Profitability of farming under pressure

08 Jun 2016 16:50pm
WINDHOEK, 08 JUN (NAMPA) – The profitability of farming is under immense pressure due to the drought, with farmers unable to pay back loans to the Agricultural Bank of Namibia.
The bank’s Manager of Marketing and Communication Rino Muranda told Nampa on Wednesday the recurrent drought situation, compounded by climate change, continues to have a negative impact on the output of producers in the agricultural sector.
“These include low prices per head, high input costs, increased livestock mortality, crop failure and shrinking livestock inventories, which has a negative domino effect on the ability of our clients to service their loans and, or to take out new loans. In essence, it means that the profitability of farming is now under immense pressure and the knock-on effect is that our clients are unable to service their loans or hesitant to take up new loans, which affects the growth of the loan book and the balance sheet of the bank.”
Namibia is battling a drought since 2013 when former President Hifikepunye Pohamba declared a State of Emergency. Farmers have been struggling to cope with the effects of the drought since then.
Explaining the current situation, Muranda said the bank has already responded positively to these adverse market conditions by providing a drought relief scheme of N.dollars 45 million to mitigate the negative impact on clients.
Under this scheme, the bank availed credit facilities such as production loans to assist with cash flow shortages and to invest in water infrastructure at affordable rates.
Other facilities include the deferment of instalment payment and financing of drilling for borehole infrastructure, fodder and lick.
An amount of N.dollars 40 million was allocated and the scheme was effective as from 01 September 2013 to 31 March 2014. During that period, a total of 149 loans were approved. A total of N.dollars 45 million was budgeted and the scheme came into effect again as from 01 September 2015 to 28 February 2016. During that period, a total of 214 loans including loans for ring fencing were approved to the value of nearly N.dollars 27.5 million.
Unfortunately not all farmers financed by the bank benefited from the drought mitigation measures and some defaulted. Due to client confidentiality, Muranda said the bank is unable to provide the number of farms to be seized for non-payment.
He added that Government has announced various incentive schemes for farmers who are affected by the drought and these include subsidies to farmers for selling livestock and assisting acquiring farming implements such as tractors.