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The impact of COVID-19 on small scale farmers

The impact of COVID-19 on small scale farmers

07 May 2020 – It is now inevitable that COVID-19 will lead to global recession and the local economy will not be spared. The true extent of its impact is not yet measurable however we are looking at negative GDP growth for the year and potential job losses with the South African Reserve Bank estimating GDP contraction of more than 6%.

The overall impact will exert further pressure on small scale farmers who were already struggling with amongst others rising input costs, limited market access, limited pricing power, critical agriculture and business skills and the list goes on. In this context we are looking at the profile of farmers targeted by the recently announced R1.2bn from the Department of Agriculture and Land Reform. Those are the farmers earning between R20,000 to a R1M per annum through their agricultural activities. The COVID-19 pandemic may worsen the pre-existing challenges but also open new opportunities. Looking at what could potentially be worsened;

  1. Due to restrictions on local sales of alcoholic beverages, cashflows for small scale wine and spirit producers as well as beer brewers will take a knock. In addition, the restrictions on travelling and gatherings limits extra incomes from social events such as beer festivals, wine tasting events and Agri-tourism.
  2. Market access and low demand on informal trading platforms– Market access is one of the pressing issues for smaller producers. Now with movement restrictions on consumers and companies closing off, informal traders keep below normal stocks. Most small growers sell their produce on informal markets and therefore reduced activity on these markets does pose a challenge on stocks on hand.
  3. Fresh produce has limited shelve life and needs proper functioning cold storage to retain marketable quality which is another challenge for small producers. Looking at the livestock, demand for meat may come under pressure given that some consumers are not getting their full salaries with others getting no salaries at all.
  4. The poultry market is of concern as keeping birds on farms for longer than eight weeks starts to eat into the producer’s profits and may lead to further burden on margins. Other livestock keepers may experience difficulties in marketing their stocks or even have proper access to feed and supplements given possible disruptions along the value chain.
  5. Labour availability – smaller producers may not have the capacity to transport their labour, therefore some may see themselves having to either cut working hours or operating on limited capacity.
  6. Farmers depend on events gatherings such as farmer’s days to access information, and with the restrictions on the number of people per gathering, this tool is limited. Network reception issues in rural areas adds to the difficulty in information access.

Some opportunities presented by the pandemic;

  1. Fuel price decline – this cannot have come at a better time, it is the harvesting season and some farmers are preparing for their fields for planting of winter crops. This will help reduce input costs to operate tractors and other equipment’s. It also reduces transport cost to markets.
  2. Input cost– input costs such as fertilizers, pesticides and herbicides may ease given that they are by-products of crude oil, helping to relieve some production cost pressure. However, Rand volatility does pose a risk to the upside on prices of these commodities.
  3. Interest rate cut – this will relieve those farmers who are highly indebted and those wishing to acquire more credit. The current prime lending rate of 7.75% per annum essentially makes credit facilities cheaper. Of course, credit applications will be evaluated using prudent financial measures.
  4. Higher demand for staple food items – for those producers who have access to markets, they may enjoy benefits of high demand for staple food items such as white maize by-products and some staple vegetables and fruits. However, some commodities have seen a decline in demand due to closure of hotels and limited operation for fast foods and restaurants.
  5. Government support– The Department of Agriculture, Land Reform and Rural Development (DALRRD) has set aside R1.2bn to assist small scale farmers (turnover of between R20,000 and R1M). These funds will be released in a form of vouchers for mainly inputs.  Priority will be given to critical industries such as horticulture, poultry and farmers should take advantage of this fund to help relieve some of the cost push pressures.

With some of the restrictions eased, we will see a slow return to normality as economic activity resume.

Comment by Pertunia Setumo, Agricultural economist at FNB Agri-Business

Help Our Local Communities

Help Our Local Communities

Block Media, incorporating SHUKELA PLUS and THE MACADAMIA, believes that business has a responsibility to contribute to the social and economic upliftment of all South Africans, particularly during this trying time of COVID – 19 and the subsequent lockdown of the economy.

