As in the swing of a pendulum, the maize situation in South Africa is moving from a crisis surplus to a crisis shortage, with no cozy stopovers.
Yesterday, Astral Foods, the listed poultry and animal feed group, warned that the price of chicken would increase by 20 percent in the next year because of the shortage of maize.
In essence, poultry producers like Astral, who rely on grain for the feed component of their business, will have to pass the increase on and the consumer is the last man standing.
Astral says it expects poultry prices to increase by 20 percent next year, a situation that could have been avoided had there been an integrated plan in place to effectively use the maize surplus that was available in the beginning of the year.
According to industry insiders, there will be a shortfall of the commodity in the next financial year, which will hurt companies such as Astral that depend on it for the chicken feed component of their business
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Chris Schutte, the chief executive of Astral Foods, said there should be better integrated planning measures to ensure food security.
It’s simple, the country can ill afford to export key commodities and then run out of stock in the process.
As things stand, South Africa cannot import from some countries, including Brazil and Argentina, due to differences in policies on genetically modified organisms between the countries. Instead, grain will have to be sought from Black Sea areas. The country is now in a position where maize must be imported at about R2 800 a ton after it was exported at R1 400 a ton.
The underlying theme facing agricultural issues in the country is that many relevant stakeholders are clearly lacking when it comes to planning for the future.
Instead of upholding ideals and values of a free market system that is failing, as evidenced by the euro zone crisis, US debt crisis, global financial crisis and even the so-called Arab Spring, is it not time to go back to the drawing board and come up with ways and means that will ensure a sustainable and efficient agricultural sector?
It is certain that we can do better than to empty silos to the first buyer that comes along and then have to chase up more than 200 000 tons of grain at more than double the price we received for our stocks. page 22
Zimbabwe
Dollarisation, which was forced on a reluctant President Robert Mugabe nearly three years ago, has proved a tonic for Zimbabwe. With the worthless domestic currency out of the way, companies are able to resume doing business.
A study of corporate results by Imara Asset Management Zimbabwe shows dollarisation is still driving turnover growth “across a wide range of Zimbabwe businesses”.
Dollarisation took place officially early in 2009 and John Legat, the head of Imara’s asset management division, says there is little sign of a slowdown in corporate turnover growth.
However, rising costs present a challenge and, as turnover growth slows next year, costs must stabilise or grow more slowly if companies are to continue to benefit.
Legat estimates real growth in gross domestic product this year will be more than 9 percent and says company reports for the first half of the year showed most listed companies in building materials, property, tyres, retail and agriculture experienced turnover growth ranging from 25 percent to nearly 90 percent .
“In almost all cases, growth is volume driven and not price driven, since dollarisation keeps competition high and prices under pressure.”
Consumption numbers suggested the informal sector was also booming.
But Legat says net profit growth rarely matches or exceeds turnover growth. “Where it has, it is usually following a corporate restructuring where the costs have been taken in the previous year, allowing margins to rise and profits to grow on a more efficient cost base. Companies that have failed to reorganise often show poor results and negative cash flow.”
Such firms had “burdened their balance sheets with expensive debt in the hopes of growing themselves out of difficulty. Where managements have been aggressive (by) improving efficiencies, selling non-core activities and generally focusing on cost control, profit and cash flow growth has been substantial.”
Economy
The more documents that are released on ways to turn South Africa into an African lion economy, the more one gets the sense that there is no great recipe available to do the trick.
When Economic Development Minister Ebrahim Patel released the New Growth Path strategy late last year, the framework document ran to many pages.
Take for example its “ambitious programme” to create jobs.
It referred to the need for a reindustrialisation in the South African economy based on improving manufacturing performance through innovation, strong skills development and reduced input costs. The document targeted “the doubling of South Africa’s research and development investment to 2 percent of gross domestic product by 2018”.
Helpfully, it also suggested that jobs in agriculture would be created “through interventions to improve efficiency by addressing the high costs of fertiliser and other inputs and by upscaling processing and export marketing”.
More livelihoods could also be created through support for smallholders, including access to seeds, silos, tractors, finance, marketing, water, extension services and other key inputs, Patel’s plan said.
In addition, “the government will explore ways to improve working and living conditions for the country’s 660 000 farmworkers”. The New Growth Path “also commits the government to unblocking stalled land transfers which constrain new investment”.
Trevor Manuel, the Planning Minister in the Presidency, in his “diagnostic” document in June, said successful countries had what was called “a future orientation”.
Their policy bias was to take decisions that led to long-term benefits as opposed to short-run solutions that could have negative effects later on.
Such countries generally preferred investment over consumption, had high savings rates, sound fiscal policy, high levels of fixed investment, a high degree of policy certainty and clear rules of engagement for the private sector.
“A clear and predictable policy environment enables businesses to take a longer-term perspective on growth and development. Countries with a future orientation generally spend more on education and value it more in communities and households,” Manuel said then.
That was starting to sound visionary, but the Vision 2030 document he released on Friday says much the same thing.
Edited by Banele Ginindza. With contributions by Ayanda Mdluli, Ethel Hazelhurst and Donwald Pressly.