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Weak rand; drought sends SA food prices rising

The drought and rapid depreciation of the rand have led to a rise in food prices, hitting poorest South Africans hard.
Alan Winde, Minister of Economic Opportunities, today (12 August 2016) delivered the opening address at the launch of the latest annual baseline produced by the Bureau for Food and Agricultural Policy (BFAP).

Now in its twelfth year, the BFAP baseline offers insight into key trends in areas including production, consumption, trade, food prices and jobs in the agriculture sector. The research provides medium and long-term projections for various industries in the South African agriculture sector.Researchers from the Universities of Pretoria and Stellenbosch, as well as the Western Cape Department of Agriculture, collaborate to produce the report. The report, titled “Putting Plans into Action: Agriculture and Economic Growth”, provides an economic outlook for crops, animal and horticultural products. It details the jobs performance of the agriculture sector highlighting the biggest challenges to growth.
Minister Winde said the report reveals the extent to which the recent drought had impacted the sector.
“In 2015, there was a 15% drop in production here and in Limpopo due to the drought. In terms of livestock, there has been a 15% reduction in the national herd. There’s been increased slaughtering during the drought and this will continue to impact production for the next three to four years.”
The report puts forward that since 2003, there has not been a supply shock comparable to the drought of the 2015/2016 planting season, when combined with the rapid depreciation of the exchange rate.
The report speculates that the rand remains the “greatest risk” to inflation.

Key insights on consumers include:

  • The cost of a basic food basket, including staples such as rice and brown bread, was R3 503 in April this year, which is unaffordable to the poorest 40% – 50% of the population;
  • This monthly cost of a basic food basket rose by 23.8% between April 2015 and April 2016;
  • Credit applications increased by 98% since 2009; and
  • Food inflation is estimated to average 10.75% in the first three quarters of 2017

Minister Winde said the report also found that the agriculture sector remains one of our most significant employers. 50 000 jobs have been created in the national agriculture sector since 2011.

Growth was being threatened by red tape and a low success rate for land reform projects across the country.
“The BFAP is an excellent tool to assist in identifying priorities to grow the agriculture sector. Trends show that the Western Cape is on the right track in terms of addressing these, having selected the reduction of red tape and accelerating the pace of land reform as focus areas.”
Climate change was identified as a concern for the African agriculture sector.
“Last year, South Africa experienced its lowest rainfall since 1904 and Ethiopia also recorded its lowest rainfall in 30 years. These trends underscore the need for a co-ordinated response to changing weather patterns, which is why we have partnered with the private sector to develop the Smart Agri plan.”
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