Economic Impact of the Drought on the Western Cape Agricultural Sector

When it comes to agriculture, the Western Cape is essential – not only because of its production of fine wines, but also for its contribution to South Africa’s agricultural labour market and the broader economy.

The province is a leading employer in primary agriculture, commanding a share of 23 percent of the country’s total agricultural labour force in the fourth quarter of 2017. In addition, the province is the second-largest contributor to the agricultural economy in terms of gross domestic product, with a contribution of 22 percent.

It is thus clear that when the province’s agriculture encounters headwinds, a lot will be at stake; the current unrelenting drought is no exception. The most recent Drought Policy Brief by fellow agricultural economists Louw Pienaar and Johann Boonzaaier puts the cost of the drought to the Western Cape agricultural economy at roughly R5.9 billion in gross value added. In volumes terms, the average agricultural production could decline by roughly 20%, and this is widespread across all crops as illustrated in the chart (featured image).

From an employment point of view, around 30 000 job-losses are expected due to the drought. This does not include the spill-over impact in the next few years as the sector recovers from the drought. Even if the province receives rainfall that is in line with average rainfall patterns, it could take more than two years for dam levels to replenish sufficiently.

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Author: Wandile Sihlobo

Wandile Sihlobo is an agricultural economist and head of agribusiness research at the Agricultural Business Chamber (Agbiz) in South Africa. He is a columnist for Business Day and Farmers Weekly magazine. Sihlobo is a member of the South African Agricultural Economics Association. He has previously served as an economist at Grain South Africa. He holds a Master of Science degree in Agricultural Economics from Stellenbosch University.

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