FairPlay’s founder Francois Baird sets out an urgent government action plan to protect farmers and consumers from rising energy costs.
Key takeaways:
- Energy costs threaten food security: Surging diesel and electricity prices, driven by Eskom electricity hikes and global geopolitical conflict, threaten to stall the agricultural sector.
- Immediate policy interventions needed: To protect local farmers from collapsing under these input costs, the government must immediately implement structural relief, including scrapping the costly Competition Commission inquiry, enforcing stricter anti-dumping measures, and resolving outstanding bird flu culling compensation.
- Urgent social and infrastructure relief: Addressing the crisis requires a coordinated “all-of-government” effort to lower food costs for vulnerable citizens by exempting targeted chicken portions from VAT, while simultaneously rehabilitating critical rural road and water infrastructure.
South African farmers are the backbone of food security, and they have been performing with distinction as the engine of economic performance over the last few years. The agricultural sector has repeatedly grown, and created jobs, when other sectors have struggled.
Farmers are tough. They have faced and overcome Covid challenges, tariff wars, collapsing infrastructure such as electricity, water and roads, and disease, from avian influenza (bird flu) in poultry to foot and mouth disease in cattle.
Now they face a new threat – our farmers are increasingly spooked by exploding energy costs. South Africa’s electricity utility, Eskom, has steadily raised prices well above the inflation rate. The war in Iran has sent the price of oil soaring, causing higher petrol and diesel prices around the world.
In South Africa, the Iran conflict has resulted in massive fuel price increases in April and May. Even if they come down a bit in June, the forecast is that fuel prices will stay high for a long time.
Diesel has been the worst affected, with far higher price increases than petrol. And diesel powers transport, production and distribution across large parts of the agricultural sector. Expensive diesel means higher costs for farmers and higher prices for consumers.
Government and the body politic now have an urgent challenge to ensure that the agricultural engine does not sputter. What is to be done?
First do no harm, is what the medical profession would advise. For the poultry sector this means stricter intervention to block unfairly priced and dumped chicken imports. It means the government should revisit overly complex regulations which are preventing mass vaccination against bird flu. It means the government should at last compensate farmers for the millions of chickens it has ordered culled during bird flu outbreaks.
It also means not burdening the poultry sector with unnecessary Competition Commission investigations such as the market inquiry which could turn profitable producers into losers.
Help to feed the poor is the moral imperative. Millions of South Africans already go to bed hungry. Higher transport and other costs mean they will have even less money to spend on food. Less food, and less nutritious food, means hunger will spread.
As prices rise, the government has to support poor consumers. It should start with VAT-free chicken – the removal of the 15% value added tax (VAT) from the chicken portions most consumed by low-income households.
The government has resisted VAT-free chicken for years, even as hunger and poverty worsened. The need is now critical.
Fit for purpose is the strategic requirement. The government must improve the enabling environment for farmers – improved municipal services and infrastructure and measures to lower energy costs in the value chain.
FairPlay calls for all-of-government effort to execute its commitments in the revised poultry master plan.
This action plan means:
- Implementing VAT-free chicken to help poor households.
- Tightening anti-dumping measures.
- Ending an unnecessary and costly Competition Commission enquiry.
- Moving urgently to enable a rapid and nationwide vaccination programme against bird flu.
- Finding and fixing every loophole through which unfairly priced chicken gets into the country.
- Addressing every failure to provide water services and useable rural roads.
- Ensuring, as a priority, that the chicken export drive succeeds.
Inadequate government attention and energy contributed to the failure to boost exports in the first phase of the poultry master plan. That must not happen again in Phase 2, with exports identified as critical to the long-term prosperity of this strategic national industry.
Soaring diesel and electricity prices could reduce the roaring agricultural engine to a spluttering two-stroke. FairPlay has provided a list of urgently needed actions to prevent that. Our call to government is to get moving on all of them. Now.
