THE HIGH COST OF DROUGHT

SA’s worst wa­ter short­ages in 23 years have caused a de­cline in farm­ing out­put that will lower its GDP and cause food-price in­creases

CityPress - - Front Page - SIZWE SAMA YENDE and STAFF RE­PORTER sizwe.yende@city­press.co.za

The drought dev­as­tat­ing parts of South Africa will cause the coun­try’s farm­ers to lose up to R10 bil­lion this year. Worst af­fected are KwaZulu-Natal, the Free State, Lim­popo, North West and the North­ern Cape, where farm­ers grow­ing white maize, yel­low maize, soya beans and sun­flow­ers have in­curred ma­jor losses.

A re­port re­leased by the UN’s food and nutri­tion work­ing group last month found this drought – the coun­try’s worst since 1992 – had caused a de­cline in maize pro­duc­tion that had al­ready led to an in­crease in food prices of 6.4%.

“South Africa’s first maize pro­duc­tion forecast es­ti­mates the 2015 harvest to be the worst in eight years,” it found.

Agri­cul­tural busi­ness cham­ber Ag­biz CEO John Pur­chase said the cost of the drought was dif­fi­culty to quan­tify.

“Just the maize crop is down from 14.25 mil­lion tons [worth R25.4 bil­lion] last year to an es­ti­mated 9.84 mil­lion tons this year. This alone trans­lates to a loss in in­come of close to R10 bil­lion. The to­tal loss amounts to [sev­eral] bil­lions [more],” he said.

Grain SA chief ex­ec­u­tive Jan­nie de Vil­liers warned that the coun­try would have barely enough white maize for its own con­sump­tion, and would need to im­port about 700 000 tons of yel­low maize to feed live­stock, which would cost farm­ers R1.96 bil­lion.

De Vil­liers said: “From May this year to Jan­uary next year, we can ex­pect an ad­di­tional in­crease of be­tween 15% and 20% in the maize meal price,” he said.

Fig­ures from the Stud­ies in Poverty and In­equal­ity In­sti­tute (SPII) in­di­cate the ef­fect could be even worse.

Re­searchers work­ing on the SPII Ba­sic Needs Bas­ket Pro­ject, which mon­i­tors the prices or cost of 39 goods and ser­vices each month coun­try­wide, have found that the price of maize meal has shot up by 37% in ur­ban ar­eas in the Free State, 34% in North West and 29% in Gaut­eng. In ru­ral ar­eas, prices in­creased by 39% in the Free State and 25% in Gaut­eng.

The price of samp, SPII re­searchers found, in­creased by 41% and 38% in the Free State and North West’s ur­ban ar­eas, re­spec­tively.

Mandla Nkomo, oper­a­tions di­rec­tor at Tech­noServe, which as­sists emerg­ing farm­ers, said the drought’s im­pact on its clients was dev­as­tat­ing.

“In ir­ri­ga­tion ar­eas, farm­ers’ wa­ter al­lo­ca­tions have been cut back, which has had a di­rect im­pact on the in­comes of those farm­ers,” he said.

“In North West, KwaZulu-Natal and Mpumalanga, which are rain-fed ar­eas, there has been a very heavy ef­fect on the maize crop. I know one farmer who has had to write off his en­tire crop. Most grains have re­ally taken a knock. And for stock farm­ers, the qual­ity of the grain feed has not been great ei­ther.

“These emerg­ing farm­ers are vul­ner­a­ble any­way. They have no in­sur­ance, sav­ings or any­thing like that, so they will take the knock full on. Ba­si­cally, we have a 2015/16 sea­son com­ing up for which farm­ers don’t have the re­sources to re­boot them­selves.”

Nkomo said that in the Nwanedi ir­ri­ga­tion area in Lim­popo, about 1 000 farm­ers had been forced to “re­duce pro­duc­tion by 50% be­cause there is not enough wa­ter”.

Large com­pa­nies Tiger Brands and Rhodes rely on the area for toma­toes, which will now have to be im­ported.

“We are ex­pect­ing a real im­pact on food prices be­tween Au­gust and Novem­ber this year,” said Nkomo.

Pur­chase said the drought – which had been hit­ting North West, parts of the Free State and the North­ern Cape for the past three years – had al­ready di­min­ished the coun­try’s GDP. “Given its sever­ity and pro­longed na­ture, the eco­nomic ef­fect will be, and is al­ready, se­vere. The latest poor and dis­ap­point­ing GDP fig­ures for agri­cul­ture – 16.6% neg­a­tive growth in quar­ter 1 – are in­dica­tive of the drought im­pact,” he said. “Ag­biz ex­pects quar­ters 2 and 3 GDP fig­ures to look even worse, as the full ex­tent of the drought is only then re­flected in the GDP fig­ures.”

Emerg­ing farm­ers, said Pur­chase, would be hard­est hit be­cause they did not have suf­fi­ciently strong bal­ance sheets to ab­sorb losses.

“They can­not re­pay their pro­duc­tion loans, and, worst of all, are go­ing to bat­tle to se­cure fi­nanc­ing for the new sea­son as their cred­it­wor­thi­ness has been se­verely af­fected. We do not have a fig­ure, but many farm­ers are at risk [of los­ing their farms],” he said.

Pur­chase said farm­ers would need to make ar­range­ments to carry over their debts, or many farm­ing en­ter­prises would be­come in­sol­vent.

Absa’s agribusi­ness head, Ernst Janovsky, said the ex­tent of the prob­lem would only be seen next year.

“Next year is the one to watch strin­gently. When farm­ers have di­ver­sity, they don’t have trou­ble,” he said. “We are, how­ever, com­fort­able, be­cause it is a small area that is af­fected when we look at our books.”

PHOTOS: MUNTU VI­LAKAZI

SCORCHED Mos­alashup­ing Kgomo at his farm near De­lareyville, North West. He is among the farm­ers in the area who have been hard hit by the cur­rent drought

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