SA’s economic performance in 2020: Agriculture a beacon of hope
10 March 2021
The Department of Statistics South Africa (Stats SA) has recently released the Gross Domestic Product (GDP) figures for the final quarter of 2020, which offered a sobering overview of the year.
The South African economy grew by an impressive 6,3% in the final quarter of 2020 - despite the second wave of Covid-19. For the year as a whole, the local economy declined by -7%, which admittedly was better than most forecasts.
Almost every sector recorded positive growth in the final quarter of 2020, with the mining and finance sectors, respectively, the exceptions. The one shining star was the agricultural sector, which recorded a 5,9% growth in the fourth quarter, at the back of increased production of animal products, according to Stats SA. The sector’s year performance flourished, as expected, coming in at 13,1% in 2020.
The impressive performance was attributed to a few known factors, which include but are not limited to, favourable weather conditions (as we have seen the La Niña climatic event play out) and, to a large degree, the classification of the sector as an essential service from the initial lockdown restrictions. That allowed for production to continue as most of the economy came to a halt.
Further to this was the good performance across sub-sectors, from the second-largest grain harvest, to impressive performance of horticulture, led by citrus exports, and the recovery in the livestock industry. However, there were challenges in some sub-sectors, particularly the alcohol and tobacco sub-sectors, that were battered by the restriction on sales and consumption of these products at various stages of the lockdown.
While the overall economy still remains in the doldrums, the past year presented a real life experiment on many aspects and has now gifted us with data that shows that, amongst other things, the agriculture sector remains the beacon of hope in tackling many of the ailments in the economy.
The data shows that, with the correct policy regime and collaboration, the sector still remains a low hanging fruit to kick start the economy. This should serve as a wake up call for government to ‘suit the action to the word, the word to the action’ – to quote Hamlet by Shakespeare.
One example of this is the limited budget that is allocated to the agricultural sector in the national budget. When compared to other emerging markets (EM), SA’s national budget allocation to agriculture has remained well below 2% over a number of years, where other EM’s spend around 6% on this sector. What this has translated to, is those particular EM’s realising a GDP growth of 3,7% on a 10 year average, whereas South Africa hovers around 1,7% in the same period.
The president and some of the ministers have on various platforms alluded to the importance of the sector, but this should not end as lip service but should transition into implementation, if there’s serious urgency to revive the overall economy and make a dent in unemployment numbers.
Looking forward, much of the risks in the system lie in the speedy implementation of correct policies, which underpin realising the growth potential. Favourable weather conditions are still with us and the production outlook remains positive. This lays a good foundation for another positive year for the sector, albeit softer, owing to base effects.
Issued by KulaniSiweya, Agri SA Agricultural Economist, 10 March 2021
