From herdsmen to central bankers, southern Africa counts drought cost - CNBC Africa

From herdsmen to central bankers, southern Africa counts drought cost

Southern Africa

by Reuters 0

From herdsmen to central bankers, southern Africa counts drought cost. Photo: Pixabay.

Molefi Ramantele, a small-scale livestock farmer who ekes out a living in Botswana's arid scrubland, lost a third of his cattle in the drought that has scorched southern Africa.

"My life is my cattle. I have never seen it so bad...It will take me years to get them back," the 67-year-old said of his livestock, often the main measure of household wealth in rural African economies.

Farmers, game reserves and central bankers across southern Africa are among those set to count the cost for years to come of the drought that wiped out livestock, pushed up food prices and caused power shortages and protests.

The 2015/2016 El Nino weather system, the Pacific Ocean phenomenon associated with droughts, storms and floods, baked southern Africa before ending in May.

This coincided with a slump in commodity prices that pressured African exporters' budgets, eroded currencies and deepened economic misery as well as challenging central bankers faced with higher prices and slow economic growth.

Central banks across the region have raised interest rates to cool prices and there is little sign of relief.

"There are as yet no clear signs of a recovery in the agricultural sector, and food price inflation is expected to remain elevated for some time," South Africa Reserve Bank Governor Lesetja Kganyago said last week.

In Malawi, where half the population needs food aid, June inflation accelerated to 22.6 percent from 21.5 percent in May, with food inflation running at 27.7 percent. The kwacha currency has lost close to 60 percent of its value against the dollar the last 12 months.

In South Africa, the continent's biggest producer of maize, the crop is projected to fall almost 30 percent to around 7 million tonnes, which will force Africa's most industrialised country to import close to 4 million tonnes.

Futures for white maize, the staple food, doubled last year and while prices are now 20 percent below January's record peaks of over 5,000 rand a tonne, time lags mean increases are still filtering through the pipeline.

Food inflation in South Africa soared to 12.8 percent in April from 4.1 percent in June last year and remains over 12 percent, pressuring the wider inflation rate which stands at 6.3 percent, above the central bank's target range.

"Food inflation in South Africa is likely to remain high throughout the year," said Wandile Sihlobo, head economist with Agbiz, a farm industry lobby group.



This is fueling wage demands of between 20 and 50 percent from mining unions, whose members on average have eight people depending on them to put food on the table.

Such demands, even if only partly met, will further stoke prices, adding to the dilemma of the central bank which has raised rates by 200 basis since early 2014 but does not want to choke an economy it forecasts to stagnate this year.

In Zimbabwe, which is in arrears of $1.8 billion on $8.3 billion of foreign debt and has fallen behind on salary payments to soldiers and teachers, the United Nations estimates 20 percent of the population needs food aid because of the drought.

This number is expected to rise to 44 percent or more than 4 million people by early 2017.

Hunger, combined with a cash crunch, is seen as one of the causes behind a one-day "stay at home" protest in Zimbabwe earlier this month, the biggest strike since 2005 against President Robert Mugabe's long rule.

"In Zimbabwe, the food shortages have added to cash shortages and perceptions of corruption, it is another factor that has driven great frustration," said Robert Besseling, executive director at business risk consultancy Exx Africa.

The Southern African Development Community has appealed for $2.4 billion to help up to 40 million people across the region in urgent need of support until the next grain harvest in April 2017.

In Zambia, Africa's second-biggest copper producer, the drought caused power shortages because water levels in the Kariba hydro-electric dam sank as low as 12 percent in January.

Analysts say the situation remains precarious, though the government has said that power supplies are being restored.



Forecasts suggest that El Nino will be replaced by La Nina, a weather pattern that often brings rainfall to southern Africa, which could fill dams and help some in the region recover.

"The soil is the driest in the 20 years that I've been here," said Gerhard Visser, who runs a game ranch in South Africa's northern Limpopo province.

"If the rains come, I might recover in two years."

He said he had to sell off over half his herd, or 600 impala.

But with the land parched, heavy rainfall may bring more problems.

"In Mozambique, the dry ground could lead to floods during the upcoming rainy seasons," said Mark Sorbara, an analyst with London-based Africa Risk Consulting.

"More importantly the poor harvest will also negatively impact the ability of farmers to plant for next year which will extend El Nino’s effects into 2017."