THE single and the most important factor that determines the sustainability of agricultural production, and its ability to provide food security to any country, is that food production must be profitable.
This is, and should be, the main objective of the agricultural sector in Namibia.
The preservation of the environment, which includes the responsible use of natural resources, is also paramount, but one can never get away from the fact that the profitability still remains a prerequisite for sustainable production.
Unprofitable production is without a doubt the main reason why many countries in the world, including Namibia, are still experiencing huge poverty and famine, despite the financial support given to agricultural sector, by government agencies.
It is, therefore, very important to understand how profitability can be created and sustained in the agricultural sector.
There are basically two drivers of profitability. The first one is generally known as the input/output price ratio; in other words, the relationship between the prices that farmers pay for their inputs and the price that they receive for their products.
In the agricultural sector, a long-term trend exists that the prices of inputs increase at a faster rate than the prices of the products produced. The main reason for this phenomenon is the fact that all the input suppliers base their prices on the total production costs of their products, plus a profit margin.
The government is also responsible for higher production costs, because of the regulation of fuel prices, electricity tariffs and minimum wages.
The second main driver, which also has a big impact on the profitability of any agricultural enterprise, is the efficiency with which the inputs used in the production process can be converted into specific outputs.
This specifically refers to the number of inputs required to produce one unit of an output, which also plays a very important role in profitability and the sustainability of production.
The best technology is, therefore, critically important to significantly improve the efficiency of the agriculture.
Production should be increased through continued research and new technological developments, in order to enable producers to increase their outputs, when their inputs increase, or even produce the same number of outputs, with fewer inputs.
This is actually the only way that the efficiency of production can be improved.
Conclusively, we must realise that it is to a large extent the responsibility of the government to support and enhance the profitability and sustainability of the agriculture, and all other industries in the economy, if it wants to create economic growth.
Government determines the political and economic policies of the country, and it must create an environment that is conducive for each industry to make a larger contribution to economic growth.
It, therefore, has a critical role to play in enhancing Namibia’s agriculture sector.
Confidente. Lifting the Lid. Copyright © 2015