Farmers seek R3bn in drought emergency
Organised agriculture will ask the government for R3bn in emergency relief after a multi-year drought left five of SA's nine provinces critically parched and two others extremely vulnerable.
As many as 31,000 jobs have been lost in the affected areas since January last year, AgriSA said on Friday in a comprehensive survey of the sector. Seven out of every 10 farmers were struggling financially and half indicated that they could be forced to retrench workers because of the drought, AgriSA said.
Agriculture accounts for only about 2% of the economy, but punches above its weight in terms of jobs and its role in food security.
A widespread drought that started in 2016 has hit maize producers, fruit growers and cattle farmers.
"We want financial relief for the agricultural sector in the form of bridging finance for some farmers, especially those in animal production, horticulture and crop production" said AgriSA executive director Omri van Zyl. Some needed cash to finance the transport of animal feed to their livestock.
The Eastern Cape, Free State, Northern Cape, Western Cape and North West are classified "critical". KwaZulu-Natal and Limpopo are at risk if future rainfall disappoints.
The provincial departments of agriculture in the Northern Cape and Western Cape have provided some relief, but more was needed, said Van Zyl. His organisation is approaching the other provinces and the national government for help.
Revenue of R7bn was lost by the sector last year and to tide farmers over, Van Zyl estimated R3bn was needed in financial support - about R1bn of it in cash - to provide assistance where needed most.
Even then sufficient moisture is needed between now and April in the summer rainfall areas and between April and September in the winter rainfall region.
Meetings have been scheduled with the departments of agriculture andco-operative government &traditional affairs (Cogta). The national disaster management centre resides under Cogta, so the department is an important port of call for the sector as it tries to stem job losses and insolvencies.
The plan is to secure money from the fiscus's contingency reserve. The 2018 budget review put the reserve in 2018/2019 at R8bn, "to allow for uncertainties associated with the economic outlook, the finances of state-owned companies and other spending pressures".
Citadel economist Maarten Ackerman said: "The [job] absorption rate of agriculture is much higher than other sectors," and it was an especially important employer in rural communities.
After the devastating drought in 2016, agriculture rebounded strongly in 2017 as the biggest contributor to growth, he said. "With other sectors, such as mining and manufacturing, not really able to grow without further investment, agriculture is an important cylinder in the economy."
Farmers of long-term crops such as fruit, tropical fruit and grapes were now desperately in need of bridging finance because their recovery phase after a drought could be four to five years. "That form of soft capital is vitally important," said Van Zyl.
Many food producers are losing hope. AgriSA's poll also reveals a psychological toll. "More than 50% of respondents also indicated some form of depression, anxiety or other behavioural health issues experienced by members," said the survey.
The drought in the Western Cape also affected JSE-listed food producers. Tiger Brands flagged it as having a significant impact on the quality and availability of important raw materials such as fruit and wheat.
Lower maize supply is bound to influence prices, which will feed into the entire value chain. Millions of South Africans will feel the hit directly as they rely on white maize as a staple. But more broadly, maize is also used as stock feed and higher prices could also cause meat prices to spike.
In the short term, meat could become cheaper as farmers flood the market with animals they cannot afford to feed, said Van Zyl. But as soon as six months down the line, meat could become much more expensive.
With consumers already browbeaten by a weak economy and high unemployment, this does not bode well for future growth prospects. Trading updates by Massmart, Shoprite and food producer AVI this week revealed how consumer thrift was hitting company results.