The Agbiz/IDC Agribusiness Confidence Index (ACI) has dropped from 46 points in the third quarter of 2019 to 44 points in the last quarter of the year. This is the sixth consecutive quarter that the ACI has been below the neutral 50-point mark.
Wandile Sihlobo, head of economic and agribusiness intelligence at Agbiz, said that an ACI of below 50 points indicated that agribusinesses were downbeat about the business environment in South Africa.
The composite index comprised of 10 sub-indices, six of which drove the recent decline in sentiment. These included lower confidence in the net operating income of agribusinesses.
“The downbeat sentiment was largely among firms operating in field crop producing areas and livestock. This suggests the poor harvest in the 2018/2019 summer crop production season and the 2019/2020 winter crop production season have weighed negatively on sentiment about net operating income.”
He added that in terms of livestock, the foot-and-mouth disease outbreaks weighed on sentiment.
The employment, exports volumes and general economic condition sub-indices also showed a decline in confidence.
However, sentiment regarding the turnover, market share of agribusinesses, capital investment, and financing costs of agribusinesses improved marginally in the last quarter.
Prof Johan Van Rooyen, director of Agricultural Development and AgriBusiness at Stellenbosch University, said that while the index was a useful tool, it was unwise to generalise too broadly about the South African agriculture sector and agribusiness sentiment, given the country’s diverse regional and climatic context.
“The negative impact of the drought should, for example, not be underestimated in the ‘overall’ index, but it could be far less [important] in a Western Cape-based index.”
Moreover, the declining value of the rand could have a negative impact on some sectors, but would boost export industries. “So there may be many potentially opposing forces at play in a generic overall index,” he said.