Quantifying the economic cost of livestock disease outbreaks
JOHANNESBURG - The world is reeling from the effects of the Covid-19 pandemic and South Africa is no exception.
While the coronavirus pandemic is primarily a human health crisis it has far reaching deleterious economic implications. The global economy is on the cusp of a slump with several major economics already on the verge of a recession.
South Africa’s economic performance has also been lacklustre, to say the least, for a while now and has recently experienced a recession, albeit a technical one, in the last quarter.
The current quagmire presented by a combination of the Covid-19 pandemic and the recent downgrade of the country by Moody to junk status is adding salt to injury.
Despite its limited direct contribution to the country’s gross domestic product, the South African agriculture sector has been the doyen of the economy and has saved South Africa from the blushes by pulling up the economy thus averting a recession. Thus, it is important to take good care of the sector.
Livestock production contributes significantly to the world economy and South Africa is no different.
However, animal diseases and food safety are still major constraints on livestock sector productivity, economic growth, employment creation, reduction of poverty, and food security.
One of the most important trans-boundary animal diseases for South Africa is the Foot and Mouth Disease (FMD). FMD is a highly contagious viral disease affecting cloven-hoofed animals, including cattle, sheep, pigs and game that has bedevilled the country for a long time now.
South Africa has experienced recent FMD outbreaks and every time there is an outbreak the country’s animal disease status changes. Because of the outbreaks in 2019 and early 2020, South Africa lost its FMD-free status for a while and thus could not export meat and related animal products.
This export ban on livestock (cloven-hoofed) product resulted in substantial financial losses to the sector and had telling detrimental effects on the country’s economy.
A country’s animal disease status changes over time as the outbreaks of notifiable diseases occur and how the country deals with such outbreak of notifiable diseases as they occur is critical.
Thus, it is important to quantify losses occurring and through assuming direct costs as the sum of losses from the first confirmation of the FMD outbreak until freedom is declared. It is against this background that this article sought to quantify the economic costs of the recent FMD outbreaks on the South African economy.
South Africa has had seven FMD outbreaks in the period stated above. The first outbreak was in March 2017, followed by another one in August of the same year. In 2018, there were also two outbreaks in May and August 2019 experienced three outbreaks that led to an export ban; the next one was in September; and the last one was in December, which precipitated a ban on livestock auctions.
This ban was only lifted in February 2020.
Monthly exports of livestock products declined from R36 million a month to R13 m a month between January and June 2019. The loss incurred through animal exports was 28 percent, equivalent to a R44m loss and the loss in the animal auction sector was R50.7m a month.
The sheep farming sector suffered a 25 percent loss, equivalent to R1.277 billion, between January and June 2019 through export ban on wool and skins.
In 2018, the export of wool and skins generated R804.2m a month resulting in a total of R9.65bn that year. In 2019, the industry could only muster R680.8 m through export of wool and skins, resulting in a total of R8.17bn for the year. Over and above the direct cost, there is a sunk cost of regaining market share.
Because of the FMD outbreak, between January and June 2019, the export loss is estimated at 16 percent, an equivalent of R167m amonth. To put this loss into context, in 2016 average monthly exports of meat were R205m and declined to R182mn in 2019, implying an 11.2 percent long-term loss of market share. The biggest loss in meat export was in the beef sector and the January 2019 FMD outbreak had the largest on meat exports.
Animal health and veterinary service activities are a global public good. It is the responsibility of governments to maintain animal health systems, including networks for the surveillance and control of animal diseases to ensure early detection of suspected animal disease outbreaks, a rapid response and, where possible and desirable, eradication of animal disease outbreaks at source.
Given that the establishment of animal health systems is a core responsibility of the State, it thus requires the use of public funds, although it does not preclude private public partnerships and strategies for ensuring complementarity between the partners involved.
It is encouraging to note that the South African government takes this responsibility seriously and is willing to put resources towards meeting the obligation of ensuring a proper functioning animal health system, thereby ensuring the economic viability of the livestock sector and food safety standards that are beyond reproach.
To this end, the South African government has availed funding to the Agricultural Research Council (ARC) to establish an excellent FMD vaccine factory to ensure the availability of suitable vaccine when required thus capacitating the sector to control FMD outbreaks. As a parting shot, the public and the livestock production sector at large, have a responsibility to adhere to all regulations aimed at curbing the spread of FMD and prevent future outbreaks.
Dr Thulasizwe Mkhabela is an agricultural economist and is currently the Group Executive: Impact & Partnerships at the Agricultural Research Council; [email protected]