Possible Short to Long-Term Impacts of the January 2011 Floods to South African and Some of Her SADC Trading Partners

aid agriculture Food security floods relief
Wednesday, 9 February, 2011 - 11:33

The recent floods that swept across South Africa have a negative impact on agriculture. The floods, which claimed over a 100 lives, left 33 municipalities declared disaster areas, thousands of houses damaged, farmers agonising from crop damage, has the potential to push food prices higher

The majority of agricultural systems in South Africa and Africa at large are rain fed. Rainfall is a natural phenomenon whose occurrence can be erratic resulting in weather shocks such as droughts and floods which can have devastating impacts on the socio-economic livelihoods of the people. Floods and droughts trigger a multiplicity of negative impacts to economies relying on rain-fed agriculture.

With eight out of nine South African provinces having been hit by floods in January 2011, this article explores the possible short to long-term impacts of floods to the economy of South Africa and partly to its Southern African Development Community (SADC) trading partners in agricultural produce. The floods, which were a result of constant heavy rains in a country which has become the sole breadbasket of Southern Africa with Zimbabwe, a former breadbasket still reeling in its political and economic challenges, claimed over a 100 lives; left 33 district municipalities declared disaster areas; thousands of houses damaged and farmers agonising from crop damage.

South Africa has a dual agricultural economy comprising a well-developed commer¬cial sector and a predominantly subsistence-oriented sector in the rural areas. Primary agriculture contributes about three percent to the gross domes¬tic product (GDP) of South Africa whose nominal value was estimated at R667 billion for the third quarter of 20101. In addition, primary agriculture caters for about eight percent of formal employment in South Africa. However, with strong sector linkages into the economy, the agro-industrial sector comprises about seven percent of GDP. The total contribution of agriculture to the South African economy increased from R27 billion in 2001 to R36 billion in 2007 and to R68 billion in 2008. Producer prices of agricultural products increases have been 17.9 percent for 2005-2006, 24.6 percent for 2006-2007 and 14.3 percent from 2007-2008. In 2008, the producer prices of field crops rose by 22.4 percent, against an increase of 44 percent the previous year. Producer prices of horticultural products increased by 20.6 percent in 2007 compared to 2006, 5.8 percent in 2008 compared to 2007 and seven percent in 2009 compared to 20082.

Maize is the largest produced field crop in South Africa and the most important source of carbohydrates in the Southern African Development Community (SADC) at large, for animal and human consumption. South Africa is the current main maize producer in the SADC region, with an average production of over 12 million tones a year for the past two years and over 10 million tones in the past decade.

Against such a background, one feels compelled to speculate the effects of weather shocks in form of floods to such an economy in terms of employment, income, food security and food prices. The most immediate impact of floods is the undermining of crop production and therefore yields on the farms, both commercial and subsistence. If farm yields are affected, it means the national harvest is affected which reduces household and national food availability and ultimately agricultural income derived from crop sales. Thus poor harvests will seriously affect food security and lifestyles of the nation but particularly of those directly relying on agriculture for their income or direct food supplies.

With crops destroyed by floods and lack of monetary compensation from the South African government to revive agricultural activity, it is highly likely that there will be a further surge in total farming debt which was estimated to have increased from over R46 million in 2009 to over R54 million in 20103 as farmers borrow to revive their crop. In addition, one gets the feeling that part of the eight percent population formally employed in the agro-industry will be laid off. Thus the supply of labour in the agricultural market will rise acutely against an acute drop in the demand for agricultural labour services. Statistics released in the third Quarterly Labour Force Survey by Statistics South Africa reveal that 25 percent of the economically active population in South Africa is unemployed4 . The retrenched farm laborers comprising migrants from SADC countries like Zimbabwe, Mozambique, Zambia and Malawi will have to find other options to bring food on the table thereby adding to the cumulative figure of the unemployed in the respective countries.

No doubt the loss of income by farmers whose crop was destroyed and by laid off farm workers will affect aggregate demand through decreased consumer expenditure on goods and services and reduced exports of agricultural goods due to low agricultural output. Important export destinations for South Africa’s agricultural produce in the SADC region are Botswana, Lesotho, Swaziland, Namibia, Zimbabwe and Mozambique with the last two having been the biggest regional trading partners in the 2009/2010 season. With over 10 million tons being required for the local market, it is most likely that South Africa, the breadbasket of the SADC region, will export less in the 2010/2011 season to cater for local food demands thereby posing possibilities of a worsening food insecurity situation in the SADC region. The floods are most likely to hamper the objectives of the Integrated Food Security and Nutrition Programme which aims to eradicate hunger, malnutrition and food insecurity by 2015 in South Africa and the country will most likely continue to be a net importer of food.

Since the deregulation of the South African agricultural market in 1996, domestic prices of maize and other agricultural produce fluctuate within a range dictated by world prices, exchange rates and local production which varies substantially with erratic weather conditions such as the floods the country recently experienced. In the face of such shocks, deficits in local produce are anticipated thereby causing the local price of the agricultural produce to rise towards import parity5. South Africa’s official average annual inflation rate was 4.3 percent for the year 2010 with the annual rate for food and non-alcoholic beverages increasing to 1.5 percent in December 2010 from 1.3 percent in November 20106.

According to the Food and Agriculture Organisation (FAO), the general global food price index rose to 215 points in December 2010, with food commodity price indices highest for sugar, oils and fats. The Cereal Price Index rose to 238 points, up 6 percent from November and as much as 39 percent from December 20097 . With the prices of most of South Africa’s food products being derived from international prices and with possible food deficits owing to the recent floods, it is reasonable to assume that South Africa and its trading partners in the SADC region must brace up for an increase in food price inflation this year. Many will pray that the Rand keeps strong as it was in 2010 to shield South Africans from any possible sharp rises in global food prices.

From the discussion, it is notable that the shock from the floods that hit South Africa in January 2011 could culminate in tremors that adversely affect not only the livelihoods of those directly earning a living from agriculture but a chain of other economic activities and indicators. The tremors are likely to cross the borders of South Africa to her regional trading partners in SADC.

One may however take solace in the fact that South Africa’s economy is highly diversified and has other diverse sources of income other than agriculture relative to other economies in Africa. As a result, the general level of vulnerability of the country to weather shocks such as floods may be minimal.

- Takura Chamuka (MSc Economics, BSc Economics, UZ) is a Cape Town based Human and Economic Development Consultant/Researcher (tchamuka@yahoo.com). This article may not be published or reproduced without the consent of the author.

References:

1. Gross Domestic Product, 3rd Quarter, Statistical Release P0441, Statistics South Africa, November 2010;

2. Statistics in this paragraph were extracted from  Agriculture, Forestry and Fisheries, Republic of South Africa, Pocket Guide 2008/09 and Pocket Guide 2009/10;
3. Trends in the Agricultural Sector 2010, Department of Agriculture, Forestry and Fisheries, Republic of South Africa;
4. Quarterly Labour Force Survey, Statistical Release P0211, Statistics South Africa, 3rd Quarter,  October 2010;
5. Import parity refers to the international price plus transport and other cost multiplied by the exchange rate, FEWS NET Market guidance, No 1, May 2008;
6. Consumer Price Index, Statistical Release P0141, Statistics South Africa, December 2010;
7. The Global Foundation Price Monitor, FAO, 14 January 2011.

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