Free State Agriculture / Vrystaat Landbou presentation to NERSA
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Free State Agriculture / Vrystaat Landbou
presentation to NERSA
MYPD3 Year 5 RCA &
MYPD4 revenue application
Bfn 23 Jan. 2019
By: Dr Jack Armour – Operations Manager,
Gerhard Kriel - CEO, Francois Wilken - Chairman and
Kempen Nel - Irrigation sub-Committee Chair
Layout: • Introduction: – Who is FSA & importance of Agriculture in the FS • Current position of farmers • Ageing Infrastructure – Consequences of aging infrastructure / – lack of inspection: • Comment MYPD3 Year 5 RCA • Comment MYPD4 revenue application • Suggestions
Who is Free State Agriculture /
Vrystaat Landbou?
• Members association of 3500 commercial
farmers
• Affiliate to AgriSA
• Have provincial commodity association affiliates:
RPO, MPO, NWGA, GrainSA, PotatoesSA, etc.
• Have Agri-Business affiliates: GWK, OVK, VKB,
SENWES, SuidWes & Afgri
• Supported by the Friends of Agriculture Network
Importance of Agriculture in the FS: • “Breadbasket status” (Wheat, Maize, Sorghum, Soya and Sunflower) • Energy intensive farming (irrigation, pork, chicken and dairy farms) • FS Ag. GDP 5% vs 2% national (5% Elect.) • FS Labour Ag. 9.4% (1.1% Elec.), • Electricity = 5% production costs Ave. (irrig. 15%) • Farmers are price takers and will not be able to pass on the higher costs of Electricity to the consumer initially, yet higher production costs lead to food price inflation
% ESKOM vs Total production costs
TPK
Eskom
Soybeans – Elec. =
17% producers’
total variable cost
(NC). Adding elec.
16% 15% comp. to water
20% 15% supply 23%
10% 11% 10% 9% Corné Louw | Sr Economist:
Inputs | Grain SA
SA Crop Producer Prices (R/ton) 2012/13 - 2017/18
*20/10/2017 JSE: ABSA Grain & Oilseed Prices ** Agbiz Research 02/05/2018
2012/23-2016/17 http://www.sagis.org.za/historical%20prices%20local.html 2018 http://agbiz.co.za
7000
Drought White Maize
Yellow Maize
6000
Wheat
5000 Sunflower
Soybean
4000
R / ton
3000 Maize framers
basically
receiving same
2000 real price for last
6 out of 7 years
1000
0
2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018**
Actual Rising Eskom Costs per Ha for
different irrigation crops
R 5 950
R 5 600
R 5 250
R 4 900
R 4 550
R 4 200
R 3 850
R/ha eskom
R 3 500
R 3 150
R 2 800
R 2 450
R 2 100
R 1 750
R 1 400
R 1 050
R 700
R 350
R-
2011 2012 2013 2014 2015 2016
Koring Mielies Lusern > 1 jaar
Grondbone Katoen Pekanneute > 8 jaar
Importance of Agriculture in the FS:
Contribution
Commodity (2017) Ranking
Sorghum 16% 3
Sunflowers 54% 1
Wheat 13% 3
Maize 44% 1
Groundnuts 37% 2
Dry beans 46% 1 Commodity ha Contribution Ranking
Potatoes 40% 1
Ostrich 2% 5
Soya 38% 2
Pecan 8% 3 Vegetable ? ? ?
Wool (2015) 23% 2 Asparagus ? ? ?
Beef 17% 3
Apples 561 2% 2
Sheep 20% 3
Eggs 17% 3 Cherries 90 34% 2
Broilers 5% 7 Apricots 3 1% 6
Pigs 8% 6
Peach 99 13% 4
Game 4% 6
Goats 4% 6 Nectarine 7 3% 5
Milk 10% 4 Plum 3 11% 7
Profile of Agricultural users in the FS:
• Extensive commercial farmers:
– 65% of our members SMME’s and 75%+ are
AgriBEE exempt
– Household, workshop, labour housing and
watering points – each transformer a hefty basic
supply/line fee before any power been used >60%
of account
• Intensive Commercial Farmers:
– Irrigation crops, pork, chicken and dairy farms
– reliability of supply (cold-chain) NB
Eskom Account for farm house
Exorbitant FIXED Service & Network Charge (i.e. Line Fees) 01/2017 vs. 12/18
R0.035/kWh
R2.1553/kWh
10Current position of Agriculture: • Worst drought in 100 years = Climate change • Extended drought since 2014/15 with a bumper yield year 2016/17 BUT price drops to 5 years backs grain prices = Climate risk • Veld fire and theft incidences cost the average FS Farmer up to R400 000 per year = Safety risk • Expected lower maize production (20% less) lead to a drop in livestock prices = Price risk • Least subsidised agricultural sector globally • Political insecurity RE Land = Political risk The Agric. sector is currently in a very dire situation
Current position of Agriculture:
Source: World Weather Inc.General feeling of our members
towards ESKOM:
• Monopoly
– Dependant on (despite alternative energy)
– State controlled and manipulated
• Mistrust
• Inefficient
– Municipal debt
• Corrupt
– State capture
– culprits to “pay back the money!”Ageing Infrastructure:
Virginia
Theunissen
after strong
winds
2 Feb 2018Consequences of aging infrastructure
& load sheading :
• Veld fire claims against ESKOM
Trompsburg 15 Nov. 2018
• Cold chain interruption &
equipment losses
• Staff down-time /
unproductivityFarmers helping
ESKOM Technicians:
good working relations on the
groundSuggestions: • President’s Economic Stimulus and Recovery Plan: South Africa Infrastructure Fund to pay for aging network infrastructure as this infrastructure serves the common good – why only charge the paying user? • Channel power hungry development to Virginia where massive excess capacity infrastructure and labour exists- central location
Comment MYPD3 Year 5 RCA We acknowledge: • the Regulatory Clearing Account (RCA) process that balances uncontrollable costs & revenues assumed with actual spending & revenue, request for R21.6Bil • NERSA approved liquidation (R31.1Bil! – vs R66.6Bil of yrs 2-4 applied for) of 2014-2017 RCA = 4.41% increase as of April 2019 We feel: • Eskom should not be allowed to transfer the costs of mismanagement, irregularities, corruption and inefficiencies to the consumer. Spiralling Medupi costs? Poor quality coal contracts & Capture! • Who takes responsibility?
Comment MYPD4 revenue
application
Eskom’s application for R219bn, R252bn and
R291bn for the 2019/20, 2020/21 and 2021/22
financial years respectively
= 15% yoy and 33% over 3 years
+ 4.41% RCA yoy for 4 years??
This WILL have an huge adverse effect on
agricultural sustainability and food security
An additional shock to the crippling drought and
political instability driving away investment & talentConclusion: 1. Agriculture really cannot afford further price increase shocks! 2. Alternative energy sources are becoming more affordable – “Utility Death Spiral” – please make it easier for small suppliers to supply into the grid. 3. ESKOM still needs to turn itself around an build trust before it can be allowed to increase fees above CPIX. 4. NERSA has a very important decisions to make and needs all the necessary professional info to do so (due diligence, state Capture reports, Eskom internal & economic impact & better demand projections)
“A Nation that takes care of
it’s Agriculture
Takes care for its Future”
Become a:
www.vlvriende.orgThank You!
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