Agribusiness income drops 10%

The income of agribusinesses has decreased by 10% in the last year due to a number of factors, including the strong rand, the falling international prices of agricultural products, and unfavourable weather conditions. These are the ­findings of the PricewaterhouseCoopers (PWC) Agri Business Benchmarking Survey, covering the period from March 2005 to September 2006, which was completed by 19 agribusinesses and cooperatives with a combined turnover of R15,4 billion. This drop in income is not only worrying for agribusinesses, but also for small towns. “Agriculture is the backbone of small towns,” said Corwyn Botha of Cape Agri, which participated in the survey.
Many agribusinesses now find themselves in a financially precarious position. “The previous financial year has been characterised by a considerable increase in advances to producers. This has now been reversed, and debtors have been significantly reduced from 48% to 42% of enterprises’ assets, but 15% of these debtors are in financial trouble. They were unable to settle input costs from previous harvests and have had to rely on special assistance. This resulted in an increase of 6,5% in the provision for doubtful debts,” said Kobie Bekker, PWC’s national agribusiness industry leader. He said if interest rates were to increase drastically due to outside factors, such as a rise in the consumer price index or the trade account deficit, it could be catastrophic for the entire agricultural industry. – Gwenda van Zyl