Priorities for SA’s agricultural sector in 2025: Navigating climate change and growth
By Greg Talbot
South Africa’s agricultural sector is a key component of the economy, creating jobs and providing food security. The past year was a challenging one, characterised by droughts and the lingering impacts of animal diseases. The year ahead will be focused on navigating and mitigating the risks of climate change to achieve growth.
Agricultural production declined in the third quarter of 2024, leading to the economy unexpectedly contracting by 0.3%, after growing in the second quarter. GDP from agriculture decreased to R85 698 million from R120 386 million in the second quarter.
Although the Agbiz/IDC Agribusiness Confidence Index recovered by 10 points to 48 in the third quarter of 2024, it remained below the neutral 50-mark, indicating that although political concerns have eased in the wake of the formation of the government of national unity, agribusinesses remain concerned about the business conditions in which they are operating.
The index reflects the perceptions of more than 25 agribusiness decision-makers on the 10 most important aspects influencing a business in the agricultural sector. These include turnover, net operating income, market share, employment, capital investment, export volumes, economic growth, general agricultural conditions debtor provision for bad debt, and financing costs. Subindices that improved in the third quarter include turnover; employment; capital investments; general economic conditions and general agricultural conditions. However, many of the other subindices, including export volumes, declined.
Climate change the top risk facing the agri-sector in 2025
There are a number of key issues likely to impact the agricultural sector in 2025. One of the most pressing issues is climate change, with rising temperatures, shifting rainfall patterns, and increased frequency of extreme weather events impacting livestock health and crop yields. The Allianz Risk Barometer 2024 report ranks climate change as the top risk facing the agricultural sector.
Drought is becoming a persistent problem across a significant proportion of the country. Not only was the 2023/2024 summer crop negatively impacted by a drought, but drought also plagued the production of wheat, sunflower, soya beans, and maize in 2024/2025 while also hindering the production of subtropical fruits, deciduous fruits and vegetables in parts of the country, according to Statistics SA.
Nearly half of South Africa’s 2024 litchi harvest, for example, was destroyed by adverse weather conditions including unexpected drops in temperatures in winter and then excessively hot temperatures in early spring.
Farmers are having to implement soil and water conservation measures and establish more efficient water harvesting, storage, and irrigation techniques to mitigate the risks of climate change.
Exports affected by regulatory requirements
The local agricultural sector is heavily reliant on exports with nearly half of the value of all agri-products exported to the rest of Africa (40%), Asia and the Middle East (23%), the European Union (19%), and the UK (7%).
Amidst growing uncertainty around the future of tariffs imposed by the incoming Trump administration and the future of the African Growth and Opportunity Act (AGOA), South Africa needs to expand its agricultural export markets. However, reaching export agreements with new markets often takes years of extensive negotiations.
Inroads are slowly being implemented. Japan, for example, had previously rejected locally grown avocados citing health and regulatory standards. However, in November 2023 the two countries reached an agreement to allow exports of avocados. India and South Africa have finalised a phytosanitary agreement, allowing for the export of avocados to the lucrative Indian market. This year, the first container of locally produced avocados was shipped to China.
Traceability key to keeping exports competitive
Local livestock producers continue to be plagued by outbreaks of animal diseases such as foot-and-mouth diseases, African swine fever, and avian flu. These outbreaks impact domestic supply chains as well as exports. China, for example, has previously banned the import of cloven-hoofed animals, egg products, and wool from South Africa. Namibia lifted a one-year prohibition on importing chickens from South Africa in mid-2024.
The introduction of a traceability system that tracks products from farm to fork will be key to ensuring South Africa’s agricultural products remain globally competitive and in demand. Industry organisation Red Meat Industry Services (RMIS) launched the first phase of a red meat traceability system in late 2024. Encouragingly, the minister of agriculture, John Steenhuisen, has recognised the value of a track-and-trace system and we expect that South Africa will proceed with implementing an effective system in 2025 to ensure continued exports.
Farmers pay a heavy price for logistics challenges
South Africa’s agricultural sector is heavily reliant on an efficient logistics infrastructure. Poorly maintained road infrastructure and the dismal state of local ports have raised the cost of getting produce to end markets, negatively impacting many exporters.
Volumes of citrus exports dipped this year, primarily as a result of climate-related disruptions, although logistical issues at local ports exacerbated the situation. It is estimated that dysfunctional ports cost farmers around R26 000 per hectare. Two-a-Day (TAD), previously known as the Elgin Fruit Packers Co-operative, says the estimated total cost of inefficiencies at the Port of Cape Town to the Western Cape apple and pear industry is R999 million annually.
Lower interest rates pose some relief to indebted farmers
Primary and secondary agricultural debt is currently estimated to be around R280 billion. Lower interest rates will provide some relief to farmers battling financial difficulties and may allow farmers who were previously not able to qualify for financing, to now qualify. The South African Reserve Bank’s Monetary Policy Committee (MPC) has adopted a cautious policy towards lowering rates, despite calls from some economists that the rate cuts should have been larger.
The outlook for 2025
Absa’s Agri Trends Livestock Report predicts an increase in both beef and lamb prices, with pork expected to trade sideways and chicken prices to ease in 2025. South African farmers intend to plant 4,47 million hectares of summer grains and oilseeds in the 2024-25 season, a 1% increase from the previous season, according to South Africa’s Crop Estimates Committee.
Wandile Sihlobo, chief economist of the Agricultural Business Chamber of South Africa (Agbiz) says relatively higher grains and oilseed prices after a poor harvest in the last season coupled with relatively lower-priced input costs, are amongst the drivers of this optimism.
The local agricultural sector will be hoping that it will be able to leverage off South Africa chairing the G20 by sharing best practice around climate-smart agricultural processes and growing exports of locally-produced agricultural products.
Finally, sustainability is likely to be a key consideration for all farmers in 2025 as they adapt to climate change with a greater focus on responsible water use and enhanced soil health to maintain productivity and improve resilience.
Greg Talbot is the CEO of Tal-Tec.
BUSINESS REPORT