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Confidence levels up for agricultural businesses

26 Oct 2012

Confidence levels in the agricultural business sector increased by 6% in the third quarter despite the political turmoil ahead the Mangaung congress of the African National Congress and the Marikana shootings at Lonmin's mine‚ according to the Agricultural Business Chamber (Agbiz) and the Industrial Development Corporation (IDC).

The Agbiz/IDC Agribusiness Confidence Index‚ measured on a quarterly basis and based on responses from executives in agriculture shows confidence levels have risen.

Even though the past year's confidence levels fluctuated the third quarter again confirmed the upward trend‚ said Lindie Stroebel‚ Agbiz manager of economic intelligence and finance.

The Agribusiness confidence index reached 62‚96 in the third quarter‚ which is 6% higher than in the second quarter and 11% higher than the third quarter of 2011.

The overall index is compiled from ten sub-indices. In the short term (indicated through the quarter-on-quarter change)‚ very small changes are anticipated for turnover and net operating income of agribusinesses.

"It is also anticipated that the market share of the businesses would decrease slightly in line with the small decrease in turnover, contributing to a maringal decrease in employment and, a decrease in capital investment‚" Stroebel said.

"The year-on-year changes, due to the seasonality of agriculture‚ are much more significant. Even though also small‚ the turnover and the net operating income are expected to increase when compared with the third quarter of 2011" she added.

The index said that the market share and employment of the businesses appeared to have risen.

Capital investment remained unchanged. "As the exchange rate weakened‚ international demand remained stable and new markets in the east are explored‚ resulting in an increase in the volumes exported - both in the short- and long-term‚" the statement from Agbiz noted.

Stroebel said it was rather concerning that agribusinesses expected economic growth in South Africa to fall as this impacted on local demand for agricultural and food products‚ on which the agribusiness sector was highly dependent.

The index noted that repayment ability of the primary agricultural sector was evident from the provision for bad debts. It said higher commodity prices‚ the weaker rand and prevailing agricultural conditions - which turned out to be better than expected - enabled producers to repay their loans and decrease their provisions for bad debt.

Source: I-Net Bridge

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