1. IDC Agro-Processing & Agriculture
Presentation to focus on:
Background to the drought
IDC interventions
Forecasts
Drought in South Africa
8 March 2016

2. INTRODUCTION
Provinces of Free State, North West, Kwa-Zulu /Natal, Mpumalanga, Limpopo, Gauteng, Northern Cape are under severe drought stress;
Many farmers have to date received only about 60% of their annual rainfall;
Last year’s maize crop at 9,8m tons, which is down from 14,3m tons in 2013/14;
Major El Nino phenomenon – bringing drought conditions
Food price effect could be astronomical – food protests a risk?
Maize production during the 2015 season is just under 70% of the previous season’s,
Prices are over 60% higher than 2014
Though the impact may be felt immediately in food availability and price,
The more concerning impact is on future planting – as they may not be adequate seed supplies for planting

3. South African Agricultural Regions
Only 2 of SA’s provinces have not been affected by the drought, Western Cape and Eastern Cape
and these regions primarily produce
Vegetables,
Fruit and
Some beef in the Eastern Cape

4. IDC INTERVENTIONS

5. IDC INTERVENTION – PREVIOUS FACILITIES (2011, 2012)
To date, the IDC has provided the following disaster relief facilities which has saved a considerable amount of jobs in total:
Landbank (R100 million) – jobs saved (including seasonal jobs)
GWK Ltd (R150 million) – jobs saved (including seasonal jobs)
Gledhow (R22 million) – jobs saved (including seasonal jobs)
The above facilities have been fully drawn, and the account status is considered good.
Previous IDC interventions provided relief funding of over R270 million, saving over jobs

6. IDC INTERVENTION – RECENT FACILITY
The IDC has approved a facility for R400 million
Anticipate support to 437 clients; jobs to be saved
The facility will assist farmers to respond positively to the drought
For companies involved in primary agriculture
Emergency working capital to prevent further losses to current farming operations
Carry over debt
Repairs to and replacement of existing infrastructure resulting from other natural disasters
Utilised as a guarantee to commercial banks
Conditions
Minimum 50% to primary agriculture suppliers to agro-processors
Minimum 50% to BEE farmers
Report on support to women, youth disabled
The current facility was done through the Landbank
Based on the clients that are already on the Landbank books made available to us,
437 clients will benefit from the facility
It is envisaged that over jobs will be saved
The conditions for the facility are that a minimum of 50% should go to black farmers,
We will track women and youth who are supported
In order to support the agricultural value chain and thus sustainability of the agro-processing industry, at least 50% should be earmarked for suppliers to agro-processors

7. Envisaged support – per province
The support to the various provinces is as indicated, and the crops that are likely to be supported through the facility are:
1. Free State:
Summer grains, Oilseeds,
Livestock- Cattle, sheep; poultry
2. KZN
Maize and oilseeds
Sugarcane
Livestock : cattle-beef, dairy
3. Limpopo
Subtropical fruits as well as citrus, forestry
Vegetables - tomatoes, potatoes: most of these are reliant on irrigation, and will be expensive to produce
Livestock - Cattle, goats and game
4. Mpumalanga
Summer grains, Oilseeds
Sugarcane, horticultural crops, forestry
Poultry, livestock-cattle
5. Northwest
Summer grains, oilseeds
Livestock - cattle, small stock, game
Poultry

8. IMPACT OF FACILITY
Provision for bad debts will be made given the high risk profile of the transaction.
Main end beneficiaries
Sugar cane
Livestock
Maize farming
from 5 declared provinces
Because of the conditions under which the facility is being provided, of distress, it is expected that there will be a high level of bad debts

9. OTHER IDC INITIATIVES
Discussions with the private sector for additional support entered into
A member of the Drought Task Team, an initiative spearheaded by Agri SA

10. IMPACT - IMPORTS
Southern Africa is assessing its food security situation
Preliminary indications that the region is experiencing a drought
Stocks available
Predictions are that we would have to import white maize by September 2016 from countries such as Mexico and the US.
Yellow maize will be coming from Argentina, Brazil and the countries in the Black Sea
The main issue will be the price
The importing of maize will hit consumers the hardest
National Agricultural Marketing Council forecasting family spending to increase by at least 25%.
If we end up importing 5 to 6 million tons of maize at R4 500,
the assumption is that if you look at the normal food basket that a family consumes. That basket will increase by 25%.
For a household of four, currently spending R240 for the basket, that will most probably increase to R350 per month.

11. REGIONAL IMPACT and strategies

12. FORECASTS
The 19th Southern African Regional Climate Outlook Forum (SARCOF-19), predicted that the region is expected to receive insufficient rainfall during the forthcoming agricultural season that runs from October 2015 to March 2016.
This climate outlook for the Southern African Development Community (SADC) is not a favourable one as the region is coming from a recent challenging situation which it has not fully recovered from
The El Niño effect has been associated with previous drought periods in Southern Africa. The phenomenon causes the sea temperature to rise significantly in the Pacific Ocean off South America, and the air becomes dry, affecting the rain-formation process.
As this drought ends, there is a high risk of the incidence of the reverse of El Nino, the El Nina effect,
which will especially affect the Mozambican channel

13. LONG TERM STRATEGIES
With the impending extreme weather conditions, the SADC region should prepare for such natural phenomena. For example, farmers could plant crops that do not take long to mature, and the region should invest more with infrastructure development, including roads, irrigation and silos.
Improving the transport network and storage facilities will allow agricultural produce to be moved smoothly from one place with surplus to another needing additional food.
We should invest more in irrigation, conserve dam water, and plant short season varieties.
Most economies in SADC are largely dependent on climate conditions, and any reduction or increase in rainfall often has a negative effect on socio-economic development.
Planning for severe climactic events is necessary to improve sustainability
The region is highly dependent on the natural climate for agriculture and food production.
The most important strategies to be able to withstand any of the vagaries is in infrastructure –
This would be in infrastructure – such as dams and irrigation and storage
Infrastructure to support livestock
And in business models of agro-processors.
An example of how drought can provide opportunities for some, is in an agro-processor who has had growth in their business,
And is able to bide his time as the drought takes root –
Supplies feed
Sources stock for his feedlot cheaply and will sell into a scarce market
Processes and innovation that include water efficient irrigation
Innovation that includes crops that are drought resistant

14. CROSS BORDER ACTIVITY
The Zimbabwe Power Company, said water levels in Lake Kariba have dropped to 41 percent compared with 80 percent this time last year. With expected low rainfall, it is likely to take longer for water levels to be at optimal.
As a result, the Zambezi River Authority, which manages the dam on behalf of Zambia and Zimbabwe, has reduced water allocation for power generation at the dam by Zambia Electricity Supply Corporation (ZESCO) and Zimbabwe Electricity Supply Authority (ZESA).
The power utility noted that there is to be a reduction in power generation at Kariba Power Station from 750MW to 475MW until dam levels have risen to requisite levels.
Another related effect of the drought, which has a significant effect that goes beyond just food is in electricity generation.
In Zambia and Zimbabwe Kariba Power Station is set to reduce electricity generation capacity from 750MW to 475MW

15. CONCLUSION
There is no indication of relief of the current drought conditions;
The below normal rain is expected to continue for the rest of the summer;
Almost the entire country has a high likelihood for warmer than normal temperatures;
Short periods of showers will occur, but is not expected to bring any drought relief