South African agricultural businesses are relatively upbeat, judged by the recently released Agbiz/IDC Confidence Index (ACI).
According to Agbiz, the ACI fell from 50 during the third quarter of 2023 to 40 in the fourth quarter of 2023 and first quarter of 2024. It hit a low of 38 during the second quarter of 2024, from where it increased by 10 points for each of the consecutive quarters to reach 58 by the fourth quarter of 2024.
ACI has since increased by another 11 points to 70 in the first quarter of 2025, putting agricultural business confidence at its highest since 2021, when it reached 75 in the second quarter and 74 in the fourth quarter, primarily because of the favourable impact of La Niña rainfall on agricultural output.
Subindices
The debtor provision for bad debt subindex fell by 8 points to 50. Agbiz ascribed this to some farmers still feeling the financial pressures from the past season.
As expected, the financing costs subindex rose by 4 points to 75 thanks to an easing of interest rates.
The turnover subindex confidence increased by 14 points to 60 and the net operating income subindex by 28 points to 70, mainly because of optimism in agribusinesses operating in fruit and winter crops. However, the view of agribusinesses operating in other sectors remained generally unchanged from the previous quarter.
The market share of agribusiness subindex increased by 3 points to 70, primarily driven by positivism among stakeholders in the winter grains regions.
The employment subindex increased by 13 points to 55. Agbiz ascribed this to a recovery form drought and animal diseases along with a minimum wage hike that was mild and aligned with industry expectations.
The capital investment subindices are up by 13 points to 75. This is reflected in high-frequency data, such as tractor and combine harvester sales, which are already strong and showing improvement in the first two months of the year.
The general economic conditions subindex lifted by 3 points to 65. According to Agbiz, this might be due to expected effects of the overall implementation of Operation Vulindlela.
The general agricultural conditions subindex rose by 13 points to 80, mirroring the positive effects of La Niña rains in the 2024/25 summer season and generally optimistic production estimates for field crops, horticulture, and livestock.
Outlook
Wandile Sihlobo, chief economist of Agbiz, stated that it was heartening to see that geopolitical tensions have not weighed on the sector heavily: “We should build on this optimism for the sector’s long-term growth.”
He added that collaborative efforts between business and government on pushing for effectiveness of the network industries, better management of the municipalities, further efforts to open new export markets and the implementation of the Agriculture and Argo-processing Master Plan were needed to keep the sector on this positive trajectory.
Paul Makube, senior economist at FNB Commercial, told Farmer’s Weekly that he expected the current momentum to be maintained for the rest of the year thanks to the favourable production conditions.
He added that the high agribusiness confidence boded well for agricultural GDP performance: “Agricultural GDP contracted by 8% year-on-year in 2024 and 4,8% in 2023. Current agribusiness confidence is pointing to a rebound in agricultural GDP in 2025,” he said.
“Climatic conditions have improved, interest rates are coming down and input costs are declining, thanks to a reduction in load-shedding and lower fertiliser and crop protection costs. Overall, things are looking more promising for farmers, agribusinesses, and consumers.”