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October 10, 2010

South African farmers hurt by power price hikes

by Olivia Kumwenda

Price hikes granted to South Africa power utility Eskom will cost the country's agriculture sector more than 300 million rand ($43.1 million) and threaten food security, a key farmers' group said.

South Africa's power regulator earlier this year granted state-owned Eskom [ESCJ.UL] annual tariff increases of around 25 percent for three years, starting with the 2010-2011 financial year, to help it amass the funds it needs to build new power plants and ease a supply shortage in Africa's biggest economy.

"The agricultural sector had been confronted over the past few years with drastic price increases of intermediate inputs, such as fertiliser and fuel, and it appears that electricity will now assume this role," Agri SA said in its annual report. "Further tariff increases would have an extremely negative impact on food security," it added.

Eskom has said it may apply to raise electricity prices by a further 25 percent a year for another two years after the initial three-year period to raise all the funding it needs.

Higher input costs last year hurt sugar production, and while the country has recorded bumper maize harvests for the past two years, the rising costs have hurt farmers' ability to service debt and re-invest amid falling prices of the grain.

South Africa is expecting its largest crop of maize since the record 14.42 million tonnes reaped in the 1981/82 season, which is also seen as weighing further on prices.

The government's Crop Estimates Committee last month trimmed its final estimates for the May 2009-April 2010 maize crop to 13.034 million tonnes, citing lower-than-expected yields and deliveries to silos.


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