Failing to solve load shedding could result in crop failure, higher food costs, and shortages of specific food goods in South Africa, according to Iain Williamson, CEO of the country’s largest life insurer, Old Mutual Ltd.
He stated in the company’s most recent preliminary results for 2022 that this would significantly impede economic development in the nation, which is already dealing with rising inflation and an energy crisis.
Williamson stated that the South African Reserve Bank (SARB) raised the repo rate by 25 basis points earlier this year to contain inflation. Analysts predict that the SARB will raise interest rates again at its second meeting in March.
While the International Monetary Fund’s Global Economic Outlook for January 2023 forecasts 3.8% growth in Sub-Saharan Africa for 2023, South Africa’s growth expectations are substantially lower, with the SARB and financial institutions estimating growth of less than 0.5% for the year.
Rising gasoline and food prices, according to Williamson, will drive inflation indicators much higher in 2022. While inflation has been slowing, food inflation has been rising.
According to Stats SA data for January 2023, food inflation reached a 14-year high of 13.4%, the highest level since May 2008.
According to the Bureau of Food and Agricultural Policy (BFAP), load shedding has continuously increased already-high food costs.
Also, the cost of farming has risen dramatically, with firms forced to make adaptations to operate around rolling blackouts – operational costs that may be passed on to the customer.
“Load shedding remains a major risk that will likely see food prices in South Africa remaining higher for longer,” BFAP said.
Eskom’s shortcomings have also resulted in supply chain difficulties. Last month, for example, meat producers throughout the country highlighted concerns about the country’s food security.
According to Roelie van Reenen, supply chain executive at Beefmaster Group, load shedding is damaging infrastructure essential to support farmers all throughout the agricultural supply chain.
Farmers rely on irrigation to irrigate their crops, according to Van Reenen, but regular power outages make it difficult.
This is causing crops to wither, resulting in a food security catastrophe in the country. He cautioned that protracted power outages might lead to food shortages and price rises since farmers cannot afford to minimise the impact of power outages.
Although both the government and the business sector have launched a number of steps to improve energy security to the country, there appears to be no short-term repression from rolling blackouts on the jail any time soon.
Financial results
Old Mutual reported a 10% increase in full-year profit in its annual results, owing to a fall in mortality claims in its life insurance business.
Headline earnings climbed by 10% to R7.94 billion in 2021, up from R7.20 billion in the previous year. The headline earnings per share were 180.1 cents.
In addition, the corporation declared a full-year dividend of 51 cents per share. The corporation was able to recover from the pandemic’s two destructive years, during which mortality claims soared considerably.
Williamson expressed his satisfaction with the company’s “robust operating performance,” which included good sales and profitability.
“We demonstrated resilience as we continued to navigate a challenging environment and remained true to our purpose of championing mutually positive futures every day,” he said.
