The National Agricultural Marketing Council (NAMC) conducted a study on the potential impact of electricity tariff hikes on the agricultural sector. The findings illustrated how sharp tariff increases could impact the agricultural economy, affecting farming activities, food production, food security, and rural livelihoods.

The agricultural sector has developed immensely, with producers integrating advanced  agricultural practices, equipment,  and machines that require electricity to operate. Activities in farming and value addition, such as grain storage silos, abattoirs, and cold chain storage facilities for horticultural and meat products, depend on electricity. Other farm operations, ranging from managing irrigation systems to maintaining the quality of stored produce, also rely on electricity.

Electricity tariffs in South Africa have increased sharply over the past two decades, reshaping the economic landscape for businesses and households. Tariffs have risen by more than 500% since 2007, far outpacing inflation and placing greater pressure on sectors dependent on stable, affordable energy. The Department of Mineral Resources and Energy reports that the average electricity tariff rose from 19,59c/kilowatt hour (c/kWh) in 2008 to approximately 143,5c/kWh by 2023, reflecting a staggering increase of over 600% in 15 years.

Steep electricity tariff hikes are among the most critical cost pressures that producers are facing. Electricity is not a discretionary expense for producers,  grain handlers, millers, and silo operators. It powers irrigation, drying, aeration, conveying systems, grading equipment, lighting, security systems, and administration infrastructure. The cost of moving grain from the farm gate into safe storage and eventually to processors and consumers increases across the value chain as tariffs rise above the general inflation rate.

Impact on grain producers and silo operators

For grain producers, electricity is closely tied to production efficiency. Although a large share of maize and oilseed production  is rainfed, irrigated grain production  is highly exposed to the high cost of electricity through pumping, centre-pivot irrigation, and water management systems. Wheat, maize and soya bean producers who depend on irrigation face higher operating costs when tariffs rise, especially during peak production periods when electricity demand is difficult to reduce without affecting yields.

The tariff increases also raise indirect costs through inputs and services. Fertiliser handling, on-farm  storage, repairs, transport depots, and processing facilities all depend on electricity. When these businesses are confronted with higher energy bills, the expenses are often passed back to producers or forward to processors and consumers. This puts pressure on farm profitability, particularly in seasons when grain prices are low or yields are reduced by drought, pests, or logistical disruptions.

Grain silos are energy-intensive  facilities, as they add value by receiving, cleaning, drying, handling, and safely storing large volumes of grain within short seasonal harvesting windows. Electricity powers elevators, conveyors, intake systems, fans, dryers, dust-control systems, weighbridges, and monitoring equipment. During the harvest season, these operations cannot simply be paused when electricity prices rise. Any disruption or delay can result in congestion,  operational downtime, grain quality deterioration, and higher post-harvest losses.

Aeration and drying are especially important during the storage and processing of grain. Grain stored with a high moisture content or without sufficient ventilation is vulnerable to mould, insect infestation, and quality degradation. Higher tariffs create an impossible trade-off: Operators must either absorb the extra storage cost or risk quality deterioration,  which compromises the value of the crop. In practice, responsible silo operators are

limited in their ability to cut electricity use without compromising grain quality.

Effects on the value chain

The impact of electricity tariff hikes is not confined to silo owners. Higher storage and grain-handling costs translate into increased fees for producers, traders, and processors. Millers and animal feed manufacturers also have to contend with higher procurement and operating costs, which ultimately filter through to consumers  in the form of higher prices for staple foods such as maize meal, bread, and other grain-based products.

The pressure is particularly acute in rural areas, where  silos serve as vital infrastructure underpinning local grain economies. If electricity costs continue to rise faster than operators can recover, investment in maintenance, expansion, and technology is likely to be curtailed. This will erode the competitiveness of the domestic grain industry and increase the risk of losses and food waste, especially during high-volume harvest seasons.

An unsustainable burden

The continued escalation of electricity tariffs has become unsustainable for the agricultural sector. Rising energy tariffs affect grain production, drying, storage, and transportation, with consequences for farm profitability, the sustainability of storage infrastructure, food processing, and the affordability of food.

Addressing this challenge requires coordinated action from all social partners. Greater emphasis must be placed on improving energy-use efficiency and boosting investment  in alternative power sources, particularly renewable  energy technologies. In this regard, the Agro-Energy Fund established under the Agriculture and Agro-processing  Master Plan (AAMP) provides producers with a mechanism to mitigate the impact of high energy tariffs.

By Bhekani Zondo, senior agricultural economist, NAMC

For more information, send an email to info@namc.co.za