22.10.2012

Confidence levels in agribusinesses increases

CONFIDENCE levels in the agricultural business sector have increased by 6% in the third quarter despite the political euphoria towards the Mangaung congress of the African National Congress and the Marikana shooting, according to the Agricultural Business Chamber (Agbiz) and the Industrial Development Corporation (IDC) released on Monday.

The Lonmin wildcat strike in the Marikana area, close to Rustenburg, attracted international attention in August following a series of violent incidents between the South African Police Service, strikers, non-striking workers and union representatives, which resulted in the deaths of about 50 people and the injury of an additional 78 workers. In addition to the Lonmin strikers, there has since been a wave of wildcat strikes across the South African mining sector that seem not to have affected Agribusiness decision makers who have come up slightly more confident with the environment of doing business in the country.

The Agbiz-IDC Agribusiness Confidence Index, measured on a quarterly basis from responses collected amongst executives of agribusinesses across the country, serving the entire agricultural sector, has come up positive.

Agribusiness confidence had reached an all-time low in the third quarter of 2009. But since then, an upward trend was observed over the following three years. Even though the past year’s confidence was rather up and down, the third quarter again confirmed the upward trend, said Lindie Stroebel, Agbiz manager of economic intelligence and finance.

The Agribusiness confidence index has in the third quarter reached 62,96, which is 6% higher than in the second quarter and 11% higher than the third quarter of last year.

The overall index is compiled from ten sub-indices. For further understanding of the results the changes of the sub-indices are very relevant. In the short term (indicated through the quarter-on-quarter change), very small changes are perceived for the turnover and net operating income of agribusinesses.

"It is also rather anticipated that the market share of the businesses would decrease slightly according to the small decrease expected in turnover. Hence the small decrease in employment, and, even though the change is insignificantly small, also the decrease in capital investment," Ms Stroebel said.

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

The index said that the market shares and employment of the businesses were perceived to have increased. Capital investment remained unchanged. "As the exchange rate weakened, the international demand persists and new markets in the east are explored, the volumes exported increased — both in the short and long term," the statement said.

Ms Stroebel argued that it was rather concerning that agribusinesses expected the economic growth in South Africa to decrease, as this largely reflected local demand for agricultural and food products, of which the agribusiness sector was highly dependent.

The index noted that repayment ability of the primary agricultural sector was reflected in the debtor provision for bad debt of agribusinesses. It said higher commodity prices, the weaker rand and the agricultural conditions, which turned out better than expected, enabled producers to repay their loans and agribusinesses to decrease their provision for bad debt.

Article source: www.bdlive.co.za

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