The world economy is paying a high price for Russia’s unprovoked, unjustifiable and illegal war of aggression against Ukraine. With the impacts of the Covid-19 pandemic still lingering, the war is dragging down growth and putting additional upward pressure on prices, above all for food and energy. Global GDP stagnated in the second quarter of 2022 and output declined in the G20 economies. High inflation is persisting for longer than expected. In many economies, inflation in the first half of 2022 was at its highest since the 1980s. With recent indicators taking a turn for the worse, the global economic outlook has darkened. The four main takeaways are: the world economy is slowing more than anticipated; inflation has become more widespread; inflation will ease but remain at high levels, and demand reduction and supply diversification are needed to avoid energy shortages. Read more in the linked OECD Economic Outlook, Interim Report September 2022.

New case studies from the World Economic Forum show how comprehensive environmental, social and corporate governance (ESG) reporting has started to drive corporate transformation around the world, particularly in sustainability efforts and company culture. Based on case studies from companies reporting on the Stakeholder Capitalism Metrics, the white paper found examples of specific strategy and operations changes as a result. These include initiatives such as new approaches to water management in real estate and implementing biodiversity strategies and targets. The case studies also indicate that despite some progress, companies are still struggling with competing and disparate ESG frameworks around the world. As regulators begin to roll out mandatory ESG reporting across regions, alignment will be key to ensuring that the clarity and efficacy of ESG reporting continues to improve globally. Read more in the linked media release by the World Economic Forum.

Higher interest rates could knock the demand for higher-value agricultural products such as meat, according to Dr Marlene Louw, the senior agricultural economist at Absa Relationship Banking. Last week, the South African Reserve Bank’s Monetary Policy Committee (MPC) increased the repo rate by a further 75 basis points to 6.25%. Louw said higher interest rates would add to the broad-based cost pressures that producers had been experiencing over the last 18 months. John Hudson, Nedbank agriculture head, said on the back of positive growth and investment in agriculture over the past two years, the sector’s exposure had risen significantly. “While this is considered to be an investment in productive assets an increase in interest rate will result in higher finance costs. The impact will vary according to the level of indebtedness but an increase in interest rates means an increase in finance costs and this will only add to the spiralling input costs and margin pressure farmers are experiencing,” Hudson said. Read more in the linked article, first published on msn.com.

It is a sunny Wednesday morning and I am visiting the Elsenburg Agricultural Training Institute just outside Stellenbosch. As I approach this pristine facility, which was founded in the closing years of the 19th century as the first centre for agricultural training in Africa, I am already impressed by how well kept the campus is. As I park I’m warmly welcomed by members of management Darryl Jacobs and Hayley Rodkin. We greet and remark on this historic institute’s excellent infrastructure and maintenance. Not long after the pleasantries the conversation shifts to the state of agricultural colleges across the country. The previous weekend the investigative journalism TV programme Carte Blanche aired an episode showcasing the deteriorating condition of SA’s agricultural colleges, an indictment in a country where agriculture still occupies an important place in the economy and has a vital role to play in ensuring food security both domestically and across the continent. Agbiz chief economist Wandile Sihlobo shares his views in the linked article, written for and first published in Business Day.

South Africa’s consumer food price inflation accelerated further to 11,5% year-on-year (y/y) in August 2022, from 10,1% y/y in the previous month. This is the fastest pace since January 2017, which was a drought period in agriculture where costs were driven by higher agricultural commodity prices. The higher agricultural commodity prices we’ve observed in the months since Russia invaded Ukraine continue to filter into the consumer food price inflation data. Moreover, the higher fuel price inflation since the start of the war is an additional cost driver of food prices. More specifically, the higher global grain and oilseed prices for much of this year have been the drivers of the costs of “bread and cereals” and “oils and fats” in the consumer food price inflation basket. These were also amongst the key drivers of the price inflation in August, alongside vegetables, sugar, sweets and desserts. In the linked article, Wandile Sihlobo discusses the latest data.

We spent time this past week engaging with some of our members in the Free State. The conversations focused on broad policy themes such as land reform, agriculture and agro-processing master plan, biosecurity, rural rejuvenation, trade policy and challenges in the network industries (water, electricity, roads, rail, and ports). Generally, the spirit is upbeat about this sector but, as with other provinces, agribusinesses are troubled by the deteriorating infrastructure in the above-mentioned network industries and the poorly functioning municipalities. These are all themes that the Agbiz office continues to focus on, amongst other activities. In terms of agricultural conditions, we shared our downbeat view of the sector for this year. Read more in the linked article by Wandile Sihlobo.

While some farmers in the grains and oilseeds industry benefited from the unusually long period of large yields and higher prices, higher input costs since the start of 2020 have limited the benefits. For farmers in the horticulture industry, where commodity prices did not increase as much as in grains, the higher input costs were an even heavier burden. These price increases were mainly in agrochemicals (herbicides, fungicides, insecticides), fertilizers and fuel. In this week’s segment of the podcast, agricultural economist Wandile Sihlobo provides insight on how the agricultural sector is coping with the rising input costs.

