Given this and the likelihood of interest rates hike in the months to come, the question is what will the downgrading mean for the South African agricultural sector which has been and remains a significant contributor to the country’s employment creation? Farmers that are export oriented are likely to benefit more from the depreciation of the local currency, provided there is an increase demand for their products from foreign buyers.
Provided that South African agricultural export producers remain competitive in the international markets, a weaker rand can gain them a significant market share as their products will be view as cheaper relative to the products priced in stronger currencies. The resulting increases in sales of agricultural products abroad can improve South Africa’s agricultural economy and job creation in the sector.
The depreciation of the rand may lead to higher cost of imports such as fertiliser and other agricultural inputs. Due to this inflation is likely to increases which will have an impact on food prices. Interest rates as mention earlier also likely to go up in the next few months – this increase the cost of debt for agricultural investors, both at farm level and along the rest of the agricultural value chain.
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