_Agri-Africa Update 2020 – The impact of Covid-19 on agriculture

Uganda
By Patience Taaka

Owing to the limited number of transactions in the aftermath of the lockdown, no direct implications have been observed on farmland values yet. We anticipate that the pandemic’s impact on farmland values will likely be evidenced in H1 2021.

Fluctuations have, however, been observed in farm produce values due to the economic effect of the lockdown on household purchasing power and the disruption of local supply chains. For example, the price of tomatoes, pineapples, onions, eggs and plantain dropped by almost 60%.

In response, the Ugandan government has put in place measures to boost the country’s agricultural sector. These include increasing taxes on imported agricultural products such as sugar by 60% to protect local markets. Credit relief measures to mitigate the adverse effects of Covid-19 on businesses have also been instituted.

Despite this, the outlook for Uganda’s agricultural sector remains positive. The earnings from agricultural products constituted 49% of total merchandise exports during the lockdown period. Further opportunities abound in coffee, tea, maize and fish export farming.

South Africa
By Susan Turner

Employment in South Africa’s agricultural sector was expanding prior to the Covid-19 pandemic with growth of 3% over the past year.

Further, there has been good rainfall across the country and dams and groundwater have recovered following the two previous drought-affected seasons. As a result, production levels have improved across all major subsectors of agriculture.

South Africa expects its second-largest grain harvest on record this year. The latest projections for the maize, sunflower seed, and soybeans harvests indicate year-on-year increases of 38%, 13% and 8% - equivalent to output levels of 15.5 million tonnes, 765 960 tonnes and 1.3 million tonnes, respectively.

Sugar cane production is also set to increase by 1% to 19.4 million tonnes.

From a horticulture perspective, the citrus industry showed a 13% annual increase in fruits exported, while apple and pear production increased by 5% and 1%.

The latest agricultural economic data indicates the Gross Value Added of agriculture will expand by almost 28% q/q in 2020 on a seasonally adjusted and annualised basis.

Although limited exports are currently taking place, the weakness of the rand should help boost trade in the short term. But, on the downside, input costs are also likely to increase.

The pandemic has, however, had a negative impact on the tobacco and wine industry, with the sale of alcohol and cigarettes prohibited during the country’s extremely strict lockdown.

We anticipate that as a result of this there might be distressed sales in the wine industry taking place in the near future. But owing to the lack of transactions due to the lockdown it is too early to say what the wider impact of the pandemic on farmland values will be.

Looking ahead, South Africa’s agricultural sector outlook remains positive. Opportunity abounds in large scale expansion of irrigated agriculture in line with the national development plan. Further value chain initiatives present opportunities in agricultural logistics parks focussing on regional and local markets.

Zambia
By Tanya Ware

At the onset of the pandemic, Zambia announced a record maize crop yield of 3.39m tonnes, one of the best in the past twenty years.

This was mainly due to above-average rainfall around the country during the October to March 2019/2020 growing season and an increase in the number of farmers planting maize.

As a result of the pandemic, the supply of food has been disrupted. This has caused a rise in food prices owing to Zambia’s status as a landlocked country and high dependency on food imports.

The dependence on imports has also led to a shortage of supplies and farming inputs, which could hit production. Movement restrictions on goods and people have, however, benefited small scale farmers growing vegetables and herbs for local markets.

In terms of value, it might be too early to determine the impact of the pandemic on farmland values. However, to date farmland values have remained stable and the sector resilient.

Zambia’s agricultural sector’s outlook remains positive owing to its range of tax incentives, capital allowances and relative stability attracting private and institutional investors.

While over 40 million hectares of the country is classified as having medium to high potential for agriculture production, only 1.5 million hectares are cultivated annually.

In addition, significant volumes of water are available for the irrigation of traditionally grown crops such as maize and wheat, while other higher value crops such as nuts and citrus are growing in importance.

Data Watch

Source: Knight Frank Research, Macrobond

Source: Knight Frank Research, FAO