New Fund to Help SA’s Drought-Stricken Farmers
Senwes, one of SA’s leading agri-business companies, has taken the initiative to establish a drought aid fund in collaboration with organised agriculture.
“The aim is to mobilise funds from outside the farming sector as well and to help alleviate the plight of farmers and support the agricultural sector to maintain food security,” says Francois Strydom, MD of Senwes.”
Strydom says on a social level the aid fund will be used to support farmers, their families and their workers throughout the country. “Scarcity of bulk feed for livestock is also a great concern,” he says.
Another initiative of Senwes is to help make fodder available, coordinating its movement from areas of abundance to areas of shortage. “On the commercial front, farmers will also be supported by way of subsidies on specific products that are mainly centred on the livestock sector.”
From export to import parity-based pricing
The country will be required to move from food prices placed on export parity, to import parity based prices, which could bring about a 75% difference in food supplies. Unless this approach is implemented, South Africa will plummet under the pressure of trying to secure its food capacity.
On a special Nation in Conversation programme dedicated to the current drought and its impact on farming, society, rainfall prospects and how to overcome drought – experts in the field of agriculture, Tracy Davids from the Bureau for Food and Agricultural Policy (BFAP); Prof Johann Kirsten, head of the Department of Agricultural Economics, Extension and Rural Development at Pretoria University; Jannie de Villiers, CEO of Grain SA, and Strydom – shared their thoughts and analyses of the situation.
The four participants agreed that the current situation is the worst of its kind, since the drought of 1992.
A study conducted by BFAP on maize as the biggest summer crop and the staple food of low-income consumers in particular, showed that production declined by 30% in 2015 from a record harvest in 2014, dropping to below ten million tons for the first time in eight years.
“If the drought persists, South Africa will be in an even more difficult position than the previous year, due to lower carry-over stock levels. Maize is a product that is normally exported. At export parity level the price is around R2 000 a ton. In the case of a shortage, the country will turn to import parity, which is more than R3 000 a ton at the current exchange rate.”
The drought has many political, economic and social implications.
“It will have a serious impact on economic growth but also on the balance of payments, as the country will have to import various commodities. The drought will also illustrate the importance of agriculture in the national economy. Agriculture is by no means a small industry as it makes up 3% of the GDP.
“If the drought materialises in the form as predicted, the impact on the national economy will be clear to see because the multiplier impact of agriculture is much more than 3%. Also in smaller, rural communities the impact will be hard-felt because of lower income by producers and less disposable income for communities,” the discussions revealed.
In 1992, the government paid out R2bn in guarantees. Today, because of inflation, the equivalent amount would be around R9bn, which the state will not be able to finance.
“Currently, farmers have just about exhausted all their risk mitigation measures such as crop insurance. There is also the impact on debt in the agricultural businesses and commercial banks. Whether they will be able to provide new loans to farmers to restart their businesses is highly unlikely. The question is what the role of the state in this situation should be,” the experts indicated.
Impacts on the consumer
The drought has a serious effect on the South African economy. The price of maize has already increased by 75%, following the weak rand-dollar exchange rate, which affects consumer affordability in a time of slow economic activity.
“The consumer price index is up from 110 to 116 in October, putting consumers under severe pressure as they look for the cheapest possible maize meal to feed their families. The farming sector bears the brunt of the current slack economic conditions, especially in rural South Africa where it has a marked effect.”
Up to 40% of farmers are already practising some form of conservation towards agriculture by preserving moisture levels with no tilling, and using varieties that are more drought tolerant.
“The government has taken some very positive steps, but drought tolerant varieties will only be available in 2018 or 2019. There is also a misconception about drought tolerance, being that those varieties might survive for ten to fourteen days longer without rain, but no plant can survive without water.
“Agribusinesses have to be very cautious not to respond with knee-jerk reactions. Government is stepping in, but at a much more modest level than in 1992,” the discussions in Nation in Conversation pointed out,
The Nation in Conversation concept was initiated by Senwes three years ago. Following the success of a series of discussion forums at the annual Nampo Harvest Day agricultural trade exhibition, Nation in Conversation has now been extended into a thirteen-part dialogue series broadcast on Business Day Television, Soweto TV and KykNet from September to December 2015.