Electricity price hike the latest shock for farmers

A steep rise in the price of electricity is the latest blow to South African farmers who have battled unreliable power supplies, escalating to daily power cuts this year. Some farmers have gone bust; others have survived by investing large sums of money in diesel generators.

This has added to a steep rise in input costs such as feed and fuel following Russia’s invasion of Ukraine in 2022. And now, on top of that, come huge increases in the price of electricity.

Eskom, the national electricity utility, has been granted price increases for 2023 that start at 18.65% for the customers it serves directly. For those who buy electricity from municipalities, the increase will be higher, because municipalities make much of their revenue from on-selling services like electricity and water.

Direct supply increases went into effect on 1 April, municipal price hikes will be imposed on 1 July.

The April increases are already hitting livestock farmers, as Farmer’s Weekly reports. The higher prices are driving up the cost of egg, chicken and pork production. These are South Africa’s most affordable forms of meat protein.

Dr Abongile Balarane, General Manager of the South African Poultry Association’s (SAPA) Egg Organisation, said the entire value chain was affected. Variable costs to produce an egg had increased between 70% and 80%, and had forced many producers, particularly small-scale producers, and some packing stations, out of the industry.

Izaak Breitenbach, General Manager of SAPA’s Broiler Organisation, said that the broiler industry was also under severe pressure because of high feed costs and load-shedding, which was having a negative impact on abattoirs. While the tariff hike would increase production costs, he said that the biggest problem was that it would also increase the cost of feed production, which would result in even higher feed prices.

Johann Kotze, CEO of the South African Pork Producers’ Association, confirmed that pork producers would also be negatively impacted by the price hike, but that the situation would be worse for feed processors and players higher up in the value chain, who were heavily dependent on the cold chain.

Kotze noted that consumers, too, were under pressure and the electricity price hike left them with less disposable income.

So far, 2023 has been a series of knocks for South Africa’s agricultural sector.