Many economies in sub-Saharan Africa grew at a record pace before the pandemic. Ethiopia and Rwanda, for example, saw some of the fastest expansions in the world—an average of more than 7.5 per cent per year over the past two decades. However, it is less clear whether the gains in economic growth have been shared equally across regions within countries because income data at the subnational level are not always available. To assess the extent to which sub-Saharan Africa’s strong growth performance spread across subnational regions, the International Monetary Fund (IMF) used satellite-recorded images of the Earth’s nighttime lights as a proxy for economic activity. The data show that at least until 2010, African countries made tremendous progress in reducing regional income inequality (differences in output per capita across regions of a country). This is in marked contrast with other parts of the world, where inequality either increased or convergence was slower. This issue is discussed in the linked blog post published by the IMF.

Staple food prices in sub-Saharan Africa surged by an average 23.9 per cent in 2020-22—the most since the 2008 global financial crisis. This is commensurate to an 8.5 per cent rise in the cost of a typical food consumption basket (beyond generalized price increases). Global factors are partly to blame. Because the region imports most of its top staple foods—wheat, palm oil, and rice—the pass-through from global to local food prices is significant, nearly one-to-one in some countries. Prices of locally sourced staples have also spiked in some countries on the back of domestic supply disruptions, local currency depreciations, and higher fertilizer and input costs Read more in the linked IMF blog post.

Farmers have been advised to exercise at least some caution regarding the spending of their recent financial windfalls as the landscape may have begun to shift. FNB Agribusiness agriculture information and marketing head Dawie Maree said although cost pressures that emanated from a dramatic increase in fertilizer and fuel costs that were seen earlier in the year due to the war-induced supply crunch have eased lately. Maree said it remains high relative to the previous season. “When you combine this elevated cost trend with the potentially negative impact of rising domestic and global interest rates on consumer demand, cautious spending is probably the best policy for everyone in the agri sector right now,” said Maree. Maree said this does not mean farmers should not be investing in the future of their operations, but they should be doing so in a measured way. Read more in the linked article, first published on msn.com.

In 2020, Woolworths was a founding signatory of the Consumer Goods Council of South Africa’s (CGCSA) Voluntary Food Loss and Waste agreement, which commits them to halve their food loss and waste by 2030. Now in the week of the International Day of Awareness of Food Loss and Waste, the retailer confirms that 48 of their food suppliers have joined them to also become signatories. But most importantly 26 of these 48, are the retailer’s biggest suppliers which equate to nearly 60% of Woolworths’ food production. "Prevention of food loss and waste is one of the powerful means to strengthen our food systems and has always been a key focus in our Good Business Journey (GBJ) including our Inclusive Justice Initiative (IJI), as it addresses both the injustice of food being wasted as well as the environmental impacts of wasting resources like water and energy in the production and growth of the food,” says Latiefa Behardien, Woolworths Foods chief technology and sustainability officer. Read more in the linked article first published on FreshPlaza.

Water security remains one of the biggest challenges facing South Africa, with the country’s supply facing many threats amid increasing demand and relatively low water availability. While the situation may not yet be an absolute crisis, if left unchecked, South Africa’s water sector is a few years away from water shortages that will have a similar impact to that of the current electricity shortages forcing state-owned power utility Eskom to implement intermittent load-shedding. It is a significant challenge, which experts have been flagging for decades, with some warning that the country faces a future of regular water-shedding, or rationing. Read more in the linked article, first published on Engineering News.

The South African table grape industry has said that it is ready to confirm its status as a preferred supplier in international markets once again. Industry organisation SATI said in its first new season outlook that producers and stakeholders had been proactively planning and assessing how to improve quality on farms and mitigate as much risk as possible during the transportation of the product. SATI chief executive AJ Griesel says emphasis has been placed on developing and improving collaborative working relationships within the industry to help address the challenges experienced last season. “Significant progress has been made, and South Africa is ready to confirm its status as a quality Southern Hemisphere table grape supplier.” Fred Meintjes discusses this subject in the linked article first published on Fruitnet.com.

The Citrus Growers’ Association of Southern Africa (CGA) is proud to announce that citrus growers in Botswana have become members of their organisation, joining over 1 400 from South Africa, Eswatini and Zimbabwe. With the addition of Botswana, the CGA now represents just over 1 564 citrus growers in Southern Africa. The CGA hopes to help maximise the long-term profitability and sustainability of Botswana growers, by providing them with increased access to global markets, assisting them to optimise the cost-effective production of high-quality fruit from their region and making industry resources available to them including the latest research from globally recognised Citrus Research International (CRI). Read more in the linked media statement issued by CGA.

The board of directors of the Animal Feed Manufacturers Association, AFMA, has elected their new chairperson and vice-chairperson. The election took place during a board of directors meeting held on 28 September 2022. Anina Hunter of RCL Foods was elected as chairperson and is the first woman to lead an AFMA board. Michael Schmitz, the managing director of Meadow Feeds, was elected to the position of vice-chairperson. Read more in the linked AFMA media statement.

The Citrus Growers' Association of Southern Africa, shares the latest news in the citrus industry in its weekly update - From the desk of the CEO. Please click here to peruse.

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