Johannesburg - A devastating drought in key agricultural provinces of South Africa has left farms in ruin and affected crop production leading to fears of an imminent hike in food prices and inflation.
The drought, the worst in more than 20 years, has pushed most productive farms in Mpumalanga, Free State and North West into despair and forced farmers there to cut back on jobs.
Industry observers said the country’s maize belt had been left in tatters and South Africa was now importing maize from overseas.
The observers claimed that the price of staple foods such as meat, maize, bread and cereal would climb to record highs in the months to come.
Grain SA said the country had been forced to import maize from other countries to meet domestic consumption.
Just last week, more than 750 000 tons of yellow maize were imported from Argentina ,while 3 100 tons of white maize were brought in from Zambia.
Poor hit hardest
“When you import from outside you take money out of the country and that means capital flight for the economy, so we are dealing with a double-edged sword that would hit both the industry and the country very hard,” Grain SA economist Wandile Sihlobo said.
“And the picture going forward does not look good because these costs would be passed on to the consumer and the effect will show when the consumer price index is released after the harvest and sadly it is the poorest of the poor who buy maize, bread and cereal as a staple food. This would stretch their pockets and lead to more people falling into the poverty bracket, and because this is something that is beyond anybody’s control there is very little that can be done to offset the impact.”
The devastation, particularly in the three provinces, has led to a huge drop in production, forcing some farmers to put their land up for sale amid rising fears that they will not be able to meet their debt obligations.
Lobby group AgriSA told Business Report that crop production and livestock farming was expected to decline by more than 30 percent, particularly in the Free State and the North West.
Thabi Nkosi, also an economist at AgriSA, said the drop would cost farmers at least R10 billion this year and would lead to massive job cuts as farmers feared that the input cost would surpass their profit.
Nkosi said most farmers were worried about the sustainability of the industry given the drought.
“A lot of farmers are worried about the profitability of their businesses and that is why we see some of them putting their farms up for sale because they are not even sure whether they would be able to service their debt,” said Nkosi.
“Some of them are already talking insolvency because no one wants to invest in a situation that remains very bleak in the immediate future, so farmers are holding back and because of that they will not be looking to employing people, instead they will retrench to lower their costs.”
Agriculture in South Africa employs more than 891 000 people and industry experts believe that their job security is under threat.
Food inflation
At its peak, South Africa produced more maize than it consumed and was able to export the rest, earning more than R6.5 billion in revenue.
The situation has changed this year, leading to nearly 30 percent of the country’s annual demand being imported.
Last month the UN food and nutrition working group described the current drought as the worst since 1992 and warned that the decline in local maize production would result in a 6.4 percent increase in food prices.
Economist Azar Jammine said the devastation on consumers would be severe given that maize was a key ingredient in the agricultural value chain, adding that consumers should expect an increase in the prices of meat, maize, bread and cereal.
“Maize works from providing staple food for millions of South Africans but it is also used as a fodder for animal feed, so its increase would naturally lead to an increase in the price of meat as well. We will only have to look at the inflation figures after this year’s harvest,” Jammine said.
BUSINESS REPORT