(Bloomberg) -- Sentiment among South Africa’s agricultural businesses soared to the highest level in more than two years boosted by sustained electricity supply, political stability and expectations of rains.
A confidence index compiled by the Agricultural Business Chamber, known as Agbiz, and the Industrial Development Corp. climbed to 58 points in the fourth quarter, compared to 48 in the prior three months.
“This optimism is a result of a combination of factors, including favorable weather conditions, with expectations that La Niña rains will be supportive of the 2024-25 agricultural season,” Agbiz said in a statement on Friday. “Moreover, the stable energy supply, improvements in port efficiency, and the better political climate following the formation of the government of national unity are some of the aspects the respondents cited as key factors underpinning their optimism.”
The improvement in sentiment followed the release of data by the government statistics agency that showed the agriculture sector contracted 28.8% in the third quarter, marking its deepest decline in at least 31 years. The outcome led to South Africa’s gross domestic product unexpectedly shrinking 0.3%.
The sector has been struggling through a drought that has curtailed harvest of crops such as corn, soybeans, wheat and vegetables.
“This optimism about business conditions in South Africa agriculture further shows that we may likely see a revision in the South Africa agriculture gross value added/GDP data that Stats SA released for Q3 showing a sharp contraction in the sector,” Wandile Sihlobo, chief economist at Agbiz said. “Indeed, agriculture should have contracted because of the drought and animal diseases, but perhaps the decline is likely not as sharp and we may see revisions.”
A sub-index measuring general economic conditions jumped to 63 by 20 points, while a gauge tracking general agricultural conditions climbed to 67 by 17, the highest since the last quarter of 2021.
©2024 Bloomberg L.P.