Negotiations recently commenced between the agribusinesses GWK and VKB about a possible partnership and synergies following approval from the companies’ respective boards.
Koos van Rensburg, CEO of VKB, said the process was still in its infancy and no decisions had yet been made.
“Shareholders and staff of the two businesses were recently informed about the decision. The ultimate aim is to create as much value as possible for the respective concerns and their shareholders.”
According to Van Rensburg, the two businesses were some of the few agribusinesses that were still fully owned by agricultural producers. He said the two entities therefore shared a mutual culture, based on producer ownership. This formed the ideal platform for possible co-operation.
Van Rensburg added that the process had nothing to do with the COVID-19 pandemic and the impact thereof on the South African business sector. Profit margins in the agricultural value chain were already under pressure before the start of the pandemic.
According to him, agribusinesses had to weigh up options to become more streamlined in order to stay sustainable and profitable.
“I want to ensure shareholders that no decisions will be taken in haste. All possible options will be investigated in detail.”
Dr Johan Willemse, independent agricultural economist, told Farmer’s Weekly it was inevitable that agribusinesses would increasingly have to consolidate their operations.
This was the result of the impact of devastating droughts on these businesses’ balance sheets, which had been greatly exacerbated by a lack of state support, Willemse said.
He added that the economic pressure on the local commercial agriculture sector forced agribusinesses to pursue all possible avenues to cut costs and grow profits.