Caught in a cash crunch with rising input costs and stagnating prices amid fears of land seizures without compensation, South African farmers are leaving the land in their droves, putting thousands of farm workers out of work and threatening to trigger a major economic crisis.
According to Landbou Weekblad, 20 640 farms in the country are currently up for sale. Many more farmers could pack up over the next year, industry experts say.
But selling farms is becoming increasingly difficult, they add, and many remain unsold.
Last month, Property24 said there were more farms up for sale than at any time in the past 20 years.
Agri-Sector Unity Forum chairperson Japie Grobler was worried that many farmers would simply give up over the next year.
He was concerned that many of them had failed to calculate the real costs of production.
“For a lot of farmers, the true costs of production are not calculated. What about overheads like electricity? It is going to be especially tough this year with the low prices and very high costs of production. We are going to face a lot of farmers not being able to farm for at least another year,” he predicted.
According to chief economist at Agri-SA Hamlet Hlomendlini, the annual turnover of farms for sale was normally 5% to 6% of the total.
However, current figures showed that more and more farmers were financially constrained and opting to sell.
“Being unable to recover from the drought might be one of the reasons leading to some of the farm sales that we see in the market. Fears of expropriation without compensation, to a lesser extent, might also be the reason.”
Hlomendlini recently raised concern that the major credit rating downgrades of banks last month could exacerbate the more than R144 billion debt crisis faced by commercial farmers.
Because farmers rely on financing from commercial banks and the Land Bank, the recent credit downgrade of the banks would have an adverse impact on the sector’s recovery.
The downgrading of banks meant that it would be more expensive for banks to borrow money and that might get passed on to consumers in the form of higher interest rates and/or bank fees.
“This will have a huge knock-on effect on the ways consumers and business can access credit to make purchases and plan their finances.”
The tough times could also mean thousands of job losses, because the farming sector accounted for 5% of all employment.
This was double the contribution of the mining sector and almost on a par with the transport sector.
“It is therefore fundamentally important that agricultural development must be made a national priority because agriculture is an area of growth, and it plays a crucial role in the broader economy.”
Grobler said that escalating production costs, some of which could be attributed to the recent drought, meant the industry’s collateral reserves were drying up, making credit access and the debt cycle even more strenuous.
“Reserves are now being emptied out and there is not a lot of collateral that farmers can use any more. They have used up everything.”
Hlomendlini said that in the past two months he had noticed an uptick of properties for sale.
However, he added that the spike in the number of farms for sale would not necessarily be a loss to the industry if they were being bought for the purpose of farming.
He also suggested that sales trends in farming property indicated centralisation and consolidation of the industry, with big farmers buying out smaller ones.
However, he added, South Africa’s slow economic growth and growing financial constraints were making commercial farms a hard sell. – email@example.com