Quote: Des Lesele, senior manager for agribusiness client value propositions at Nedbank Commercial Banking

The Q2 2025 South African Reserve Bank (SARB) Quarterly Bulletin offers a largely positive view of South Africa’s agricultural sector and its contribution to economic performance. Agricultural exports grew for the third consecutive quarter, driven by strong demand for fruit, particularly grapes, demonstrating the sector’s competitiveness in international markets. Output was further supported by favourable rainfall, which led to higher production in both horticultural and animal products. At the same time, a decline in agricultural imports points to greater reliance on locally produced goods, which is encouraging for domestic producers and the broader agricultural value chain.

From a financing perspective, the SARB’s recent 25 basis point interest rate cut brings welcome relief. Lower borrowing costs are expected to stimulate investment in farm operations, equipment, and technology, enhancing productivity and long-term sustainability for producers. However, this monetary easing comes alongside rising cost pressures. The Producer Price Index (PPI), which reflects input cost trends, rose from 102.70 in April to 103.20 in May 2025, marking a monthly increase of 0.5 index points. This upward trend indicates growing input and operational expenses particularly in transportation and equipment, just as the fuel levy increases take effect on 04 June 2025. Petrol and diesel levies are up by 16 and 15 cents per litre respectively, further adding to farmers’ financial strain.

The latest Agbiz/IDC Agribusiness Confidence Index also reflects a tempered outlook, declining by 5 points to 65 in Q2 2025. While still comfortably above the neutral 50-point level signalling overall optimism, the dip reflects mounting concerns over global trade disruptions, geopolitical tensions, and the ongoing threat of domestic animal diseases.

As lenders in the agricultural sector, we urge farmers to take a balanced approach leveraging the benefits of improved market conditions and lower interest rates, while proactively managing the challenges posed by rising costs and market uncertainties. Financial resilience and smart planning will be key to sustaining momentum in the months ahead.