Earlier this week, Statistics South Africa indicated that the country’s official unemployment rate reached 26.7% in the first quarter of 2016, rising from 24.5% in the previous quarter. This increase in unemployment was on the back of lower production in some sectors of the economy, as weak economic growth continues to negatively affect business confidence.

The total employment dropped by 355 thousand to 15.7 million, which is a 2% quarter-on-quarter contraction. On a quarterly basis, job creation contracted in almost all the sectors of the economy, with the exception of the agricultural sector, as well as community and social services sector.

The jobs gains in agricultural sector were, to some extent, a surprise given that the sector is currently battling the adverse impacts of an El Nino induced drought. In the first quarter of 2016, the agricultural sector employed 876 000 people, up by 2% from the previous quarter, but 2% lower when compared to the same period last year. It is important however to note that the primary agriculture constitutes 6% of employment in South Africa, which is well above sectors such as mining, and almost at par with the transport industry (figure 1).

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Figure 1: Employment in South Africa
Source: Statistics South Africa, Agbiz Research

A close observation of the agricultural sector reveals that most sub-sectors performed well on a quarterly basis, despite the negative effects of the ongoing drought. The organic fertilizer industry, animal husbandry, game industry and logging services sub-sectors recorded notable gains, which were however coming off a low base. Meanwhile, the aquaculture industry and forestry industry showed some contraction (figure 2).

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Figure 2: Quarter-on-quarter percentage employment in South Africa’s agricultural sector
Source: Statistics South Africa, Agbiz Research

When comparing the first quarter of 2015 to the first quarter of 2016, it is clear that some sub-sectors such as crops, logging and related services and livestock (farming of animals) showed positive jobs gains. This could be attributed to seasonal employment increases during the harvest period in the horticulture industry, increased cutting trees on the back of drier conditions in the logging and related services side, as well as increased slaughtering in the livestock sector, as the higher feed prices – induced by drought conditions – continue to put the sub-sector under increased pressure (figure 3).

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Figure 3: Employment in South Africa’s agricultural sector (‘000)
Source: Statistics South Africa, Agbiz Research

Outlook

The outlook for the South African jobs market remains poor as the domestic economy continues to offer less confidence to business. The prospects of a lower GDP growth, projected at 0.7% this year, will keep the labour market under sustained pressure.

The agricultural sector is likely to register contraction in the next quarter, due to reduced activity in most crop producing areas, as an aftershock of the drought. South Africa’s 2016 total summer crops production is estimated at 8.6 million tons, down from 11.9 million tons in the previous year, and well below the 2014 volume of 17.5 million tons.[1]

[1] Summer crops: maize, sunflower-seed, soybeans, groundnuts, sorghum and dry beans.