South African agribusiness confidence rises to a three-year high amid recovery

The latest findings from the Agbiz/IDC Agribusiness Confidence Index (ACI), released on Monday, reveal a notable surge in confidence among South African agribusinesses.

The index jumped 11 points from the fourth quarter of 2024 to reach 70 in the first quarter of 2025, marking the third consecutive increase and the highest level since the end of 2021.

This significant boost in confidence is primarily attributed to favourable weather patterns, particularly La Niña rains, which are set to enhance the agricultural season for 2024-25.

Additional improvements in port efficiency, which bolstered exports last year, and progress in controlling animal diseases have also played pivotal roles in fostering this optimistic outlook.

Within the ACI, 10 subindices paint a vivid picture of the sector's sentiments, with nine showing robust improvements in the first quarter of 2025, while only one experienced a mild decline.

The turnover subindex, for instance, soared by 14 points to 60, reflecting heightened expectations among agribusinesses, especially in the fruits and winter crops sectors.

Moreover, optimism surrounding net operating income surged significantly, with the subindex rising by 28 points to 70, its highest since late 2022, driven by the same factors impacting turnover.

The market share subindex also achieved a modest increase of 3 points to 70, indicating a positive outlook, especially from stakeholders in winter grain regions.

Furthermore, the employment subindex rebounded impressively, climbing 13 points from the fourth quarter of 2024 to 55 in the first quarter of 2025.

This rebound is not surprising given the sector's recovery following challenges posed by drought and animal diseases, alongside a manageable increase in the minimum wage that aligned with industry expectations.

Capital investments also demand attention, with this subindex increasing by 13 points to 75, signalling strong activity as high-frequency data showed promising sales for tractors and combine harvesters in the early months of the year.

Notably, sentiment regarding export volumes saw the most significant rise, advancing 17 points to an impressive 100 in Q1 2025, reflective of South Africa's agricultural exports reaching a record $13.7 billion (R248bn) in 2024.

Additionally, positivity pervaded the general economic conditions subindex, which improved by 3 points to 65, suggesting a revival in sentiment associated with operational strategies like Operation Vulindlela.

The agriculture sector also benefitted from a 13-point rise in the general agricultural conditions subindex to 80, buoyed by the anticipated positive effects from the La Niña rains during the summer season and optimistic production estimates for field crops, horticulture, and livestock.

Wandile Sihlobo, chief economist of the Agricultural Business Chamber of SA (Agbiz), said that the ACI results showed that the mood in the sector was upbeat, reflective of the recovery in the agricultural industry following a challenging season of drought and animal diseases.

“It is heartening to see that the geopolitical tensions haven't weighed on the sector heavily. We should build on this optimism for the sector's long-term growth,” Sihlobo said. 

“An effort to keep the sector on the positive path requires collaborative efforts between business and government on pushing for the effectiveness of the network industries, better management of the municipalities, further efforts to open new export markets, and the implementation of the Agriculture and Agro-processing Master Plan.”

Waldo Krugell, an economics professor at North-West University, said that we saw that the RMB/BER Business Confidence Index was unchanged in the first quarter, but the sub-indices for retail, wholesale, construction contractors, and manufacturing were lower, pulled up only by optimism among new vehicle sellers.

“Confidence in the so-called 'other services' sector also shows mixed sentiment. Confidence was lower in sub-sectors such as transport and storage, property, and business services, but it increased significantly for hotels and restaurants,” Krugell said.

Krugell added that in agriculture, other things matter, like good rainfall, improved port logistics, and better control of animal diseases.

“Recent GDP numbers showed that when the rest of the economy is growing very slowly, agriculture can be a significant swing factor, so improved confidence bodes well for the sector's contribution to growth later this year.”

BUSINESS REPORT