Agricultural debt N$1b up

THE agricultural debt increased by N$1 billion from N$6,3 billion in June 2018 to N$7,1 billion by June 2019, representing a 13% increase in debt levels worsened by falling primary production.

This is according to the Namibia Agricultural Union (NAU) 2019 fourth-quarter review released last week.

The report indicates that despite the growing debt burden on farmers, production has been dropping over the years due to drought and herd liquidation, leading to a further reduction in herd sizes.

“As it stands, the majority of the young and emerging farmers are heavily indebted because they have long-term loans to pay back, making them more vulnerable,” the review found.

The review explained that income received from the sale of livestock was reinvested in maintaining the livestock left on the farm, consequently leaving farmers under immense cash flow pressure as they still had workers to pay, as well as loans (short-and long-term) to repay.

NAU projected that the next three to five years would be challenging for livestock producers in terms of herd rebuilding while surviving cash flow problems.

“The cash flow pressure also applies to dairy, crop and horticultural farmers,” the researchers stated.

According to the NAU cash flow model, farmers that are farming with own remaining herds without fully utilising the whole farm (e.g. buying-in animals to fully optimise the carrying capacity of the farm) or identifying alternative income streams such as charcoal production and tourism are expected to experience serious cash flow problems and financial ruin.

Researchers also indicated that the indebtedness and inability to maintain cash flow would further shrink the agricultural sector performance, reducing production and the sector’s contribution to the country’s overall production.

In return it leads to an undesirable effect on the 70% of the population that depends both directly and indirectly on agriculture.

NAU stated that for farmers’ cash flow to stabilise fast and to get out of debt, sustainable and well-structured refinancing loan options such as loan repayment holidays and consolidating short-term loans and providing loans (short- and long-term) at subsidised rates would be essential going forward.

The review also indicated that annual output from various agricultural sub-sectors such as agronomy, Swakara, dairy and livestock sectors (cattle, sheep and goats) experienced significant decreases in production values.

The agronomy sector’s production value dropped by more than 50% year-on-year (y-o-y) due to low production volumes resulting from delayed rains and late planting.

Swakara’s estimated production value fell by 25,4% y-o-y in response to a decline in both the price and quantity of pelts marketed, while the sheep and cattle production value fell by 17,5% and 4,2%, respectively.

While total milk produced in 2019 was 2 million litres less than what was produced in 2018, there was no increase in the price of raw milk for the past three years, thus triggering a drop in production value by 6,7% y-o-y.

The charcoal and poultry sectors continued on a positive trend, signifying strong growth in the last two years, with the production values of charcoal and poultry increasing by 11,8%
y-o-y and 16% y-o-y, respectively.

NAU indicated that charcoal production played a significant role in helping farmers survive the drought period, as it became one of the extra activities farmers could venture into for revenue generation.

Additionally, the pig and grape sectors that experienced negative production values in 2018, both made a comeback in 2019, displaying increases of around 2,7% y-o-y and 20,2% y-o-y, respectively.

The review attributed the rise in pig production value to growth in production, whereas that of grapes stemmed from improved prices on the market.

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