Farmers feel the pinch

Local farming has been crippled by prolonged droughts, disease outbreaks and low prices for meat.

28 September 2018 | Agriculture

The surge of commercial farms being put up for sale or defaulting on loans continues unabated, as farmers buckle under increasing burdens linked to environmental and financial problems as well as uncertainty about the outcome of the land reform debate.

Moreover, as older generations of farmers near retirement, younger generations are turning their backs on the low profit and strenuous family business, experts say.

In 2016 Namibian Sun reported that the crippling cost of the prolonged drought, as a primary factor, in addition to revised animal import rules, disease outbreaks, low meat prices and high operational costs, had pushed many commercial farmers to breaking point and led to a steep rise in farm sales and defaults.

Now worries about the government's land acquisition policies have been added to the list.

Maans Dreyer of Aqua Real Estate says this trend has continued, with more and more farms being offered to the government each year.

His estate agency alone offered 184 farms to the government during the 2016/17 financial year, and 184 farms the next year.

Since April this year, 45 farms have been offered for sale.

Comparably, 132 farms were offered through Aqua Real Estate in 2014, and 139 in 2015, while 175 farms were offered by November 2016.



Hit hard

Dreyer says in his experience, the main reasons for increasing farm sales are the continued drought conditions in many parts of the country, despite good rains received in some areas.

Moreover, problems related to the export of small stock on the hoof to South Africa have tightened the financial noose.

He says the upcoming land conference, and the land reform debate in South Africa, have created uncertainty among farmers, often leading to a mindset of “rather sell now before land prices drop if expropriation talks become reality”.

Namibia Agricultural Union (NAU) executive manager Roelie Venter says the challenges highlighted by Dreyer are correct.

Venter adds that farming is not for the faint of heart, explaining that under normal circumstances, “the profitability of farming is cyclical and inherently low, with an average return on investment of 3% per annum”.

Moreover, as farmers approach retirement age, “the new generation do not regard farming as a permanent career choice” due to low profits and “insecure policy environment in terms of land, markets and more”.

He says the upward trend of sales is set to continue.



The big crunch

Dreyer adds that foreclosures have “increased considerably over the past year”.

He says as a result “banks are becoming very strict on the lending criteria and require a deposit of plus minus 30% of the value.”

Agribank spokesperson Rino Muranda says while Agribank lending criteria remain the same, the extent of the arrears problem and the more than N$500 million outstanding payments are well publicised.

He says the bank cannot comment on the specifics of foreclosures, but it is doing “everything possible within the legal framework to collect these monies” and has consequently strengthened its collections approach as part of its financial sustainability.



No go

Dreyer warns that farms in good areas that are priced reasonably are selling, but farmers who expect to sell above market indicators can expect a long wait.

He estimates that the land reform ministry has around N$140 million available for the current financial year, which is not “remotely enough to purchase the offered available farms suitable for resettlement”.

Dreyer calculates that at current valuations, the government could likely purchase between 12 and 14 farms a year with the available budget.

“With 45 farms offered by our office alone, this means that the vast majority of the offered farms will be waived again, due to a shortage of funds and not due to a lack of farms offered.”

NAU's Venter notes that farm prices per hectare have not changed much, according to research the NAU conducted this year, comparing the relationship between market prices for land and producer prices for the periods 1985 to 1989 and 2017 to 2018.

JANA-MARI SMITH

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