South Africa has to protect its food security capacity. If in the years ahead the country has to continue coping with climate change, it will be in trouble. Then the country will move from food prices based on export parity to import-parity based prices, which will bring about a difference of 75 percent. As a country South Africa will not be able to afford it.
On a special Nation in Conversation programme dedicated to the current drought and its impact on farming and society, rainfall prospects and what has to be done if the drought continues, four experts in the field of agriculture shared their thoughts and their analyses of the situation. They are Tracy Davids of 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 Francois Strydom, Managing Director of Senwes.
Nation in Conversation is hosted by Theo Vorster, CEO of Galileo Capital.
The four participants agreed that the current drought is the worst since the big drought of 1992. A study conducted by BFAP on maize as the biggest summer crop and the key staple food of low-income consumers in particular, showed that production declined by 30 percent 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 a much 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 a shortage scenario the country would go to import parity, which is more than R3 000 a ton at the current exchange rate and world price levels.
During the previous big drought in 1992, maize yields fell below one ton per hectare. A lot of progress has been made since. Production practices and technology have improved, so one would expect that the situation would be better than in 1992. If there is a normal crop in the irrigated areas and about two tons per hectare in the rest, production would be approximately seven million tons, which means that maize will have to be imported. Just over ten million tons are needed for local consumption. Considering some regional exports, it means that about 3.5 million tons will have to be imported. Yellow maize is freely available on the world market, but white maize is more scarce. It is produced mostly in Southern Africa. Zambia may have some surplus but looking at the demands of the rest of the region that is experiencing the same drought, it may not be enough. Transportation costs from Zambia are also very high. There is some substitution in the animal feed market. In years of surplus white maize is used in animal feed, but in years of deficit more yellow maize is imported to use in animal feed. Then almost all the white maize is utilised in the human food market, with yellow maize used as a substitute in the animal feed market.
During the 1991-1992 drought the state was able to activate a state guarantee to help farmers restart their businesses because no one was able to repay their loans. If the current drought persists, it will be the first time that the new democratic government will have to deal with such a situation. It will be difficult to put a comprehensive, coordinated plan in place that will accommodate new, emerging farmers, land reform beneficiaries and also commercial farmers, who are important for food security. The government will have to address rising food prices, the future of new, developing farmers, and the future of rural communities, not only in terms of food production but also water provision. 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, seeing that the country will have to import various commodities. The drought will also illustrate the importance of agriculture in the national economy. Everyone thinks that agriculture is a small industry as it makes up only three percent of GDP, but 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 three percent. Also in smaller, rural communities the impact will be hard-felt because of lower income by producers and less disposable income for communities.
In 1992 the government paid out about R2 billion in guarantees. Today, because of inflation, the equivalent amount would be about R9 billion, which the state coffers will not be able to afford. In the current situation 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 quite questionable. The question is what the role of the state in this situation should be.
Taking the NI highway as the central dividing line, the farmers to the east of the line have to plant between mid-October and mid-November to avoid the frost at the end of the season. They have planted about 95 percent of the intended volumes of maize. They can still plant a bit of soya in the east, but the optimum window for maize is over. Some farmers planted in the dust in the hope that the rain will come. It is uncertain what their yields will be, but they have started off the season on a bad note. On the western side, where farmers plant mostly white maize, they have until the end of December. Moisture levels in the soil are extremely low because of the dry season last year. This is the highest risk area in terms of rain, starting on a basis of almost no soil moisture and temperatures that are on average three to four degrees higher. This is compounded by high wind flows, scarcity of fodder and potable water, dropping dam levels, and off-flow of rainfall where any rain disappears very quickly with no down-flow into the soil. The heat has a serious impact. Last year even irrigated maize did not pollenate properly, resulting in a lower yield. This is something new with which farmers and agribusinesses will have to cope.
The drought has a serious effect on the South African economy. The price of maize has already increased by 75 percent, following the weak rand-dollar exchange rate. It affects consumer affordability in a time of slow economic activity. The consumer price index is up from 110 to 116 in October. Consumers are under severe pressure. 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 it has a marked effect.
Forty percent of farmers are already practising some kind of conservation agricultural 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. Drought tolerant 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.
“To help alleviate the plight of farmers and support the agricultural sector to maintain food security,” announces Francois Strydom, “Senwes 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. In this regard, Agri SA is acting as medium for Senwes.”
Francois says on a social level the aid fund will be used to support farmers, their families and their workers throughout the country, wherever and whoever they may be. “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.”
Francois invites anyone wishing to contribute to the drought aid fund to visit the website,
www.DroughtAidFund.co.za, for information.
Enquiries / Requests for interviews:
Ronel Botha – Brand Republic (producer)
011 465 0099 / 082 875 3914
Background note to Nation in Conversation
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.
Francois Strydom, Managing Director of Senwes, says the discussions are focused on bringing important matters in the agricultural sector to the attention of a wider audience, creating greater cohesiveness, and ensuring a solution-driven approach towards a new dispensation in agriculture. “What happens in agriculture impacts on our nation’s well-being – our ability to access quality and affordable food.”
Nation in Conversation partners: Senwes, AFGRI, Fort Knox, Hinterland, NWK, Nedbank and Monsanto.