The Agbiz/IDC Agribusiness Confidence Index improved by two index points in the first quarter of this year to 57. A reading above 50 indicates expansion in the South African agribusiness activity. Therefore, an index point of 57 suggests that agribusinesses are having an optimistic view regarding business conditions in the country. Worth noting is that the Index has remained above 50 index points for the past three consecutive quarters, which signals a consistent improvement in agribusiness activity.
Amongst the ten sub-indices making up the Agbiz/IDC Agribusiness Confidence Index, the turnover, net operating income, employment, economic growth and agricultural conditions sub-indices were the key drivers of the improvement in confidence in the first quarter of 2017.
The general improvement in these particular sub-indices is in line with positive prospects for the 2016/17 production season. Meanwhile, the decline in other sub-indices mirrors the aftermath of the 2015/16 El Niño induced drought, as well as uncertainty regarding land reform processes in the country.
The Agbiz/IDC Agribusiness Confidence Index results paint an encouraging picture of the South African agricultural sector. Following higher rainfall in the past few months, the sector is expected to show positive improvements in production this year compared to the previous one. This will subsequently have positive effects on employment, economic growth and food inflation this year.
With that said, developments in the land reform subject, particularly the talks of expropriation without compensation, could potentially discourage investments in the agricultural sector over the foreseeable future.