From 2013 to 2019, most areas of Namibia received below normal rainfall for five of the past seven years. This led to the depletion of natural rangeland reserves and decreased water capacity in the country, ultimately affecting agricultural productivity.
Continuous drought and rising debt
During the same drought period, major destocking took place to prevent sizable livestock and financial losses. The marketing of a large number of breeding stock compromised the reproductive capacity of the Namibian livestock sector, which puts pressure on the rebuilding phase of this sector post-drought.
Namibia received good rains at the beginning of 2020 in the cattle producing areas, whereas the south is still crippled by continuing drought. Nevertheless, the good rains received broke the spell of drought and marked the beginning of the restocking phase of the livestock sub-sector. However, farmers entered the restocking phase with negative cash flows.
As of June last year, agricultural debt stood at NAD7,1 billion from NAD6,3 billion in June 2018, representing a 13,1% increase in debt level. Considering the extent of the debt farmers are in, it is anticipated that post-drought recovery will take three to five years. Besides that, the post-drought recovery challenge is now coupled with the COVID-19 pandemic, and there are uncertainties post COVID-19 that could negatively influence investment in the agricultural sector.
Ensuring food and job security
The agricultural sector is working hard to maintain current employment levels and to provide the commodities and food needed by the market. The sector sustains approximately 70% of the Namibian population and supports a great part of the rural economy.
Classifying the agricultural sector as an essential service/industry was a good starting point; however, more can be done to ensure the sustainability of the sector beyond COVID-19. During the COVID-19 period it would therefore be prudent to have minimal disruption of agricultural activities to ensure food sustainability and to prevent adverse effects such as job and livelihood losses that could be detrimental to the rural economy and the Namibian economy at large.
The following sectors were negatively affected:
The dairy sector is cost intensive and 71% of production costs consists of feed. Over the past few years, the high cost of fodder production has made dairy production in Namibia less competitive. To reduce and control feed costs, most dairy farmers are using spent grain, which is a by-product of beer brewing sourced from Namibia Breweries.
However, due to the State of Emergency declaration, which prohibited the sale of alcohol during the COVID-19 pandemic, spent grain has not been available.
The non-availability of spent grain resulted in high feed costs and reduced milk production; it also forced farmers to change dairy rations to supplement the spent grain.
The eight-year drought in the south and south-western parts of Namibia placed swakara farmers and the sector at large under severe financial pressure, consequently leading to undesirable trends in 2018 and 2019.
The COVID-19 pandemic added more challenges to the already strained sector. For that reason, the swakara sector is regarded as one of the economic sectors worst hit by the pandemic. The State of Emergency declaration put a ban on international travel, which affected the transportation of pelts by air to auction markets – the April 2020 auction was subsequently cancelled.
As an alternative, 3 228 pelts were sold on an electronic platform and the sale of 27 393 pelts were postponed until September 2020. This is a significant reduction in pelts sold at the April 2020 auction – in 2019 around the same time 32 975 pelts estimated at about NAD14,9 million were sold. Swakara farmers are therefore experiencing serious cash flow challenges.
Tourism and trophy hunting
Tourism is one of the sectors livestock farmers diversify into to improve on-farm cash flow. The sector relies heavily on foreign tourists, and an embargo on international travel due to COVID-19 meant zero tourist arrivals. This led to the cancellation of excursion bookings, major financial losses and possible job losses especially in rural areas.
With the amount of challenges being encountered in the tourism and hunting sectors during the pandemic, it is proving difficult to keep paying normal salaries, maintain regular working hours, as well as keep employees. However, retrenchment remains a last resort.
There is also uncertainty as to when international travels will resume and when foreign tourists will gain the confidence to tour again, because the time it takes for activities to normalise will determine the extent of the damage to the sector. In addition, a 14-day state quarantine does not support any tourism and hunting activities.
The poultry sector signified strong growth in 2018 and 2019, with small and medium enterprises contributing a significant amount to the sector. The sector caters for over 67% of local consumption (Ministry of Industrialization, Trade and SME, 2020).
However, the biggest challenge during the lockdown period has been the cross-border imports of raw materials (e.g. importation of parent chicks from neighbouring countries such as Zambia) and the closure of informal markets, which resulted in surplus production and loss of income.
Livestock and meat industry
The slowdown in economic activities has affected consumer income, changed their purchasing behaviour and their protein demand. Consumers have shifted from demanding restaurant services to grocery shopping (retail service).
The closure or partial operation of restaurants, as well as a decline in tourists and travels have reduced the demand for high-price meat cuts and all other types of meat. A decrease in the demand of red meat especially in South Africa is expected to affect the demand of weaner calves in the South African and Namibian markets.
A lack of demand for weaners from the Namibian market could create an inability to sell livestock and further constrain farmers’ cash flow. Changing market demand can be detrimental to the Namibian beef sector because it is still recovering from the impact of drought.
The uncertainty surrounding the COVID-19 pandemic puts pressure on markets and the disruption of the global economy is likely to affect export commodities. Effective co-operation and collaboration are therefore necessary, and the Namibian agricultural sector would have to restrategise to either improve or maintain their competitive edge. – Press release, Namibia Agricultural Union