Business

Farmers face ruin as consequences of strikes take root

Lynley Donnelly

South Africa's fruit industry is beginning to tally the losses after two weeks of unrest by striking farm workers across the Western Cape.

The country's table grape industry was among those hardest hit by strikes. (Gallo)

The full scale of the financial loss, both in terms of lost production and damage to property, is not yet certain, but industry bodies have raised concerns that workers' demands for a minimum wage of R150 per day may shut down marginal farms, adding to the country's unemployment woes.

The wage demands come at a time when farmers face increases in other areas, including electricity hikes and shipping costs.

The country's table grape industry was among those hardest hit. The Hex River Valley – which includes De Doorns, the epicentre of worker unrest – makes up 34% of industry production by volume and contributes 28% in value terms, according to Rhomona Gounden, manager for trade, marketing and communications at the South African Table Grape Industry.

South Africa exports R3.5-billion worth of table grapes. Total losses to the industry would only become clearer once the season rolled out, but the Hex River Valley region had seen 50 hectares, out of a total of 3956 hectares, burnt down, said Gounden.

The establishment cost for a hectare of table grapes was between R250 000 and R280 000 and production costs were R150 000 per hectare, she said.

Many producers would battle to cope with the extent of the increases being demanded.

Deciduous fruit industry
"A major number of table grape producers, who tend to be in the category of small producers, won't be competitive in the markets in respect of price and so returns at the farm gate will most likely be negative," said Gounden.

The country's deciduous fruit industry faces similar challenges, according to Mariette Kotzé, information manager for agricultural economics at Hortgro.

Deciduous fruit, made up of pome fruit (such as apples and pears) and stone fruit (such as apricots and nectarines), brought in R3.8-billion in exports and R1.6-billion in local sales. Combined with processed and dried fruits, the value of the deciduous fruit industry amounted to R6.3-billion for the 2010-2011 season, said Kotzé.

The stone fruit industry would be most affected, she said, because  these fruits were currently being harvested, packed and exported. If total production for this harvest has been hit by the strikes, the losses could amount to R114-million. This figure could increase in the weeks to follow, she said.

The pome fruit industry could also be affected because  the sector was in the orchard preparation process to ensure a quality harvest.

South Africa could also lose its status as a preferred supplier, she warned. "On top of these damages and lost time, it is also possible that South Africa could lose its credibility as a reliable supplier of fresh fruit."

Importers would look to other exporting countries that were capable of guaranteeing produce at the time that it was required.

Sharp rise in food prices
"Other southern hemisphere countries are more than capable of filling this gap," she said.

Labour currently represents 30% of input costs for farmers and cannot be seen in isolation of proposed cost increases in electricity and shipping, set to rise by 16% and 30% respectively.

"No industry could afford a 100% increase in one of its largest input costs," Kotzé said.

Because of inflation, farm labourers, who make up some of the country's poorest workers, are faced with the ongoing erosion of their meagre incomes, particularly in terms of food prices.

According to a recent study by the University of South Africa's Bureau of Market Research, households that earned less than R54 344 per year spent nearly half of their money on food. This was followed by housing and electricity, which accounted for 15% of poor households' expenditure.

Meanwhile, the latest consumer price inflation figures for October rose to 5.6% year on year, owing to a sharp rise in food prices.

According to Kevin Lings, economist at Stanlib, food inflation has risen by an annualised 21% over the past three months.

The upward pressure on food prices was "relatively broad-based", he said, and included a 9.5% month-on-month surge in vegetable prices, a 5.4% month-on-month rise in fruit prices and a 2.8% month-on-month jump in bread and cereal prices.

According to the latest food price monitor, released by the national agricultural marketing council, domestic white maize prices increased by 37.53 % compared with July 2011.

Urban retail consumers paid 16.2% more for 5kg of super maize meal and 46.35% more for 5kg of special maize meal in July, compared with July 2011.

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