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The situation is so serious that South Africa may soon have to import all produce
The situation is so serious that South Africa may soon have to import all produce

Power prices threaten SA food

ECONOMIC NEWS

Fin24 - Jun 24th 2011, 07:52

Johannesburg - Rising electricity costs could spell the end of irrigation farming in South Africa.
 

Agricultural experts say it is becoming impossible for these farmers to operate profitably.

Dr Theo de Jager, deputy chief executive of Agri SA, said the situation was progressively deteriorating because electricity prices would rise sharply for years to come.

De Jager said 25% of South Africa’s staple foodstuffs – wheat and maize – is being produced under irrigation.

This may not sound much, but it is this 25% upon which the country relies. Production of the other 75% depends on whether or not it rains.

De Jager said if fewer farmers irrigate and a drought should occur, South Africa’s food security could be at risk. Farmers are struggling with more than just electricity prices, he said. The high cost of diesel is taking just as heavy a toll.

De Jager said the situation is so serious that South Africa may soon have to import all produce currently being grown using irrigation, as that would be cheaper.

Eskom spokesperson Hillary Joffe said the utility was aware of farmers’ concern over the cost of electricity, but it was so far unaware of specific cases where farmers had started switching off irrigation pumps.

In the 2010/11 financial year farmers had to pay 18.7% more for power. This increase was less than the 24.8% average price increase that the National Energy Regulator (Nersa) had approved for the period.

Joffe said the agricultural sector will pay 25.78% more for electricity in the 2011/12 financial year.

The average increase for this period is 25.8%.

The agricultural sector uses around 3% of Eskom’s total generated electricity. Most of this is used for irrigation.

De Jager said farmers are already doing all they can to use the electricity as efficiently as possible.

For instance, they irrigate after 22:00 at night, when electricity is cheaper, but still struggle to recover costs.

Investment Solutions economist Chris Hart said that above-inflation tariff increases are bad news for the agricultural sector, and that the problem is that prices of agricultural products do not rise correspondingly.

He said the entire economy is experiencing the same problem. That is one reason why the economic recovery has been so lacklustre. At current interest rate levels the economy should be growing strongly, but this is not happening.

Hart said to rectify the situation farmers’ production prices should rise. But this could not happen because it would then be cheaper to import.

On Thursday, Eskom met representatives of organised agriculture to discuss issues such as electricity tariffs and electricity theft. The outcome of the meeting was unknown by production time. 

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