CEO warns of food shortages in South Africa
Failure to address load shedding will lead to crop failure, higher food prices and shortages of certain food products in South Africa, says Iain Williamson, the CEO of the largest life insurer in the country Old Mutual Ltd.
In the company’s latest preliminary results for 2022, he noted that this would further dampen economic growth in the country – which currently faces high inflation on top of an energy crisis.
Williamson said that to control inflation early this year, the South Africa Reserve Bank (SARB) increased the repo rate by 25 bases. Economists anticipate another rate hike at the SARB’s second meeting in March.
While the International Monetary Fund’s World Economic Outlook for January 2023 has forecast growth in Sub-Saharan Africa at 3.8% for 2023, South Africa’s growth prospects are much lower, with the SARB and banking institutions projecting a sub-0.5% figure for the year.
Williamson said that rising fuel and food prices pushed inflation metrics much higher in 2022. While inflation has been easing, food inflation has been tracking higher.
Data from Stats SA for January 2023 showed that food inflation hit a 14-year high at 13.4% – the highest point since May 2008.
The Bureau for Food and Agricultural Policy (BFAP) said load shedding has steadily escalated already high food prices.
On top of this, the cost of farming has increased significantly, with businesses having to make adjustments to work around rolling blackouts – operating costs which may be passed onto the consumer.
“Load shedding remains a major risk that will likely see food prices in South Africa remaining higher for longer,” BFAP said.
Eskom’s failings have also led to supply chain constraints. Last month, for example, meat producers across the country raised the alarm over food security in the country.
The supply chain executive for Beefmaster Group, Roelie van Reenen, said that load shedding is crippling infrastructure required to maintain farmers all along the agricultural supply chain.
According to Van Reenen, farmers rely on irrigation to water their crops, but frequent power outages make it impossible.
This is causing crops to wither, leading to a crisis in the country’s food security. He warned that prolonged load shedding could result in food shortages and price increases as farmers cannot afford to mitigate the effects of power cuts.
Although a slew of initiatives to bring energy security to the country has been instituted by both government and the private sector, there seems to be little short-term repressive from rolling blackouts on the prison anytime soon.
Financial results
In its annual results, Old Mutual reported a 10% rise in full-year profit – benefitting from a decrease in mortality claims in its life insurance business.
Headline earnings increased by 10% to R7.94 billion, up from R7.20 billion in 2021. Headline earnings per share were recorded at 180.1 cents.
The company also declared a full-year dividend of 51 cents per share. The company was able to recover from two damaging years of the pandemic, where mortality claims significantly increased.
Williamson said that he is very pleased with the company’s ‘robust operating performance’ with strong sales and earnings.
“We demonstrated resilience as we continued to navigate a challenging environment and remained true to our purpose of championing mutually positive futures every day,” he said.
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