Article written by Maluta Netshaulu (Senior Manager of Agriculture, Nedbank Business Banking)
Food security remains a major concern as businesses throughout the world struggle to get to grips with the Covid-19 pandemic. The lockdown has affected agriculture exports also. But as the country eases lockdown regulations, the ability of South Africa and the Continent to look after its people remains high on the agenda.
According to the fourth annual Global Report on Food Crises (GRFC 2020), Africa has the largest numbers of acutely food-insecure people in need of assistance in countries badly affected by weather events, particularly in the Horn of Africa and Southern Africa, followed by Central America and Pakistan. Conflict, insecurity, weather extremes, desert locusts, economic shocks and Covid-19 are expected to be the key drivers of acute food insecurity.
Food insecurity refers to the lack of secure access to sufficient amounts of safe and nutritious food for normal human growth and development and an active and healthy life. According to the United Nations Sustainable Development Goals (SDGs), the second out of 17 challenges, is Ending Hunger. In sub-Saharan Africa, the number of undernourished people increased from 195 million in 2014 to 237 million in 2017. This report was done before the impact of Covid-19 was established.
Agriculture is no stranger to adverse external factors presenting risk to the point of business continuity being threatened. Climate change, pests, diseases, and a volatile currency are some of the external factors that this sector has to face year in and year out, with the added pressure of nations depending on this sector for food security.
The fears about the potential disruptions that the novel Coronavirus could cause global supply chains have raised questions on whether South Africa could experience food shortages in the near-to-medium-term. From a national perspective, we doubt this would be the case, at least for most food products. South Africa is an agriculturally endowed country, generally a net exporter of agricultural and food products. What’s more, there are prospects for an abundant harvest of staple grains and fruit this year, which will increase the local supplies.
Businesses that are exposed to global markets, and are dependent on income from exports, face a real challenge that demand is severely contracted. This will ultimately affect cashflow ensuring that pressure will originate as a result of a mismatch in meeting forward exchange cover. Nedbank Business Banking has solutions to alleviate cashflow pressures through the provision of temporary short-term overdrafts or the extension of import facilities.
The Covid-19 pandemic has amplified the urgent need to address bottlenecks in the smallholder farming communities and cultivate the vast amounts of underutilised land across the country.
This was also the message delivered by both Professor Ferdi Meyer, Managing Director of the Bureau for Food and Agricultural Policy (BFAP) and Dr John Purchase, Chief Executive Officer of the Agricultural Business Chamber (Agbiz) in a webinar hosted by Nedbank Business Banking.
‘What the pandemic has made very clear is that there are two distinct levels of food security – at a national level, which is secure, and at a household level, which is very precarious,’ says Meyer.
Purchase agrees, saying that the situation was fragile even before Covid-19. ‘We must acknowledge that the Zuma administration was disastrous for South Africans: per capita GDP was cut from USD8000 to USD5200, which means that South Africans are now roughly 25% poorer in US dollar terms than before the Zuma years.’
Then came Covid-19 and the lockdown which Purchase says ‘cut off the legs’ of the informal food supply network. ‘Informal trade was ceased, which was a remarkably efficient mechanism, so physical and financial access became problematic and this has created a humanitarian crisis on the same scale of the pandemic,’ he says.
Purchase says a number of initiatives are in place to support this sector, particularly to weather the storm created by the pandemic: the Department of Agriculture, Land Reform and Rural Development has ring-fenced R1.2 billion to support around 15 000 small-scale farmers, and Agbiz is working with the Office of the Gauteng Premier through the Public-Private Growth Initiative to develop food supply chain security in the informal market, the objective of which is less about food aid, and more about small-business development opportunities.
Nedbank is proud to be an integral partner in the food and fibre value chain. As a bank, we subscribe to the SDGs because they represent a universal agreement on the economic, social and environmental priorities to be met by 2030. Nedbank’s purpose, which guides our business strategy, is to use its financial expertise to do good for individuals, families, businesses and society.
Our solutions are developed with the industry challenges and United Nations SDGs in mind. For example, at its current state, the national grid is unreliable and expensive with huge ramifications for the productivity and sustainability of the sector. The ripple effect of this can result in job losses and increased poverty. Our solution to this problem is our Renewable Energy and Efficiencies solution – the solution is structured (over 10 years) in a cashflow-friendly manner and accommodates future savings to support repayment ability.
When it comes to climate change and adverse climatic conditions, Nedbank has developed a solution ideal to combat the impact of such conditions on the horticultural sector, which helps improve the packout percentage by protecting produce from sunburn, hail, frost, high speedwinds, birds and cross-pollination. Not only does this solution help farmers to remain profitable and sustainable, it also prevents job losses.
Crime is a concern in our society and the agricultural sector is not immune. To facilitate cashless transactions at Farmgate, we have developed Send-Imali to help farmers pay their farmworkers through their cellphones. Farmworkers also have the option of opening a MobiMoney account linked to their cellphone to enjoy features similar to that of a traditional bank account, like withdrawing small sums of money, buying airtime, transferring money to other people, etc.
Smallholder and emerging farmers and the informal sector play a critical role in our food system. Investment in the segments contributes to increased agricultural activity, economic growth and job creation. These segments are also efficient as a result of their proximity to rural area and townships, which helps with a continuous supply of fresh produce to communities with convenience and affordability, thus contributing to household food security.
Through our Enterprise Development division, the bank partners with various organisations with the objective to widen its reach to communities where assistance is needed the most, such as capacity building and investment in community projects. Beyond this, our Business Banking agriculture team uses its expertise to provide input at various industry forums that are aimed at developing innovative solutions through risk-sharing approaching to attract investment in the rural agricultural landscape such as smallholder and emerging farmers and community projects under communal land.