Industry players this month warned that load shedding is threatening food security in the country. Photo: Ayanda Ndamane/ African News Agency(ANA)
While food prices will increase at the till as load shedding knocks the agriculture sector, it is not clear to what extent, according to according to Theo Boshoff, the CEO of the Agricultural Business Chamber (Agbiz).
Load-shedding is placing pressure on the agricultural industry directly through additional costs incurred to run generators. This applies both to primary production, but also in the value chain for cold storage, dairies, processing, among others.
In an interview on Friday, he said “The extent to which this will be passed onto the consumer is not clear. Actual food prices will also be influenced by whether or not there is damage to the various crops.”
He said currently there was a lot of pressure on irrigation as South Africa had experienced a very hot and dry January.
Approximately 20% of maize, 15% of soya, 34% of sugar cane and the bulk of the country’s fruit and vegetable production is under irrigation.
“Should we succeed in our efforts to find a workable solution, or should we receive good rainfall for the remainder of the summer season, that pressure may decrease and the crops may be able to recover. Given these variables, I do not think it is possible to put a figure on food price inflation as of yet.
“One will only know later in the season. What we can share from the survey we are conducting, is that out of a sample of 500 businesses, roughly R100 000 per month was spent on diesel for generators. Businesses up and down the value chain will feel the effect of this on their profitability, but it is too early to tell what the knock-on effect will be on food prices.”
Boshoff said the risk to (food price inflation) was currently high but, it could be mitigated through the work that the Eskom Task Team was busy doing.
“Should Eskom be able to contain load shedding to the lower levels (2 or 3), then the sector should be able to retain good output, but their profitability will certainly suffer. If stage 2 or 3 is to become a fact of life for the coming years, the focus must be on contingency plans and adaptation.
“This may include embedded generation in the medium term but in the short term, an investigation is underway to determine the extent to which agricultural companies can be isolated from the grid to apply a differentiated schedule so that they have longer periods on and off,” he said.
This could assist to bring an element of predictability so that companies could arrange their operations around this certainly, but it also depended on a number of factors, including whether they were tied to the same infrastructure as other businesses or households that could be negatively affected, Boshoff said.
Industry players this month warned that load shedding is threatening food security in the country. Industry bodies - including sugar cane growers, dairy sector, franchise sector and poultry sector - have urgently called for the government and Eskom to find a solution and come to the table as load shedding knocks their businesses.
Agbiz said it was working hard behind the scenes to gather information and explore these possibilities, but implementation would ultimately depend on the facts of each case.
Meanwhile, Chris Engelbrecht, the chairperson of the Association of Southern Africa Sugar Importers said, “I estimate load shedding will increase the South African food cost in general by 20% in the next few months.“
He said power shortage was affecting the whole manufacturing sector of South Africa.
“Manufacturers are absorbing the cost of generator, diesel, unproductive labour and machines for now. They won’t do forever. I would say prices are going to increase gradually over the next few months,” Engelbrecht said.
Last year food prices in South Africa came under pressure. Food price inflation spiked after Russia’s invasion of Ukraine, which disrupted commodity and supply chains, as well as high inflation, among other factors.
In December Statistics South Africa reported food inflation slightly eased slightly to 12.4% from 12.5% November.
However, in one year, since January 2022 until this month, food prices at the till are up nearly 12%, according to the Pietermaritzburg Economic Justice & Dignity (PMBEJD) Household Affordability Index.
The index released last week showed that the average cost of the household food basket is now R4 917.42.
“If you compare it to January 2022, consumers were paying R4 401.02. They are now paying R4 917.42 in January 2023. This translates to an increase of R516.40, or 11.7%,” PMBEJD said.
BUSINESS REPORT