Farmers and economists have sounded the alarm on the dire situation facing the sector after Eskom’s electricity tariff increase came into effect.
The farming community has warned that food security is at risk, as farmers struggle to continuously absorb the numerous increase in the cost of food production.
Farmers and economists have sounded the alarm on the dire situation facing the sector after Eskom’s electricity tariff increase came into effect on Monday.
The tariff increase of 12.74% is for customers who are directly supplied by Eskom. For those supplied by municipalities, tariff increases take effect only in July.
Eskom in October, 2023, had applied to the National Energy Regulator of South Africa (Nersa) for the approval of its Retail Tariff and Structural Adjustment Application, and the schedule of tariffs for the period April 1, 2024, March 31, 2025.
It had sought a much higher increase but was granted 12.74% by Nersa.
One farmer said the sector was under severe pressure and the Eskom tariff hike came when there were other serious costs farmers had to contend with, including fuel increases and labour costs that had doubled.
Bennie van Zyl, general manager of farming organisation TLU SA, said the tariff increase was devastating for the farming sector.
“We should look at this in connection with other issues ... There will be more fuel price increases and we have a minimum wage increase that farmers have to pay...
“We as farmers are price-takers on the input side and production when we deliver our produce ... For us it’s only cost, cost, cost and now our viability is at stake. There is a lot of pressure on farmers to overcome the harsh realities of these costs.
“At the end of the day, this will have a major impact on the sustainability of food production for our consumers, leaving food security at great risk ... For farmers this is not a good time.”
Van Zyl warned that South Africa needed to protect its farming sector, “because the country cannot afford a food-shortage crisis”.
“Food on the table is crucial and you can imagine: there will be anarchy if there’s a food shortage. It is something that we as a country will not be able to manage,” he warned.
Jaco Minnaar, president of Agriculture South Africa (AgriSA), said the electricity tariff increase would have a big impact on all their operations, as it would weigh heavily on production costs.
“In the medium to long term any increase in production costs will reach the consumer, as farmers and the value chain can only take so much on themselves. Farmers are already under severe pressure because of lower production due to dryer conditions this year, as well as additional expenditure due to deteriorating infrastructure like roads and rail, as well as the collapse of other services,” he said.
Minnaar said farmers are in a constant process of increasing production efficiency in order to produce as cheaply and sustainably as possible.
However, such large increases in production costs eroded any progress made.
“A big concern is also in manufacturing and processing of foodstuffs, where a lot of energy/electricity is needed. Those additional costs will also influence food prices, something that we as a poor country can ill afford.
“The sad and disturbing part is that these big increases from Eskom are largely due to their own inefficiencies and historical mismanagement, but the consumer is now paying the price for that,” said Minnaar.
Economist Dawie Roodt warned that consumers should brace for more pain.
“This is going to be very painful for the average consumers in South Africa. We have to understand that the economy is barely growing, we have a very high level of unemployment and poverty, and electricity is one of those very important things in life that we need.
“Such a big electricity price increase is not only about people paying much more for electricity – it will also result in upwards pressure on inflation generally. This will filter down and result in food price increases, among others.
It’s going to be very tough for people,” Roodt warned.
He said Eskom was trying to fix its myriad problems by increasing prices and this could have the opposite effect, as it could drive more customers away.
“This really is a mess, a major issue for SA, and yes, this is going to hurt.”
Economist Professor Irrshad Kaseeram of the University of Zululand’s economics department said the 12.74% increase in the electricity tariff would put “huge strain on consumers”.
“This implies that real consumer inflation or headline inflation will rise well above the 5.5% core inflation rate, as the SA Reserve Bank does not include volatile energy and food price increases in its estimation of inflation.
“This also means that even our yearly salary increases will not adequately cover our spending needs. Salary increases are determined by core inflation,” Kaseeram said.
The Mercury