Agriculture set to drive South Africa's economic recovery in 2025

South Africa’s economy is expected to rebound slightly in 2025 on the back of a rebound from the agricultural sector after ending last year on a high note. 

Data from Statistics South Africa (Stats SA) on Tuesday showed that gross domestic product (GDP) rebounded by 0.6% in the fourth quarter of 2024 from a downwardly revised contraction of 0.1% in the third quarter.

Stats SA said the agriculture, forestry and fishing industry increased by 17.2%, contributing 0,4 of a percentage point to the positive GDP growth, primarily due to increased economic activities reported for field crops and animal products.

Old Mutual Group chief economist, Johann Els, said the rebound in agriculture from the third quarter into the fourth quarter was quite substantial after it contracted by 19.7% in the third quarter to a contraction of 17.2% and adding 0.4% to overall GDP growth. 

However, Els said overall these were “dismal numbers” in terms of the production side of the economy but the outlook was not that bad.

“So, a dismal picture of the economy over the last two years. The revision in agriculture was far less than what everybody expected. Perhaps in the next round of annual revisions, the agricultural numbers will look a lot better,” he said.

“The outlook for this year is better. From a structural basis, we see less constraints, electricity, transport volumes, even water is looking better with good drains. The agricultural sector is going to perform far better this year.

According to Agricultural Business Chamber’s chief economist, Wandile Sihlobo, less animal issues around foot-and-mouth disease or poultry should all be positive for the sector and the economy. 

Sihlobo also said that far better rainfall should be good for crops and good for consumer prices from the food side.

‘So, less structural constraints from electricity and export volumes, and some significant cyclical support, low inflation, improved confidence, lower interest rates, suggest that economic growth this year could be 2.2%,” Els said.

“That's not great, but it's far better. So, the data is important, far better than what we had over the last two years. That should drive confidence further and have a further positive impact in terms of future economic growth.”

Overall, Stats SA said real GDP increased by 0,6% in 2024, following an increase of 0.7% in 2023 primarily led by higher economic activities in finance, real estate and business services, personal services and electricity, gas and water.

The agriculture; construction; trade; transport; manufacturing; and general government services industries recorded negative growth in 2024.

Paul Makube, senior agricultural economist at FNB Commercial, said the decline in the overall 2024 agriculture sector GDP for the second consecutive year by -8% year-on-year reflected the massive El Nino-induced downturn in production particularly for summer crops. 

Makube said the decline was unavoidable given a massive contraction of 9.1% year-on-year in total summer crops output to 15.53 million tons with the country’s major staple, maize, falling sharply by 22% to 12.85 million tons.

“Nonetheless, the fourth quarter sector rebound reflects the resilience of the sector despite the challenging operating conditions. We saw total agriculture exports jumping 3% to $13.7 billion for 2024 on the back of strong demand and better prices. 

“The return of La Nina weather conditions boosted confidence, and the sector is now set for recovery in 2025 as early indications are that total summer crops might yield a 17.23 million-ton crops, a 10.9% increase from the 2024 levels. Consequently, grain prices eased from the 2024 highs recently which augurs well to improved margins in the intensive livestock production systems as feed costs decline. Further, this is positive from a food inflation perspective as upward pressure dissipates into the second half of 2025.” 

 BUSINESS REPORT