Despite Downside Risks, Agriculture Remains Key to South Africa's Growth and Job Creation
Despite Downside Risks, Agriculture Remains Key to South Africa's Growth and Job Creation
Sanele Nkosi, Audit Partner & Agriculture Lead, BDO South Africa
Emerging downside risks, heightened global uncertainty and regional macroeconomic vulnerabilities continue to cast a shadow over South Africa's economic growth prospects. For the agricultural sector, these pressures are increasingly evident. Local farmers are facing rising fertiliser and fuel costs, while consumers are contending with elevated food prices. Compounding these concerns are warnings from the South African Weather Service of a heightened risk of an El Niño event developing later in 2026.
Should these forecasts materialise, below-average rainfall could affect the next crop cycle and place additional strain on agricultural production. While these developments present significant challenges, agriculture remains well positioned to support economic growth and employment creation in 2026, particularly as the sector continues to recover from the drought-induced contractions experienced in 2024.
Agriculture has consistently demonstrated resilience, even during periods of subdued economic growth. As one of South Africa's most important productive sectors, it plays a critical role in supporting economic activity, safeguarding food security and creating jobs. Despite the possibility of reduced rainfall later this year, expectations remain that food production will stay relatively strong, which could help moderate food inflation over time and support household purchasing power.
To navigate the increasingly complex operating environment, however, farmers will need to strengthen business continuity strategies, reinforce balance sheets and remain agile in responding to emerging risks. These risks extend beyond macroeconomic uncertainty and geopolitical tensions to include biosecurity threats, climate volatility and persistent infrastructure challenges.
Biosecurity remains a major concern. The recent foot-and-mouth disease outbreak has raised questions about South Africa's preparedness and ability to respond effectively to agricultural threats. The sector remains largely reactive, highlighting the need for a long-term strategy that builds resilience and enables farmers and agricultural value chains to withstand future outbreaks without suffering severe financial consequences.
Climate change presents another significant challenge. Following the severe droughts of 2023 and 2024, South Africa experienced abundant rainfall during the 2025 rainy season, resulting in above-average precipitation across much of the country. While this improved agricultural conditions, it also raised concerns about the country's infrastructure readiness should unseasonal weather events and flooding become more frequent.
Government's decision to allocate more than R1 trillion towards infrastructure investment is therefore encouraging, particularly in areas such as water systems, roads and logistics networks that are critical to agricultural productivity and exports. However, while budget allocations have been made in the past, implementation and execution remain longstanding challenges. Greater certainty around project delivery, coupled with tax incentives that encourage private-sector investment in infrastructure, would significantly benefit the sector.
Cost management is another critical priority. Fuel and fertiliser costs remain among the largest input expenses for farmers, making the performance of the rand against major currencies, particularly the US dollar, an important determinant of profitability and financial sustainability. In addition, the prospect of higher interest rates, as central banks respond to inflationary pressures linked to geopolitical instability, could place further strain on farming operations. In this environment, profitability will increasingly depend on disciplined cost control and operational efficiency.
What, then, will success look like for the agricultural sector?
First, business continuity must remain a priority. Strong balance sheets, stress-tested debt structures, effective working capital management and cash flow cycles aligned to production timelines will be essential. Agriculture is characterised by long planning horizons, with crop farmers typically working on 12-month cycles and livestock producers often planning over even longer periods. Financial planning and liquidity management are therefore critical to long-term sustainability.
Second, comprehensive risk management must become embedded within agricultural businesses. Market diversification is essential not only for survival but also for growth. Farmers should integrate climate, biosecurity, market and currency risks into formal enterprise risk management frameworks. Export markets continue to offer significant opportunities, but recent geopolitical developments have demonstrated the dangers of overreliance on a single market or trade channel. Diversification remains key to building resilience.
Finally, farmers should continue strengthening operational capabilities through greater adoption of technology, data analytics and governance systems. Agriculture has historically been a highly manual and paper-based industry, but digital transformation presents significant opportunities. Better access to reliable data enables faster, more accurate decision-making, improves operational efficiency and enhances long-term competitiveness.
South Africa's agricultural sector is both unique and complex, yet it remains indispensable to economic growth, food security, export earnings and employment creation. The country possesses significant tracts of underutilised arable land that could be brought into productive use, creating additional economic value and supporting export expansion. Opportunities exist to repurpose this land towards high-demand crops, but unlocking this potential will require expanded market access, particularly in regions where high tariff barriers continue to constrain trade.
Despite the risks on the horizon, agriculture remains one of South Africa's strongest levers for inclusive growth. With effective planning, prudent risk management and supportive policy interventions, the sector can continue to play a central role in driving economic recovery and creating sustainable employment opportunities.