The far-reaching effects of Eskom’s rolling power cuts have brought about serious concerns regarding food security as South Africa’s agriculture industry has been put under severe strain.
As economists and unions bemoan the higher input costs farmers face, the unstable power flow has put the entire chain in the industry in a vulnerable position.
Ross Stratford, the director of Stratford Farms in KwaZulu Natal, recently disposed of 11 000 litres of milk at his dairy farm after it spoilt due to load shedding. He shed more light on the wider effects power cuts is having on the industry.
“Without electricity, our input costs are driven up. We are forced to run our farms using generators which use fuel, an extra cost to us,” Stratford told Business Report.
“Load shedding damages our infrastructure and, in turn, claims to insurance increase, which then sees an increase in our insurance premiums. Production and quality is compromised, which will eventually be felt by consumers in the country. We are trying our very best to keep our prices the same, by cutting costs such as looking for cheaper, alternative feed for our livestock. However, we have cut costs as far as we could and now our business will suffer even further.
“We sell milk to milk producers. We need to ensure that our cows are fed well, milked twice a day and are able to graze on grass fields. Without electricity, we are unable to irrigate our grazing fields, which means less food for the cows, which will eventually mean less milk produced.”
Jobs at risk
This past week, Astral Foods warned not only that it might have to resize and cuts jobs, but South Africa’s food safety was compromised, as poultry companies are being slaughtered by high feed input costs, devastating levels of load shedding and the general decay of municipal infrastructure.
On Wednesday, in a voluntary update for the six months ending March 31, 2023, the JSE-listed poultry Astral Foods said it expected its headline earnings per share (Heps) to drop by 90% year on year to 142 cents.
It cautioned the market that Astral was expecting market conditions to deteriorate, with record high feed input costs, devastating levels of load shedding, and the general decay of municipal infrastructure continuing to impact operational efficiencies and costs negatively.
Astral warned that a substantial poultry selling price increase would be required to recover the high feed input costs and the impact of load shedding.
“However, Astral was unable to implement the selling price increase required, and as a result, Astral continues to ‘subsidise’ the increased cost of production to our customer base and the consumer,” it said.
On Thursday, SA Canegrowers added its voice to the growing call for the government to put short-term measures in place to mitigate the impact of load shedding, in this case on sugar cane producers, saying data it had compiled showed the sector was set to lose a massive R723 million in 2023 due to the rolling black outs.
Last week, the Agricultural Business Chamber of South Africa said it was holding continued engagements with Eskom and the government as severe load shedding had increased food security risks in the country.
Roughly 20% of maize, 15% of soybeans, 34% of sugar cane and nearly half of South Africa's wheat production was under irrigation, said Wandile Sihlobo, the chief economist at the Agricultural Business Chamber of South Africa. He added that farmers had raised concerns about power cuts hitting output.
Earlier this week, the Franchise Association of South Africa (Fasa) also added its voice to other representative business associations calling on the government to take urgent action to resolve the energy crisis and bring national security under control to prevent an explosion of unrest and civil disobedience.
SA Canegrowers said load shedding affected 1 135 irrigated growers who employed more than 10 000 workers.
“Growers need a minimum of 6 hours of continuous energy for proper irrigation. As a result of the intermittency of the power supply, disrupting irrigation, irrigated growers will lose up to 40% water capacity. The resulting loss of yield could amount to more than R723 million,” it said.
Intervention from government
Many have called on the government to ease the pressures on the sector by ending load shedding for farmers.
The Minister of Agriculture, Land Reform and Rural Development, Thoko Didiza, met leaders of the agriculture sector and food, fibre and beverages value chains on January 13, to assess the impact of load shedding on business activity and plans for the sector.
At the meeting, the industry leaders conveyed the difficulties faced by businesses, workers and associated costs.
They also highlighted the threat to food security in the event that continuous load shedding continued at short notice, without joint strategies on how to mitigate the impact through contingency plans and predictability.
The department said possible development of alternative energy sources within the sector was also analysed.
The meeting resolved that the minister establish a small sector task team comprising the government, industry participants and energy specialists who would continuously monitor the impact of load shedding in the sector and its ability to provide safe and nutritious food to South Africans.
The FairPlay movement, a non-profit organisation, said on Thursday that consumers were about to face chicken shortages and price increases.
In December, due to load shedding, many chicken franchise restaurants shut their branches because of shortages and the energy crisis.
“South African poultry producers supply 66% of the country’s meat, so the threat to the industry from electricity shortages and other factors is a threat to national food security,” FairPlay said.
“Chicken production is vital for South Africa’s food security,” he said. “Chicken is produced in vast and affordable quantities, and is by far the country’s most popular meat protein, particularly for low-income households. Yet load shedding has compounded the industry’s burdens of dumping, poor infrastructure and municipal service delivery,” FairPlay founder Francois Baird said.
Baird said the crisis affected the whole poultry value chain. Poultry producers had to invest millions in producing their own electricity because Eskom, the national utility, could not keep the lights on in the chicken houses.
“Small poultry farmers without the means to provide alternative energy are in dire straits. Maize and soya farmers who feed the chickens, cannot irrigate their crops. A poultry feed shortage may loom next year, further escalating input and consumer prices for chicken.”
Thousands of chickens have been killed over the past couple of weeks, either culled or suffocating due to the challenges faced by load shedding.
Dudley Anderson, the owner of Holcombe Poultry, a broiler breeding business in Mooi River, KwaZulu-Natal, recently lost 11 500 chickens after they suffocated due to load shedding causing a fault in their ventilation systems.
Anderson told Business Report: “We had a very high-tech air flow and temperature system installed about 18 months ago, where it would alert us if power was lost at the chicken house. However, due to load shedding, causing a surge and cellphone towers failing in our area, it was a perfect storm for everything to fail, which, sadly, cost us our flock, despite having back-up power and solar energy as well for our business.”
Anderson said the broiler breeding business was a niche one, with each bird costing the business about R120, due to special genetics required for breeding.
Anderson told Business Report that his broiling breeding business was essentially the parent of a chicken broiler, where Holcombe Poultry supplied fertile eggs to hatcheries and it was paid for whatever hatched.
“It is a very different business to just selling chickens. At 60 weeks, the chickens are no longer financially viable, which is when they are sold to cull buyers.”
Anderson stressed how important breeders were in the poultry chain: “The initial capital required to get into this business is very high. At a high price of about R120 a bird, to insure the birds against losses is not viable in this business. We, unfortunately, have to take this loss and move on. But if this situation continues in our industry, the entire poultry sector could collapse.”
BUSINESS REPORT