Tariff hikes to impact on Agriculture sector - NAU

By Kelvin Chiringa
August 2016
Prime Business

The hikes in fuel and electricity tariffs spell a gloomy picture to the already lackluster economy with the agricultural sector bound to feel the heat the effectively if projections from the Namibia Agricultural Union (NAU) are anything to go by.

Speaking to Prime Focus Magazine, Namibia Agricultural Union (NAU) Assistant Manager, Jaco Hanekom, submits that the tariff hikes in electricity coupled with an increase in the cost of fuel would likely worsen the agricultural sector’s performance, which has projected a steady decline over the past two decades.
“Specifically for electricity, for the past ten years costs have increased by 336.59%, and now this is going to kick in the second quarter. If we update these statistics to the second quarter there is going to be another jump by 14%. The overall costs for farmers will near 400%,” says Hanekom.

Hanekom goes on to posit that these hikes put farmers in a precarious situation as they do not have any control of their expenses but having to face the difficult option of increasing production at a low expense.

“The farmers themselves do not have any control of their expenses, they will not be able to call for the reduction of the tariffs, but what they can do is to focus on their own activities bearing in mind that productivity has to be achieved at low costs,” he says.
 However, Hanekom reasons that individual farmers who have not yet embraced the use of solar energy are bound to feel the effects of the steep electricity tariff hikes more.
Chairperson for the Steinhausen Farmers Association, Kay Dieter Rumpf, says that the ban on imports of live weaners into South Africa and the drop in prices for cattle, coupled with the rise in electricity tariffs have a boomerang effect that translates to job losses in the sector due to financial constraints.

“In general, any increases in our production has an impact on the current economic situation, regardless of whether one is a commercial or communal farmer. Any increases of any kind has a negative impact on the cost of production. The closure of borders for the export of live weaners to South Africa makes it even worse, the price of  has dropped drastically  by 30%  on auctions for cattle in general, any increase of tariffs amounts to a loss of income which makes it a serious  issue since employers will not be able to pay their workers,” he says.

Concurring with these sentiments, Principal Officer for the Agricultural Employers Association (AEA), Danie van Vuuren submits that the rising fuel and electricity costs comes as a shock to the agricultural sector which has reflected a bad performance in the last quarter.

He says the situation has come in to press hard on the farming community that is already reeling from the effects of extremely low rainfall and water scarcity.

“It is also came as a shock to the farming community because we are in a drought situation now. To get an increase three times the inflation rate is a shock because it is now an expense that you must cater for, and the income is just not there to absolve all these tariff increases,” says van Vuuren.

Van Vuuren notes that the initial increase of 31% in electricity tariffs was met with disapproval by stakeholders from all the sectors of the economy as it posed a huge threat to its performance sectors, and although the Electricity Control Board (ECB) came to an agreement of 16%, the standing percentage increase of electricity puts a dent to the agricultural sector.
“Given the facts we got from ECB and Nampower, we understand the 16% percent (increase) that was approved, but it absolutely has a negative impact to the sector as it increases burdens on farmers,” he tells this publication in an exclusive interview.

However, Vuuren foresees many farmers having to be forced to embrace renewable sources of energy to cushion the agricultural sector from these economic shocks.

“What I definitely think farmers will do is they will definitely look at alternative energy sources. They will go back to wood, the donkey system for geysers instead of electricity because there was at some stage just before and then after independence that Nampower really took electricity lines to commercial farmers who then shared the costs,” he says.
Yet with the prevalent increases in tariffs year by year, Vuuren believes it was not prudent for farmers to get electricity all the way from the national power utility.

However, he consents to the dismantling Namibia’s over reliance on the southern African Power Pool as the costs came in time to bite hard on the economy
“What we must do is to decrease our dependency on power imports and promote energy generation from within Namibia like the approved Independent Power Producers, we have almost 550 days of sunshine, and that is a natural resource that is under-utilized in Namibia,” he says.