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Home / Finance insight with Mekupi Kambatuku - Impact of repo rate hike on farmers

Finance insight with Mekupi Kambatuku - Impact of repo rate hike on farmers

2022-12-06  Staff Reporter

Finance insight with Mekupi Kambatuku - Impact of repo rate hike on farmers

Last week, the Bank of Namibia announced an increase of the repo rate by 50 basis points to 6.75%. So, what does this mean to us as farmers? A hike in the
repo rate simply means an increase in interest rates. Interest rate is the amount you pay on a debt borrowed from commercial banks or other financial institutions for a given period.

Interest is mainly paid on debts such as loans, debt securities, and bonds. Interests are normally paid on intervals of a monthly basis as part of the lump sum payment for debt taken out.

For most of us, an increase in repo rate consequently means that the instalment we pay on the home loan, vehicle payment, or loans taken for farming increases since most of these agreements are made flexible to respond to the current market changes accordingly. Hence, it is thus imperative that we adjust our monthly budgets to the real charges, as at times they persist for a while.

However, when you have savings or investments, this is good, as the returns increase with higher interest rates. As a farmer, these interest increases consequently affect your disposable income, as you now have to allocate the same unadjusted income for increased expenses.

Additionally, increases in interest rates have a substantial impact on the agricultural industry at large, as it affects the farmer’s investment decisions, the cost of loans, the cost of production/inputs, and the value of farmlands.

As farmers, we are already faced with major challenges of uncertainty in weather conditions, the impact of wars on input costs, such as the increasing cost of fertilisers, prices of plant protein crops and grain usually used for feed manufacturing, and the hike we have witnessed with fuel.

 As stated earlier, this hurts your cash flow, disposable income, and business profitability since the agricultural industry is a capital-intensive industry. Most businesses would look at the options of adjusting output prices accordingly (the prices at which you sell your products) under these circumstances.

The advice from the economists is that we should brace ourselves for the continued rise in inflation and consequently the increase in interest rates, and thus we should be more diligent in how we spend money, and how we manage money, now more than ever. It is thus critical to do bookkeeping as part of Farm Financial Management.

Bookkeeping, budgeting, and financial management as an agripreneur/farmer will help you mitigate these challenges, by tracking each dollar and planning. Remain diligent and remain updated with the changes in the market.

2022-12-06  Staff Reporter

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