The food security risk from severe load-shedding is evident across South Africa’s agricultural sector and the broader food, fibre and beverages value chain.
The ministerial task team assessing the impact and crafting response mechanisms to lessen the blow needs to move speedily as the challenge in the farms and food processing facilities worsens each day.
Aside from the power crisis, the latest harvest news in wine grapes and maize paints a mixed outlook for these subsectors.
Wine grapes for this year are projected to be lower than the 2022 harvest because of unfavourable weather earlier in the season. The wine industry will release its production estimates later this month but has already indicated the prospects of lower yields.
This means wine production could also be lower than 2022 levels, with preliminary estimates pointing to an output of around 800-million litres. This will add pressure to an industry still recovering from the slump through the worst of the pandemic, when the ban on sales had a severe negative financial impact.
This industry is labour-intensive and any additional financial strain in an already low-profit environment could negatively affect employment, particularly seasonal labour.
One effective response to assist the wine industry, especially through this tough year, would be for the National Treasury to review the excise tax burdens for wine. These are at 11% — well above the other emerging markets’ duties on wine producers.
In the maize subsector, the near-term outlook is somewhat better. The season started with excessive rains, which slowed some regions' planting by roughly a month. But this proved beneficial when we confronted the heatwave in the past two weeks as the soil moisture was reasonably high and cushioned the crop.
This is the case for roughly 80% of rain-fed regions of maize. The preliminary production estimates from organisations such as the US department of agriculture paint a positive picture, forecasting South Africa's 2022/23 maize crop at 15.6-million tonnes, down only 3% from the previous season.
This includes commercial and non-commercial maize. The non-commercial estimate is 600,000 tonnes, down from 667,000 tonnes in the previous season. The minor decline reflects reduced area plantings and slightly lower yields.
It is still early in the season, and these estimates could change.
The agricultural sector and the entire food, fibre and beverages value chain remain on shaky ground because of dependency on a consistent energy supply
The crop estimates committee (CEC) holds a cautious view, estimating the area plantings for commercial maize to be 2.5-million hectares, which is down 4% from the USDA estimate. Still, these are tentative figures. The CEC will release its revised area planting and the first production estimates on February 28. If the area planted remained unchanged at 2.5-million hectares, with an average yield of 5.6 tonnes per hectare (lower than the USDA's yield estimate of 5.7), then the commercial maize crop could be around 14-million tonnes.
This would be well below the CEC's estimate of the 2021/22 commercial maize harvest of 15.4-million tonnes (when the yield was 5.9 tonnes per hectare). Still, this harvest would be well above the annual consumption of around 11.8-million tonnes and maintain South Africa's status as a net exporter of maize.
Such a harvest could contribute towards softening maize prices from levels we saw in previous years. The critical drivers of maize prices in the past season were global, such as drought in South America, rising demand in China and the Russia-Ukraine war.
With global grain prices having softened in the past few months, that trend will likely filter into the South African market, even if this is to a more limited extent than in the world market. Both white and yellow spot maize prices in the July contract months are below R5,000 per tonne.
These price levels benefit consumers and the poultry and livestock industries, which have faced higher feed costs over the past few years. The two industries face unique challenges from load-shedding and its associated costs; thus, any relief in feed prices would be welcome.
In sum, the agricultural sector and the entire food, fibre and beverages value chain remain on shaky ground because of dependency on a consistent energy supply.
Government interventions to ease this burden are crucial as there are serious food security risks. Beyond the challenges presented by the power crisis, weather conditions have created varying outlooks across different subsectors.
The wine industry is on a recovery path, but lower wine grape harvests and excise tax will continue to weigh on the sector. The National Treasury should review the excise tax to ease the pressure in this critical and labour-intensive industry. The picture of maize production remains positive and supportive of staple food availability and the livestock and poultry sector.
* Sihlobo is chief economist at the Agricultural Business Chamber of SA, author of 'Finding Common Ground: Land, Equity, and Agriculture' and senior fellow in Stellenbosch University’s department of agricultural economics
