Index follows
the SP500 Index, which represents
the top 500 companies in the US.
For the most part, global share prices
trended lower in 2018 and 2019. South
Africa’s share prices have generally
been less volatile than those of other
major markets, and local share prices
did not decrease dramatically in 2018
as they did in other markets.
Moreover, it is clear from Graph 2 that,
although South Africa’s average rainfall
has declined significantly over the past
20 years, the gross producer value of
field crops increased significantly.GETTING OFF THE GRID AND
BECOMING A POWER SUPPLIER
For South Africa to escape the low-
growth cycle it has been trapped in for
the past few years, the country will
have to generate more electricity.
At the same time, farmers know that
they need to become less dependent on
the national grid, as they incur significant
harvest losses due to load-shedding.
If we want to curb food inflation,
and inflation in general, to prevent
South Africa from becoming more
dependent on imports, farmers and other
players in the food value chain have to
become more energy-independent.
South Africa needs to fix its electricity
challenges, and this poses an opportunity
Eurozone
India
US
China
Japan
SouthAfrica
Brazil30 farmer’sweekly 9 AUGUST 2019
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 (Q1)GRAPH 1: GDP GROWTH RATE (%) OF SELECTED COUNTRIES FROM 2009 TO 2019
12,08,04,00-4,010,06,02,0-2,0-6,0
-8,0