There are concerns over the looming drought, as such drought could spell disaster and affect the farming production process, prices of livestock and crops, as well as the cost of food in general. Not so long ago, Namibia witnessed two consecutive cycles of the worst drought it has ever experienced in the modern era.
The outcome was that a lot of people lost livestock and crops, and generally experienced disruptions to their farming business operation. Others literally lost everything. Thus, the burning question is: how do you, as a farmer, prepare financially before the drought hits again?
Here are some steps you may implement to prepare financially for drought:
•Develop a drought plan that outlines your financial goals, assesses your risks and identifies potential resources to mitigate the impacts of drought. Your plan should include the cost of any measures you plan to take to protect your crops during a drought.
•Build a financial reserve to help you manage the financial impact of a drought. Create emergency funds accounts that you can draw on during a drought to cover costs such as irrigation, feed and other expenses.
•Plan for expense variances through strict budgeting – with cash flow projection to understand your ‘normal year’ or average costs of production. How much revenue loss can you handle and still break even? What pricing of water is justifiable that you are willing to pay for? What is the cost of water (if available) versus the loss of yield?
•Diversify your income sources by growing multiple crops or raising different types of livestock. This can help mitigate the impact of drought on your income.
•Farmers should reduce the number of livestock on their farmlands to decrease grazing pressure on the rangeland. This approach will also promote an available and abundant feed supply, allowing farmers to prepare other drought-management measures.
We must prepare for drought before it hits us. As such, ensure that you start implementing these steps as soon as possible. Also, do further research on other possible strategies to help you prepare better and lessen the impact on your farming operation and livelihood. We will focus on more tips in the next column.
Mekupi Kambatuku is a managing consultant at Simpli Business Advisory
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