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Apart from the Reserve Bank’s increased interest rate announcement yesterday Nedbank expects that South Africa’s interest rates will increase only once more. Furthermore, John Hudson, Nedbank’s national head of agriculture, said during a media event held recently, that the prime lending rate might reach a peak of around 11% in the first half of 2023.
Shortly after the event, the Reserve Bank made the announcement that the Monetary Policy Committee (MPC) decided to increase the repo rate by 25 basis points to 7,25% per year, effective from 27 January 2023. Consequently, the prime lending rate increased to 10,75%.
“We’re nearing the end of the interest rate hiking cycle and while the higher interest rates will have a negative impact on farmers with debt, those who devise strategies with their bankers to steer through the current storms will emerge stronger,” Hudson told journalists. He added that it could be sensible to restructure debt and/or possibly re-evaluate plans to expand farming businesses.
During the same event, Wandile Sihlobo, chief economist of Agbiz, said the impact of load shedding has been more severe than anybody anticipated. “Overall economic growth could decline to below 1% and we could even fall into a technical recession. The next six months are going to be very tough,” he said.
According to Sihlobo, farmers are especially under pressure and this is a great opportunity for government and the private sector to come up with incentive schemes to help farmers make the switch from coal-dependent energy to more sustainable energy sources. “Load shedding will last for at least two more years and there’s no doubt that we will see an uptick in alternative energy such as solar and wind farms,” he remarked.
Sihlobo is, however, especially concerned about the short-term impact that load shedding has on irrigation farmers. “Currently, primary agriculture directly employs 873 000 people. Two thirds of these people are employed by irrigation farmers, particularly in fruit and field crops. Load shedding directly impacts the viability of irrigation farmers and therefore we could see massive job losses if a solution cannot be found soon.”
However, Sihlobo reiterated that South Africa remains a food-secure country for now. – Susan Marais, AgriOrbit
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