With South Africans dealing with indefinite load shedding as high as Stage 6 on a daily basis, we have to wonder how this is going to impact the price of our regular food staples.
Arguably one of the hardest-hit sectors is the agricultural industry, where farmers are having to keep their entire operations running on generators fuelled by diesel. Due to South Africa’s ever-rising fuel prices and Eskom’s constant breakdowns, this is often a costly option.
Dairy production and distribution has had time in the national spotlight thanks to the Love Local Dairy campaign which launched in September 2022 and aims to put the power of informed purchase decisions into the hands of consumers, encouraging them to purchase only locally produced dairy foods. One of the key concerns for consumers is the issue of maintaining the cold chain.
Creighton dairy farmer and owner of Bush Hill Cheese, John Kidger, outlines measures that farmers have to put in place to ensure that the cold chain is not broken in the production and supply of dairy products.
“We have to ensure we have a reliable alternate power supply, namely a generator, in the dairy and at the cheesery. This is a massive undertaking for the cheesery as the cold rooms require 24/7 cooling. Other farmers have installed solar systems to bridge these power challenges. And even though all dairies do have stand-by power for emergencies such as storm outages, these are not designed to run for extended periods every day.”
Load shedding is also wreaking havoc with the poultry supply in the country. Some farmers are forced to run generators on an extensive level just to keep their chickens alive, but there are also issues at the abattoirs.
Marlize Keyter of Astral Foods, the largest integrated poultry producer in South Africa, says that the poultry division has experienced severe operational disruptions due to load shedding.
“This has continued and led to abnormal additional costs as well as substantial production cutbacks of at least 12 million broiler placements. Abnormal costs have been incurred on a backlog in the broiler slaughter programme that have resulted in older and heavier birds consuming higher levels of feed.”
What percentage of profit is lost by the farmer due to load shedding?
“It’s difficult to quantify,” says Kidger, “however our diesel bill in December for example cost us an additional R40 000. This does not include the damage load shedding does to refrigeration units and cooling systems at the dairy.”
David De Jager, CEO of Tip-Top Milk, a national milk logistics and testing company, says much of the extra costs are being passed on to the consumer.
“With input costs in agriculture soaring, the farmgate price of raw milk has increased to record highs worldwide. Without a constant electricity supply, farmers and the dairy industry as a whole are struggling to cover costs. The result, according to Stats SA, is that food inflation in South Africa was at 21.8% in January. Consumers are paying for the ever-increasing fuel costs to run generators. It is well publicised that generators are costing some retailers R60 million per month, which has a direct impact on the consumer. Due to load shedding, cold chains cannot be kept intact. The result is much higher volumes of wastage and spoilage within food chains. This has a direct impact on the price the consumer pays for a product.”
Astral indicated that a substantial poultry selling price increase would be required to recover its high feed input costs and the impact of load shedding. Based on prevailing market and operational conditions, the cost to produce chicken exceeds the selling price by at least R2.00 per kilogram.
Janine Caradonna of Pick n Pay says that the retail group is doing everything that it can to avoid passing the cost on to customers. “We have always kept our stores open and our shelves stocked for customers during load shedding. This does come at a cost as we run emergency generators, but we can assure customers that we are keeping our stores open, our shelves full and our chillers operating to keep food fresh.”
It was announced during the 2023 budget speech that the diesel fuel levy refund would be extended for food manufacturers, but it has excluded food retailers. Zinhle Tyikwe, CEO of the Consumer Goods Council of South Africa, which represents SA’s biggest food retailers, says that the government needs to understand that the food value chain doesn’t start and end with food production, and that food retailers need a tax break “or more will go hungry”.
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