One-quarter of the world’s greenhouse gas emissions result from food and agriculture. The energy in food production can be broken down into four parts; agriculture, transportation, processing, and handling.
Electricity is a key agricultural input. According to Department of Agriculture, Land Reform and Rural Development (DALRRD) statistics, agriculture spent about R9 billion on electricity in 2021. This is more than 7% of the sector’s expenditure on intermediate goods and services. A reliable power supply is especially critical for the sector’s irrigation and water treatment.
Food production finds itself in a perfect storm. The Ukrainian war has directly led to energy shortages with sanctions imposed by the US and all Nato-affiliated countries importing gas and oil from Russia.
On top of that came the initial blockage of Ukraine’s grain export port terminals.
This at a time of rising global inflation after the US and many other countries adopted monetary policies that included zero to negative interest rates and the printing of dollars to ease their economies out of the Covid stranglehold.
Food insecurity has also become evident in some regions due to global warming. For example, Bangladesh chicken farmers have been forced to switch to duck farming because of rising sea levels and higher salinisation levels in fresh water sources resulting therefrom.
In South Africa food producers are also affected by the world events, but we have additional problems caused by none other than our own horrific decisions and the collapse of SOEs.
Transnet as a transport system is failing the country, so is Eskom, which is producing insufficient energy, resulting in load shedding and enormous price hikes at the same time. Our harbours are of the most inefficient in the world.
In 2018, the US consumed 101.1 quadrillion Btu (British thermal units) of energy. Roughly 10 percent of that enormous number came from the food system.
Christo van der Rheede, executive director of Agri SA, said the impact of the power outages on agriculture and the wider economy holds serious implications for food security and social stability.
“The extended period of level 6 load shedding threatens the viability of the sector. An escalation to level 7 and higher would be catastrophic and would pose a risk to the country’s national security.”
Pumping stations, irrigation, cooling, and other systems all depend on power supply. While some farmers have the means to move away from the power grid, most are unable to do so.
This is especially true for small-scale farmers. Farmers forfeit their water quotas for irrigation purposes when the power is off – an irrecoverable loss that paralyses farms.
Professor Irrshad Kaseeram, of the University of Zululand’s Economics Department, said the impact of power cuts due to load shedding is enormous.
“When we look at agribusinesses, they have to export products from South Africa, and whenever there is load shedding there are bound to be delays with delivery and that will result in loss of income and penalties and which will ultimately have an impact on the South African economy.”
Structural reform is the government’s favourite word. It brings hope even if nobody knows what or when, if anything is going to happen, it is like a lucky draw. Draw the wrong route and spend five years on the wrong track and then pick another route.
At the end of 2019 the Cabinet decided to re-establish an “energy war room”, which was to tackle the energy crisis head-on. It was set up by Deputy President David Mabuza, and included then finance minister Tito Mboweni, Public Enterprises Minister Pravin Gordhan, and Energy Minister Gwede Mantashe.
It seems there were many chiefs but no Indians. Eskom is estimated to have at least 30% more workers than what is required. It is said the Russians employ people and pretend they will pay them. The workers then pretend to work. It seems this is also the case at Eskom.
The “war room” was never heard of again, and it seems the “war” may have been a war within itself.
Now there is a new plan. Eskom is to move from the portfolio of Public Enterprises to the Department of Mineral Resources and Energy (DMRE).
To do this will mean that Eskom is removed from an entity whose focus was to oversee commercial operational entities, to a non-operational administrative entity.
It is a case of jumping from the pan into the fire. The example below is indicative of what awaits us.
“The Department of Mineral Resources and Energy (DMRE) has noted an article published by News24 on 29 December 2022, titled: ‘Eskom can save billions with diesel import licence – but De Ruyter says progress with DMRE is slow,’ and would like to provide the following clarity: The DMRE confirms Eskom has applied for the diesel wholesale licences, however, it was not awarded since the application did not meet certain requirements, the details of which have been shared with Eskom as the applicant.”
A dark cloud overhangs two other critical entities in our food chain in the form of overburdened debt and crime.
Eskom owes about R400 billion but isn’t generating enough income to cover operating costs and interest payments. The bulk the debt is guaranteed by the sovereign.
Transnet currently does not have sufficient funds to repay its bondholders some R23 billion as more bonds mature until March 2023.
Corrie Kruger is an Independent Analyst.
BUSINESS REPORT
