Simon Segal
DESPITE the re-emergence of El Nino, the harbinger of drought in this region, there is still a reasonable chance that South Africa could have a favourable agricultural season. The rains over the past few days have done no harm, noticeably boosting the morale of farmers.
With the vital February-March rains still to come, South Africa Agricultural Union (SAAU) economist Koos du Toit believes agricultural output could reach R29-billion this year, some seven percent above 1994’s estimated R27- billion.
“This is on the assumption of normal rains from now on. But some of my colleagues are looking at a figure nearer R25- billion.”
The rains matter not only for farmers. A rule of thumb is that every 20 percent increase in direct South African agricultural output is worth one percentage point on the gross domestic product (GDP), the main measure of growth of the national economy.
So in Du Toit’s most optimistic scenario agriculture could yet add 0,4 percentage points to the 1995 growth. If the pessimists are right and the rains stay away, agriculture could yet drag GDP down by a similar amount.
When most economists are forecasting a deficit on the overall current account of the balance of payments, perhaps more crucial is agriculture’s contribution to the country’s trade balance. Estimates are of a net surplus in agricultural trade of R3-billion in 1994 (R7,2-billion exports against R4,2-billion in imports).
In his favourable scenario Du Toit is looking at a R2- billion net contribution this year (a slight drop in exports and rise in imports).
Looming large behind these figures is the maize crop, South Africa’s largest agricultural product anmd one which accounts for about one sixth of total farm output.
For this reason the Agriculture Department thinks that from the three million hectares planted a crop of eight million tons is still possible in ideal conditions.
This is well below last year’s estimated 12 million tons (the second highest ever) but is in line with South Africa’s average 7,5 to eight million tons. With South Africa’s maize consumption around 7,5 million tons (three million for humans and 4,5 million for animals) maize imports are unlikely this year as last year’s surplus could be used.
However, maize exports, which brought in R1,4-billion last year, are most unlikely this season.
Du Toit feels deciduous fruit exports should reach R1,5- billion this year (R1,2-billion in 1994), citrus exports R800-million (R740-million), preserved fruit R900-million (R820-million) and sugar R250-million (zero).
On the other hand some 500 million tons of wheat will have to be imported at a cost of around R500-million.
Down on the farm net income — total income after deducting costs but before interest payments — could fall to R6,5- billion in 1995 from R8-billion in 1994.
Total agricultural debt could also reach R22-billion at the end of this year (R20-billion at the end of 1994 and R18,4- billion at the end of 1993).
In general — and there are major regional and crop exceptions — South Africa’s farmers are unlikely to enjoy as happy a year as they did in 1994 when prices firmed, the weather was favourable and the falling rand boosted export earnings.
But this year is most unlikely to be as miserable as the drought-stricken early 1990s.