Many households have lost their income and thus the ability to support themselves.

BLOK MEDIA have teamed up in support of www.inani.org , as a simple and effective means to support some of these communities through the delivery of essential food parcels to those who need it most.

Once purchased, the parcels are then sent into one of four locations to be distributed to those in need.

We encourage our grower partners, customers, suppliers and the general public to participate in this scheme by purchasing one of these packs. This will ultimately enable us to make a deeper impact for real change.

Please get in touch with the team at inani.org for more information, and to see the wonderful work they are doing.

During this challenging time, let’s work together to Help Our Local Communities

Your R300 can make the world of difference to a hungry family.

Every cent, bar bank fees, goes towards food. And often suppliers cover the bank fees

https://www.inani.org/

 

COVID-19 crisis points to the need for robust succession plans

COVID-19 crisis points to the need for robust succession plans

Although it’s recommended in King IV, succession planning is often neglected because it’s an uncomfortable subject. The COVID-19 crisis should act as a wake-up call for organisations to ensure not only that they have a plan to govern an orderly succession for key senior posts, but also an emergency back-up plan, says Parmi Natesan, CEO of the Institute of Directors in South Africa (IoDSA).

“The current crisis should remind governing bodies that in addition to key management positions like the CEO and CFO, succession planning should also cover key board positions, including the chair of the board and chairs of board committees,” she says. “For example, the current COVID-19 crisis raises all sorts of issues for corporate succession plans. What if the CEO contracts the virus, or the CFO is forced to self-isolate? Organisations need to have not only a long-term succession plan but an emergency backup plan as well.”

She argues that a crisis such as this places unusual strains on the entire leadership team. One contributing factor is the protracted nature of the crisis, others include the need to completely reorganise the workforce to enable remote working, adopt new management practices suitable to a dispersed workforce, and conduct an urgent review of the business model and strategy. Moreover, all of these would have to be continuously reviewed as the crisis unfolds.

At the same time, of course, leadership is more important than ever during a crisis. If any of the leadership team is forced to take time out (because of overstraining or actual illness), the impact is extremely pronounced—as we saw when the British Prime Minister Boris Johnson was admitted to hospital with the virus and the Foreign Secretary took on his role.

“Organisations should have a full succession plan for each senior management position, which includes both an emergency and a long-term plan,” she says. “It is also worth pointing out that the emergency plan is likely to nominate an in-house resource, and effort should be put into giving those individuals the mentoring and training needed, including crisis response management.”

Courtesy: IODSA

Gradual lifting of lockdown – Impact on agriculture

Gradual lifting of lockdown – Impact on agriculture

24 April 2020 – The phased or risk-adjusted approach to lift the current national lockdown is welcome news for the agricultural sector, especially those industries mostly affected by the Covid-19 lockdown. As from 1 May, all agricultural activities can resume as normal, including industries such as the wine-industry (although the sale of alcohol will still be prohibited). The wine industry will therefore be able to produce and make wine but probably will need to store or export the produce.

Forestry will also be able to resume production as normal. It is important to note that the levels may vary between provinces and municipal districts, which may affect agriculture again, thus producers need to stay informed of what is going on. The interpretation of the regulations is somewhat ambiguous in the different provinces and this led to unhappiness in the red meat industry when auctions for example in the Free State were stopped and prohibited. Moving to Level 4 will hopefully sort out these challenges.

Other industries that will resume activity will be mining as well as all financial and professional services. This will also be positive news for agriculture in the sense that the deeds office will most probably resume activities and hence financial transactions, such as farm purchases, can resume.

Although most measures on Level 4 will be similar to Level 5 lockdown, the risk adjusted approach for lifting the lockdown is the most appropriate one to prevent another hard lockdown for the country. The South African economy will not be able to withstand another Level 5 lockdown. It is therefore imperative that we all adhere to the restrictions set out for as long as possible to protect ourselves and our economy.

By Dawie Maree, Head of Information and Marketing at FNB Agriculture