The impact of Covid-19 on South Africa's agriculture economy

29 May 2020

We are all living through something the severity of which we have never experienced before and are currently in the 64rth day of lockdown. There have, of course, been pandemics before. The plague or Black Death of the mid-1300s resulted in between 75 and 200 million human deaths, while 100 million people perished due to the Spanish flu in 1918/19. In the late 1950s, Asian flu (H2N2) infected more than a million people, resulting in approximately 116,000 deaths, and in 2009/10 a strain of H1N1 infected 1,4 billion people and killed around 50 million.

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Agriculture has been declared a critical industry and as such is exempt from the harshest lockdown regulations. However, job losses in the agriculture sector will be an unintended consequence of lockdown. In South Africa, this will be a major spoke in the wheel of government’s ambition to increase employment in agriculture and agro-processing by a million jobs by 2030.

Now, in 2020, we are faced with Covid-19. The fortunate thing is that science has progressed tremendously with respect to understanding diagnostic technologies, the epidemiology of disease, vaccine development technologies and screening for antiviral treatments. However, for now, there is no treatment or vaccine.

What we do know is that Covid-19’s mortality rate is higher than that of the 2009 H1N1 virus, and it is far more infectious.

To slow down the spread of the pandemic in order to give healthcare systems time to prepare, governments worldwide have enacted varying levels of social distancing and lockdown. This response is having a massive negative impact on our already struggling economy.

While agriculture has been declared a critical industry and as such is exempt from the harshest lockdown regulations, the industry as a whole, and secondary agricultural industries in particular, are feeling the consequences.

Food production value chains are operational, albeit not at optimal levels, which is causing bottlenecks and blockages that will lead to product losses.

For example, with restaurants closed, the demand for high-end meat cuts has dwindled to the point that some feedlots are not buying-in cattle, putting their businesses and jobs at risk. Similarly, the throughput at abattoirs is down.

As farmers are forced to keep more sale-ready animals back, they need to spend more on feed and routine stock remedies such as vaccines and supplements, while not generating an income from those sale-ready animals. However, we are already seeing that farmers buy less essential and preventative medicines. The knock-on effect on co-ops is significant. As turnover decreases, co-ops are letting their stock levels decline, in turn affecting their suppliers.

Similar situations prevail in other segments, especially the poultry sector where the single biggest purchasers of broilers – the fast-food chains such as KFC and Nando’s – are closed. In the companion animal sector, the picture is even worse. Vets attend to emergency cases only. Walk-in consults, routine vaccinations and non-emergency procedures just do not occur.

Job losses in the agriculture sector will be an unintended consequence of lockdown. Constraints on the movement of labourers, especially seasonal and migrant workers, are and will lead to increased automation and mechanisation. In South Africa, this will be a major spoke in the wheel of government’s ambition to increase employment in agriculture and agro-processing by a million jobs by 2030.

What will the economic recovery be like?

Studies of the economic impacts of epidemics and pandemics in 1918, 1957/8, 1968 and 2003 show a deep but steep V-shaped drop and recovery, followed by positive growth. I believe we will experience the same. In particular, I believe that the positive side of human nature will take over. The joy of having survived the crisis will stimulate all to work, invest and spend.

After lockdown, trade outlets like cooperatives, wholesalers and veterinarian practices will be low on stock and we can expect good sales as they fill their shelves. As markets stabilise, farmers too will again start using essential stock remedies and veterinary medicines.

When will this be? I am no expert, but my guess is that a relaxation of lockdown will start the recovery and that once we know the infection peak is behind us (probably by September 2020) we will see relief, happiness and optimism that will drive economic improvement, supported by what I believe will be a government-driven "Marshall Plan".

Keep well, keep strong and together we can make this work.

About Dr Peter Oberem

Dr Oberem is a prominent and respected veterinarian. He started his own business in 2000 and today it is the biggest locally owned Animal Health Company in Southern Africa, Afrivet Business Management (Pty) Ltd.