We are in great trouble with the opening. Farmers can not produce enough food, which will lead to higher food prices, which in turn will push up inflation that will see us pay more interest for longer, said a well-known economist. Prof Jannie Rossouw, a visiting professor at Wits Business School, said she was deeply concerned about the impact of the current load shedding. “I suspect there is a plan in the government to cause a public outcry about the lack of electricity that will actually be welcomed by Karpowerships and not questioned,” he said. If Karpowerships…
We are in great trouble with the opening. Farmers can not produce enough food, which will lead to higher food prices, which in turn will push up inflation that will see us pay more interest for longer, said a well-known economist.
Prof Jannie Rossouw, a visiting professor at Wits Business School, said she was deeply concerned about the impact of the current load shedding.
“I suspect there is a plan in the government to cause a public outcry about the lack of electricity that will actually be welcomed by Karpowerships and not questioned,” he said.
If Karpowerships ends up supplying the country with enough electricity, Rossouw said South Africans should insist that the contract be issued because he suspects that someone in government will profit.
“Why do we send a delegation to Davos to the World Economic Forum if we can’t guarantee power? It doesn’t mean the president stays behind because he can’t take a decision.
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Less food, higher food prices
Bennie van Zyl, general manager of the agricultural organization TLU SA, agrees that the low production will lead to an increase in food prices which will lead to inflation.
Load shedding causes the biggest problem for farmers who use irrigation and for those who have to store their products in the cold chain.
“Agriculture is a complex and diverse industry. Farmers who use irrigation cannot interrupt the irrigation cycle because it interferes with the biological growth phase that cannot be carried out later.
A potato farmer, for example, spends R260 000 per hectare to irrigate his fields. If the irrigation cycle is interrupted, he cannot break even and if he has 7 hectares of irrigation, that means he owes R1 million and has no product.
Farmers who cannot keep cold also suffer because they have to throw away produce, such as fruit, vegetables, milk and meat that are not kept at a sufficiently cold temperature. In addition, the farmers must irrigate the fields where fodder is planted for the winter.
Van Zyl said all this means that there will not be enough food and the market forces of supply and demand will cause food prices to rise, which will lead to an increase in inflation.
“Consumer food price inflation has picked up, estimated to average around 9% in 2022 (from 6.5% in 2021), driven mainly by global agricultural commodity challenges.”
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There is no more pressing issue than the energy crisis
Wandile Sihlobo, chief economist at the Agricultural Business Chamber (Agbiz), says there is no issue more pressing than the worsening energy crisis for South African agriculture and agribusiness.
“Farmers who rely on irrigation all express concern that the constant load affects production. In important fields, about 20% of corn, 15% of soybeans, 34% of sugarcane and almost half of the wheat production is produced under irrigation. Fruits and vegetables are also heavily dependent on irrigation and thus, face similar challenges.
There are also concerns that open shedding beyond stage 2 makes operations and planning difficult in the production of red meat, poultry, pork, wool and milk, as these industries all require continuous power for their activities.
“Agribusiness faces similar challenges in various downstream processing activities, such as milling, baking, abattoir, wine processing, packaging and animal vaccine production. Agribusiness exports, especially those with products that are prone to delays, such as fruits, red meat and wine, also worried about port activity, which fortunately was not affected.
Sihlobo said the financial impact on farmers and agribusiness or food security was not yet clear and would be difficult to measure. There are also concerns about food security because the effect of reducing the load may be seen in the volume of products that will be harvested or produced later in the coming months due to the delay in the agricultural production stage.
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Less food production, less employment
He also pointed out that jobs will be affected if business is severely affected.
“There is a real danger that some farmers could lose their crops, which would affect the financial future of their farms and could have a negative impact on agricultural financiers.”
Although TLU and other organizations have asked the government not to release the burden, Sihlobo said that the total exemption of the sector is almost impossible because many food processing companies and farms are technically linked to other localities and cannot be easily isolated from the burden.
“With Eskom’s challenges looming for some time, reducing reliance on Eskom may be a strategic business survival consideration for many businesses, albeit at a high cost. Investment in alternative resources should be prioritized if financial resources allow.
While the financial commitment associated with this may be considerable and businesses may encounter regulatory hurdles, said the department of agriculture, land reform and rural development should help overcome the available resources and means.
“One step the department can take is to speed up the application process under the Subdivision of Agricultural Land Act (SALA) and the Spatial Planning and Land Use Management Act (SPLUMA) to allow the use of land for energy production.”
The government can also consider subsidies for solar panels and battery storage on top of relaxing this requirement to enable farmers to get out of the grid and generate enough power for their system, he said.