The worst drought in over a hundred years in South Africa is having disastrous effects: crops have been devastated, food prices are rising, investors are increasingly losing faith in President Jacob Zuman and it is even contributing to racial tensions.
The rand has fallen sharply and analysts say a credit ratings downgrade to "junk" status is possible.
Agriculture only contributes 2.2 percent to economic output, but a major farming contraction could turn slow growth into recession. This could push up the jobless rate from around 25 percent and widen the gap between rich and poor, factors already contributing to political tensions and exposing the racial rifts that Nelson Mandela tried to heal after years of apartheid.
Sim Tshabalala, the head of Standard Bank, one of South Africa's largest banks, said on Wednesday that racism and inequality were weighing on the economy.
Finance Minister Pravin Gordhan said on Thursday the economy was not heading for recession. The government is forecasting growth of 1.5 percent in 2016 but recent indicators are downbeat.
The rand, also hit by the slump in global commodity prices, slid 25 percent in 2015 and last week briefly plunged 10 percent to a record low of 17.995 to the dollar. This could push up inflation, currently 4.8 percent year-on-year, particularly if food is imported to compensate for the loss of domestic supply.
Agriculture, a particularly volatile sector, could make the difference. A 20 percent contraction in farming output, for example, could shave 0.4 percent off overall growth, analysts say. It shrank 12.6 percent in Q3 after declining 19.7 and 18 percent in the previous two periods.
The central bank has repeatedly warned about drought and food prices and is expected to raise interest rates at the end of the month to curb inflation pressures.
