Climatic Conditions, Macroeconomic and Financial Dynamics, and Agricultural Performance in South Africa: Implications for Sustainable Development from an ARDL Framework

Climate conditions affect the macroeconomic and financial environment, which in turn affects sustainable agricultural development in South Africa. In this study, the short- and long-run relationships between agricultural performance, temperature, economic activity, trade openness, Consumer Price Index and financial-sector development are investigated using annual South African time-series data for the period 1972 to 2022 in an ARDL (Autoregressive Distributed Lag) model. The ARDL bounds test confirms a long-run equilibrium relationship among the variables included in the final specification. Economic activity exhibits a negative and statistically significant long-run association with agricultural performance (β = −0.7985, p = 0.0009). Temperature also has a negative long-run coefficient (β = –0.1119), but this is not statistically significant at conventional levels (p = 0.1212). In addition, financial-sector development has a negative, but marginally significant association with agricultural performance (β = −0.0032, p = 0.0589), whereas the natural logarithm of the Consumer Price Index (β = 0.3994, p = 0.0537) and trade openness (β = 0.0080, p = 0.0873) have positive, but marginally significant associations. The sign of the error correction coefficient is negative and highly significant (−0.4742, p < 0.001), suggesting that around 47.4% of short-run disequilibria will be resolved over a period of a year. Overall, the results indicate that agricultural performance is linked with climatic, macroeconomic, trade, and financial conditions in South Africa. However, the strength and statistical significance of these relationships vary across variables. The results therefore provide evidence relevant to sustainable agricultural development while supporting careful consideration of climate adaptation, macroeconomic stability, productive finance, and market integration.