Article
Western Cape drought weighs on broader economy
Published: 01/02/2018
When it comes to agriculture, Western Cape is essential – not only because of its production of fine wines, but also for its contribution to South Africa's agricultural labour market and the broader economy. The province is a leading employer in primary agriculture, commanding a share of 20 percent of the country's total agricultural labour force in the third quarter of 2017. In addition, the province is the second-largest contributor to the agricultural economy in terms of gross domestic product (GDP), with a contribution of 22 percent - Wandile Sihlobo, Agbiz economist
This was first published in Huffingtonpost on 30 January 2018.
When it comes to agriculture, Western Cape is essential – not only because of its production of fine wines, but also for its contribution to South Africa's agricultural labour market and the broader economy.
The province is a leading employer in primary agriculture, commanding a share of 20 percent of the country's total agricultural labour force in the third quarter of 2017. In addition, the province is the second-largest contributor to the agricultural economy in terms of gross domestic product (GDP), with a contribution of 22 percent.
It is thus clear that when the province's agriculture encounters headwinds, a lot will be at stake; the current unrelenting drought is no exception. The third quarter of 2017 Quarterly Labour Force Survey by Statistics South Africa confirmed this. Of the 25,000 job cuts in South Africa's agricultural sector in the third quarter, about 84 percent were in Western Cape.
Eastern Cape, Free State, KwaZulu-Natal, North West and Limpopo combined accounted for 16 percent of the third quarter reduction in employment. However, the balance was also skewed by production seasonality factors. There was reduced agricultural activity in the summer crop production areas at that time of the year.
It is worth noting that employment in South Africa's agricultural sector has been on the decline since the beginning of 2017.
The combined job losses for the first half of 2017 are estimated at 84,000 jobs, with Western Cape again accounting for the lion's share of these losses. Overall, South Africa's total agricultural labour force was estimated at 810,000 jobs, which is the lowest since the fourth quarter of 2014.
The year 2018 might not show such vibrant results due to an expected decline in summer crops on the back of unfavourable weather conditions and, of course, the Western Cape drought.
South Africa's agricultural labour market was relatively more vibrant in the 2015/16 season, despite the El Niño-induced drought in many parts of the country at the time.
This is because Western Cape was not hit as hard as the other provinces had been, and was able to continue absorbing labour. Historically, the third and fourth quarter of each year typically records job gains in Western Cape, which coincides with increased activity in the orchards and vineyards. This would, of course, include seasonal labour.
In terms of the overall agricultural economy, the sector performed robustly in the past three quarters of 2017, supported by a recovery in summer crop production following several seasons of drought in some areas, as well as the low base effect.
Western Cape's horticultural sector also performed relatively well in 2017, contributing to the good performance of the sector. The Agricultural Business Chamber's trade economist, Sifiso Ntombela, estimates that South Africa's fruit exports grew by 5.5 percent in 2017, despite the relatively slight decline in fruit production.
However, the year 2018 might not show such vibrant results due to an expected decline in summer crops on the back of unfavourable weather conditions and, of course, the Western Cape drought.
Moreover, the labour market could also take a strain due to reduced activity in the fields. Above all, the persistent drought in Western Cape is a cause for concern for all South Africans, as its impact will be felt nationally, particularly in the agricultural sector.
ENQUIRIES:
Wandile Sihlobo (wandile@agbiz.co.za)
Agbiz economist
012 807 6686