Severe drought, driven by the current El Niño cycle, continues throughout Africa south of the Sahara, and South Africa is one of the countries being hardest hit. According to a new policy brief from the Bureau for Food and Agricultural Policy (BFAP), South Africa’s total rainfall in 2015 was the lowest national annual precipitation seen by the South African Weather Service since 1904.
The effects of the drought vary from region to region and from crop to crop. Five provinces have been declared disaster areas, and South Africa’s maize crop is seeing particularly large negative effects. According to the Crop Estimate Committee (CEC) of the Department of Agriculture, Forestry and Fisheries, a significant share of the country’s 2016 maize area was only planted in January, rather than in the optimal planting window that occurs four to six weeks earlier; this late planting has led to the fear that the CEC’s original prediction of a 7.4 million ton maize crop in 2016 could in fact be optimistic. Taking the drought’s potential effects into account, the BFAP report presents a second scenario in which estimated crop yields reach only 6.6 million tons.
Due to these anticipated lower yields, it is likely that South Africa will need to import a significant amount of maize this year to meet domestic demand; in 2015, domestic maize consumption exceeded 10 million tons. Under the CEC’s baseline estimates, 2016 imports of white maize could reach 856,000 tons and yellow maize could reach 1.9 million tons, at a cost of 11.5 billion Rand. Under the BFAP’s alternate estimates, white maize imports will increase to 1.2 million tons and yellow maize imports to 2.2 million tons, at a cost of R14.5 billion. South Africa is typically a net maize exporter, and these unprecedented import volumes could strain the country’s infrastructural capacity and hinder the receipt of imports by populations facing shortages.
In addition, South Africa’s lowered maize yields will not only affect domestic maize consumers; many neighboring maize-deficit countries, including Swaziland, Lesotho, Namibia, Botswana, and southern Mozambique typically depend on South African maize exports. Since the drought’s effects have spanned the region, imports will need to be sourced from outside the region in order to meet all of these countries’ needs. Mexico and the United States have the potential to meet the need for white maize imports; however, white maize from the US faces challenges due to South Africa’s regulations regarding genetically modified (GM) crops.
Food prices of course relate strongly to crop yields, and South Africa’s agricultural commodity prices are already seeing impacts from both the drought and a weakening exchange rate. The BFAP’s reduced yield scenario results in lowered production volumes and prices relatively unchanged at import parity levels. South Africa’s agricultural sector typically sees a positive trade balance, but this year’s maize sector will likely shift to a negative trade position. Thus, instead of earning revenue and contributing to the country’s GDP, the maize sector will incur costs due to the price of imports.
While agriculture contributes only a small amount to South Africa’s GDP, the severity of the current drought will likely lead to impacts beyond agriculture. The BFAP report uses a Computable General Equilibrium (CGE) model to estimate the drought’s impact, in terms of percentage increase/decrease from normal levels, on several key macroeconomic indicators. The estimations project that the drought will cause general inflation in the country to increase and will lead to a continued weakening of the Rand; these in turn will lead to significant reductions in government spending, household consumption, and total GDP. Income from all production factors also declines under the estimation, particularly for skilled labor.
The report also finds that the cost of the staple consumption basket in January 2016 increased by approximately 19 percent from January 2015; a further increase of 10 percent in the next few months is expected.
What does this mean for the country’s smallholder farmers? Many poor rural households continue to be dependent on household agricultural production, and the report estimates that more than 1.2 million individuals will be affected by the current drought. While data regarding smallholder maize planting is limited, estimates suggest that in the Eastern Cape region of the country, plantings could be as low as 30 percent of the usual area; around Mthatha, this number is closer to 50 percent of normal plantings. Of particular concern is the impact the drought will have on smaller plots and backyard gardens, which play a large role in households’ food security.
In order to protect long-term food security and agricultural growth, policymakers and private sector actors will need to work together in the short term. The report recommends that immediate action be taken to address the legal and regulatory challenges to white maize imports from the US. Urgent action is also needed to coordinate the country’s logistical, infrastructural, and transport resources to make sure that maize imports can reach areas in need; the South African government has taken a first step to address this need by forming a working group to establish a Grain Logistics Coordinating Committee, in collaboration with the South African Cereals and Oilseed Trade Association.
To combat long-term food price inflation, South African agriculture needs to be able to bounce back from this drought. There are several long-term policy recommendations that can help ensure future agricultural production and protect farmers against future risk. These include crop insurance, continued investment in agricultural R&D, and the creation of an attractive enabling environment that encourages investment in and competitiveness of both small-scale and commercial farmers. Closer and more transparent monitoring of exchange rate movements and household-level expenditure and consumption data is also needed, both in the short and the long term, in order to anticipate and respond to the impact of future weather shocks and agricultural price increases.
By: Sara Gustafson, IFPRI