Cost implication of drought on operations of commercial farm businesses in Cape Winelands district, Western Cape

Abstract

In Africa, agriculture is the main source of food as well as livelihoods. Among the factors that affect the agriculture industry is drought which is a widely known and is a costly natural hazard caused by the climatic change. Unlike other natural hazards that are climate related, droughts are usually long in duration and may cover a large geographical region. In South Africa, the Western Cape is one of the provinces which is prone to droughts. This is of concern as commercial farming is the greatest source of food for the Western Cape population. Drought severely affects commercial farming, resulting in a substantial production decrease. This crisis also triggered heightened demand and elevated prices for goods, a decline in exports, increased unemployment due to job losses, and the shutdown of unprofitable businesses. One of the key reasons for commercial farms being so drastically affected is the lack of strategies on how to deal with drought effectively. Stemming from the foregoing, the problem statement of this research is "The drought has drastically affected commercial farms due to inadequate strategies to mitigate the negative cost effects of draught on operations of commercial farms in Cape Winelands District, Western Cape”. This study aimed to explore the effects of drought with regards to the cost implications and operations of commercial farms in Cape Winelands District, Western Cape. These are the objectives: • To assess the production cost effects of drought on commercial farms in the Cape Winelands District, Western Cape. • To assess the significance of drought on commercial farmer’s yielding outputs in the Cape Winelands District, Western Cape. • To evaluate the strategies and costing tools used by commercial farmers in Cape Winelands District, Western Cape to encounter the effects of drought. A qualitative approach was used in this study from designing the study up to the data analysis stages. In so doing, semi-structured interviews were conducted with the representatives of registered commercial farmers, to pilot the study. Interviews were conducted with 12 respondents who either managed or owned a commercial farm in Cape Winelands District, Western Cape.

The major findings of the study were, i) All respondents revealed that they experienced drought, although it was at varying magnitudes between the period of 2015 and 2018, ii)The study revealed the production losses of up to 70% signifying a concerning loss due to drought, iii) The costing tools and strategies that commercial farmers had established to maintain cost control during the drought period were available, but they were not adhered to or implemented as intended. For future studies, the following studies are suggested, i) Future research could focus on comparing the drought costing tools and strategies used by commercial farmers between South African provinces or other countries to reduce the impact of drought. ii) Comparing the impacts of drought between provinces in South Africa to document if drought is having a similar or different impact in South Africa. The study provides insight to other businesses and countries facing similar drought challenges and economic downturns. It offers ways in which it can better prepare for future drought to achieve operational efficiencies and sustainable results. This study serves as an additional source of information regarding the effectiveness of commercial farm businesses in the Western Cape. Furthermore, the findings of this study are of importance to everyone affected by drought especially commercial farm businesses.