Friday, 12 October 2012

SA's agriculture sector key to sustainable food supply

By: Gareth Lloyd-Jones
Agriculture and food-production activities represent the future of our country's development. They hold the key to poverty alleviation and job creation. They create the platform for rural development and the provision of basic needs. More importantly, they are the essence of having an economically, environmentally and sociably sustainable food supply in the future.
Significantly higher food prices are on the way in the next 18 months. Consumers have already seen high price increases in key food staple items, such as: chicken, lamb, maize meal, vegetables and fruits, and local producers, who are also bearing the brunt of high costs, have started retrenching workers.

In order to remain economically viable, globally and locally competitive, and socially stable, South Africa's agriculture industry needs to prepare for the short and long term, as the challenges it is currently facing will be here for a long time. These challenges include: rising input costs, food safety, water, and the lack of support from authorities, all of which will be further exacerbated with the volatility of the rand.

Fuel price increase

This month's 93c per litre petrol increase, which is linked to the oil price and to the rand/dollar exchange rate, will impact on South African farmers greatly, especially on the running of farm machinery as well as the transport of agricultural produce, as the bulk of food in SA is transported by road. 

The price of electricity is also rising, with the proposed increase by Eskom to reach a high of 14.6 percent over the next five years. In October 2009, AgriSA released figures suggesting that Eskom's proposed electricity price hike will cost agriculture R600 million. As input costs such as these continue to rise, it is evident that farmers will remain under pressure as they battle to keep costs low. 

In the USA, 62 percent of farms have been affected by the recent drought. US maize and soy accounted for more than 40 percent of total world exports and the subsequent shortage has driven maize prices in SA to historic highs.

Forty percent drop in SA-produced wheat

South Africa is producing half the wheat it consumes, down from the 90 percent that it used to produce. This clearly indicates that South Africa's agricultural industry is shifting towards a nation that depends on other countries for produce, rather than being self-sustainable. 

As global food safety becomes paramount, South African producers will need to show their compliance to remain a legitimate player in the global food supply framework. Grains such as maize, soy beans and wheat are the most critical items for the domestic food supply chain as part of these must be used in the feeding of livestock. Therefore, producing less locally, coupled with the tough drought conditions experienced by the US, has pushed up prices of goods. Local farmers are being forced to import more expensive grains to feed their livestock.

Further to this, in order to address the food security crisis in South Africa, as was experienced globally in 2007 and 2008 due to a direct result of a sharp increase in food prices, the government and the private sector must establish a self-sustainable local food production and agriculture industry through the implementation of a development programme. By creating a self-sustainable local agriculture and food production industry we will reduce hunger and poverty, and increase agricultural development. This will subsequently contribute towards skills development in the country and improve inclusive economy growth and job creation.

A structured, integrated and co-ordinated effort

The key initiative to achieving this is a structured, integrated and co-ordinated effort to develop the full ambit of the food supply chain from farm to fork. This will create a food supply chain that is not only economically viable, but also sustainable on an environmental and social level in the future. 

The ultimate aim should be to turn South Africa's food supply industry into a nett exporter as opposed to a nett importer of food, without compromising the full spectrum of food supply locally and the inherent threat of this industrialised approach on the environment. 

In this difficult time, farmers will have to try to strike the balance between food safety compliance and rising costs. Industry players will need to ensure food safety is not compromised in order to maintain financial performance. Companies, therefore, need to enforce due diligence when maintaining food safety standards and move from a "tick the box" approach, whereby farmers simply do the bare minimum to pass hygiene and safety tests to satisfy health inspectors, to create a more practical verification system. This should become part of a company's culture and fostered on a continuous basis. 

Water reserves dry by 2050

According to Water Affairs Deputy Minister, Rejoice Mabudafhasi - who recently spoke at South Africa's fourth Youth Water Summit - South Africa's water reserves will run dry by 2050, should no action be taken to conserve water. 

Industry players need to implement strict water saving measures in order to address the country's impending water deficit that is threatening food security and produce all around the country. Farmers should implement strict water saving control measurements to recycle water and prevent water wastage caused by pipe bursts, water leaks and unscheduled use of water. 

Cost-effective water-saving measures including having a water-recycling system in place, whereby used water is drained through a filtration process to rid all solids and then put through a chemical intervention to make it suitable and fit to use back into plant facilities. This water can then be used to wash larger areas, such as driveways or equipment.

Lack of support from the government

Furthermore, so far in 2012, a lot of frustration has been brewing from players in the agriculture, forestry and fisheries industries, due to lack of support from the government and the Department of Trade and Industry (DTI). They have been dissatisfied with how they have been handled regarding import and export quotas. Cheap, low-quality meats are currently being imported without rigourous inspections or policing, as no government intervention exists and this is a necessary gatekeeper in enforcing stringent food-security protocols at our borders.

There are several possible interventions that should be considered to improve the situation for local producers. These include improved farming legislations and international regulations. A food-control agency, independent meat inspectorates and bio-security are needed in order to address food-safety issues at our borders.

We have also seen the protein sector struggling with a lack of aid from the authorities. The outbreak of Avian bird flu brought many ostrich farmers' businesses to a standstill between 2010 and 2012. Although the government has compensated farmers for the culling of the birds, the compensation does not adequately cover the financial loss experienced by the farmers. As a result of the bird flu epidemic, an indefinite export ban has been placed on the ostrich industry. 

Poultry industry in dire need of support

Moreover, the South African poultry industry is in dire need of support from the government in order to avoid a collapse of the industry as incidences of chicken dumping are likely to increase over the next few months as suppliers in struggling EU economies look for ways to dispose of surplus product. This will place severe pressure on the already struggling local chicken industry. The local market is already oversupplied with poultry products, putting local producers under pressure. The rise of costs, such as electricity and fuel, makes it extremely difficult for local producers to keep costs low, in order to compete with cheaper imported products. 

More decisive action, therefore, needs to be taken to curb poultry dumping. There are several possible interventions that the government should consider looking into to improve the situation for local producers. A blanket import duty could be placed on all products entering the market or, alternatively, support to local producers in the form of subsidies, for example water, maize and veterinary, could be implemented.

Indirectly, the government can impose stricter regulations in terms of licences and import legislation, thereby creating a bigger barrier to entry. Regulation can also be introduced to stipulate a certain proportion of retail stock to be local produce.
Original Article Here

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