A further sign of resilience as agriculture posts a strong GDP rebound in Q2 of 2021

Comment by Paul Makube, senior agricultural economist at FNB Agri-Business

07 September 2021 – Statistics SA’s latest economic growth numbers came out stronger than expected in quarter two of 2021 underpinned by robust gains in the transport sector, personal services, as well as agriculture with quarterly increases of 6,9%, 2,5%, and 6,2%, respectively.

Overall growth came in 1,2% higher quarter-to-quarter (q/q) from 1% q/q in quarter one of 2021. Resilience in the agriculture sector continued as expected despite the ongoing COVID-19 related challenges with all sectors, field crops, horticulture crops, and animal products making immense contribution. Leading signs of yet another impressive rebound, ahead of the release of quarter two of 2021 gross domestic product (GDP) numbers included the robust harvest of summer grain and oilseed crops, good commodity prices, the record high agribusiness confidence, as well as strong exports.

South Africa recorded an agriculture trade surplus of US$1,5 million, which is 40% ahead of the same period in 2020. This follows a 36% year-on-year (y/y) spike in total agriculture exports in quarter two of 2021 at US$3,2 billion, bringing the total first half of 2021 export value to US$6,1 billion, which is 30% higher y/y. The overall good export revenue was underpinned by strong export demand despite the quarter 2 of 2021 rand exchange rate appreciation of 6% quarter-on-quarter and 21% relative to quarter two of 2020 at R14,09/US$. Further, the Agbiz/Industrial Development Corporation (IDC) Agriculture Business Confidence for quarter two of 2021 reached a 10-year high of 75 points in the earlier update.

Looking ahead, another great agriculture year is in the offing, if the recent weather forecasts of another La Nina year (normal to above normal rainfall) materialise for the 2021/2022 summer crop season. This combined with relatively strong commodity prices despite input cost pressures, should deliver another good agriculture year ahead and positive news on the inflation front with the food category likely to be tamed.