Farmers could need subsidies or special tariffs to survive

The agriculture industry, a key sector of SA’s economy, will very likely require subsidies or special tariffs to survive, should the energy regulator approve Eskom’s latest application for tariff hikes, a major industry body says.

TLU SA, an industry body that represents mostly white commercial farmers, said on Thursday a tariff hike will be the death knell for several farmers, unless government steps in.

Agriculture contributes about 3% to GDP and is responsible for nearly 900,000 jobs. Electricity is essential for modern farming methods and the surging costs of production and the recent increase in load-shedding have seriously disrupted operations, forcing some farmers to scale back their businesses.

The National Energy Regulator of SA’s (Nersa’s) electricity subcommittee is considering Eskom’s revenue application for 2023 and 2024. The beleaguered state-owned power utility, which is struggling to keep the lights on after more than a decade of running its plant too hard and neglecting long-term maintenance, is seeking annual standard tariff increases of about 32% in 2023 and 9% in 2024.

Nersa okayed a 9.6% increase in the standard electricity tariff for 2022/2023 which came into effect in April. That was about half of what Eskom had been pushing for.

TLU SA president Henry Geldenhuys said the association will be writing to government to express its objections to the proposed hikes.

“The reality is agriculture cannot afford the increase. Farmers already must deal with increased prices of diesel and fertiliser (the price has increased by 150% in certain cases) to name just two. As things stand now, the situation is already bad and for some too bad. Then I’m not even talking about the impact of load-shedding. This hinders farmers’ ability to perform their daily tasks,” he said.

He called on government to intervene urgently, as several farmers are now being forced out of the production process.

“The importance of food security cannot and must not be underestimated by the government. Farmers must be kept in production. The government will have to find a way to help the agricultural sector to overcome the situation through subsidies or special tariffs,” Geldenhuys said.

The agricultural sector has been reeling in recent times in part due to persistent load-shedding and another industry group warned recently that the crippling outages will increase production costs, which will have serious implications for food security and social stability.

With essential systems unavailable during the day, farm workers are required to work after hours, Christo Van der Rheede, executive director of agricultural industry body Agri SA, said earlier this year. Overtime wages push up production costs which have already been escalating in recent months.

phakathib@businesslive.co.za