Farm debt soars to N$7.1 billion
One of the country's most important productive sectors is swimming in a sea of debt, heightening fears of food insecurity.
02 June 2020 | Agriculture
Agricultural debt stood at N$7.1 billion in June last year, while post-drought recovery is expected to take between three and five years, a new report states.
This is in comparison to the N$6.3 billion farm debt in June 2018 and does not reflect the challenges that the sector now faces with the coronavirus pandemic and the uncertainty about the post-pandemic future, which could negatively influence investment in agriculture.
The Namibia Agricultural Union (NAU) says in its quarterly review that the agricultural sector is working hard to maintain current employment and to provide the commodities and food needed by the market. The sector sustains about 70% of the Namibian population and supports a major part of the rural economy. “The uncertainty surrounding the coronavirus pandemic puts pressure on markets and the disruption of the global economy is likely to affect export commodities.
Therefore, effective cooperation and collaboration is a necessity, and the Namibian agricultural sector would have to re-strategise to either improve or maintain their competitive edge,” the union said.
The NAU elaborated on how some of the sectors have been affected by the coronavirus.
According to the union, the high cost of fodder production has made dairy production in Namibia less competitive over the years.
“To reduce and control feed costs, most dairy farmers are using spent grain, which is a by-product of beer brewing sourced from Namibia Breweries.”
However, because of the ban on alcohol sales during the coronavirus state of emergency, there has been no spent grain available. This resulted in high feed costs and reduced milk production.
The union further said the prolonged drought in southern Namibia placed karakul farmers under severe financial pressure, consequently leading to undesirable trends in 2018 and 2019.
The coronavirus pandemic added more challenges to the already strained sector and its therefore regarded as one of the economic sectors that have been the worst hit by the pandemic.
Travel restrictions under the state of emergency affected the transportation of karakul pelts by air to auction markets and resulted in the cancellation of the April 2020 auction. As an alternative, 3 228 pelts were sold on an electronic platform and 27 393 pelts were deferred to the auction in September. “Swakara farmers are therefore experiencing serious cash flow challenges.”
The NAU said while the poultry sector experienced strong growth in 2018 and 2019, the biggest challenge during the lockdown period has been the cross-border imports of raw materials and the closure of informal markets, which resulted in surplus production and loss of income.
The sector caters for over 67% of the local consumption.
The slowdown in economic activities has affected consumer income, changed purchasing behaviour and protein demand, which affected the livestock and meat industry.
“A decrease in the demand for red meat, especially in South Africa, is expected to affect the demand of weaner calves in the South African and Namibian markets.”
The NAU said a lack of demand of weaners from the Namibian market could create an inability to sell livestock and further strain farmers' cash flow.
“Changing market demand can be detrimental to the Namibian beef sector because it is still recovering from the impact of drought.”
Many farmers diversify into tourism and hunting to improve their cash flow.
The NAU said because of the challenges to the tourism and hunting sectors during the pandemic it is proving difficult to keep paying normal salaries, maintain regular working hours, as well as to keep employees.
“Moreover, there is uncertainty as to when international travel will resume and when foreign tourists will gain the confidence to tour again, because the time it takes for activities to normalise will determine the extent of the damage to the sector.”