In his Sona speech, President Cyril Ramaphosa spoke about the cost-of-living crisis and made a reference to policies in the pipeline to address it.
“National Treasury is considering the feasibility of urgent measures to mitigate the impact of load shedding on food prices,” the president said, without elaborating.
We understands that the measures will be outlined by Finance Minister Enoch Godongwana in his National Budget speech on Wednesday, and they will not include outdated or radical policies such as price controls.
Rather, according to more than one source familiar with the matter who spoke on condition of anonymity, they will focus on giving farms incentives to generate their own electricity, which will presumably include the installation of solar panels.
They will be focused on intensive power users such as farmers who irrigate, as well as the dairy and poultry sectors, among others.
Another measure will be a managed load shedding schedule that takes the needs of farmers into account.
These will be near-term interventions focused on the supply side rather than the consumer side.
It remains to be seen precisely what the incentives will entail, but tax breaks for self-generation initiatives come to mind. Ramaphosa also announced in his Sona that tax incentives would soon be unveiled to allow households and businesses to tap solar energy using rooftop panels.
On the farm front, urgent measures are clearly required to mitigate the impact of power cuts, which in recent months have reached unprecedented levels.
Load shedding is one of the key domestic drivers of food inflation in South Africa, because it triggers screw-ups in the production pipeline that send farmers’ costs soaring.
Astral Foods is one of many examples. The poultry producer said in a trading update in late January that it expected its earnings for the six months to the end of March 2023 to tank at about 90%, largely because of the toll taken by rolling blackouts, which disrupt the ventilation of chicken coops and the slaughtering of birds in abattoirs.
Irrigation is another major concern because the rains this summer’s growing season, though abundant at times, have also been erratic. About 18% of the staple maize crop in South Africa is irrigated, as is much of the country’s citrus and sugar production.
Providing incentives for farmers to generate their own electricity is also a policy that will probably prevent the jackals of corruption from gaining access to the hen house.
It’s hard to see how the cadres could cash in on the self-generation drive, which may explain why the ANC has been so reluctant to embrace the policy until the scale of the crisis forced the government’s hand.
Another way to view the issue is through the prism of reducing the onerous cost of doing business in South Africa. The Ramaphosa administration has banged on about doing this for years, but, like so much else, has little to show for it.
Zwanani Mathe | Eskom must improve energy availability as a quick win to end loadshedding
Meanwhile, the cost-of-living crisis continues to gnaw at South Africa’s frayed social fabric. Consumer inflation in the year to January slowed from 7.2% in December to 6.9%, which is still an elevated level. But food inflation quickened to 13.8% from 12.7% in December, and part of this acceleration is a consequence of rolling blackouts.
Bread and cereal prices were up almost 22% in the year to January, and meat prices were 11.2% higher. And this is unfolding against the backdrop of stagnant and declining real wages, a state of affairs that will hit poor and working-class households the hardest.
Enabling commercial farmers and others in the food production chain to generate their own power more easily and cheaply will not immediately put a brake on food prices. But, over time, it should help to ease some of the pressure on food inflation, which soared last year in the wake of Russia’s invasion of Ukraine, a major grain producer.
Rolling blackouts are reaping a bitter harvest across the South African economic and social landscape, and rising food insecurity is one of the harsh consequences.
Establishing the right policies now – policies that could have produced a different outcome if they had been implemented years ago – is urgent to prevent the withering vines from producing the grapes of wrath.
