Briefly, what is your background?
I was born in Stellenbosch, where I also attended school and university. I have a Bachelor of Commerce (Agricultural Economics) and an MBA. I’ve been in banking for 15 years in various disciplines ranging from credit to sales, but always within the agricultural segment. I’ve been in my current role for 12 months.
In your opinion, what are the main challenges facing agricultural bankers from a financing point of view?
How are you overcoming these challenges? Nedbank believes success in agricultural banking is based on relationships. However, this is becoming more challenging as the banking industry becomes more regulated and is tending towards being more centralised. The Nedbank model is not following this trend, but is choosing to remain decentralised, specialised and focused on customisation. This allows for informed decision-making close to the customer and faster credit turnaround times. Another challenge we face is the sharp increase in production costs, which in certain regions will put pressure on profitability This will also imply that the working capital funding requirement is higher. In future commercial banks will have to ensure that their product range can accommodate “production-type” facilities, an area previously dominated by Land Bank and the co-ops.
For the first time in 2007 agricultural trade was negative. What are your views on this? does this mean for the agricultural sector?
We believe this negative trade is a symptom of a lack of investment and support by government, mainly in providing competent technical advisors, and a lack of investment in research and development. Unfortunately the situation won’t be rectified overnight and will require combined effort between the agricultural sector and government to create an environment conducive to increased production and investment. Too often, government still perceives the agricultural segment in terms of its socio-economic impact as opposed to its commercial value, and this needs to change. South Africa’s commercial farmers are used to competing in a global world. The future challenge will be to further optimise production with market demand.
What is your view of agriculture in thiscountry, looking at the next five years?
I’m very positive about the medium-term outlook for SA agriculture. All indications are that commodity prices will remain high, with strong demand for packaged fruit, vegetables and protein. Nedbank has well-established agribusinesses and farmers who are well-positioned to grasp the opportunities resulting from strong demand. The level of technology, sophistication and productivity in these businesses often isn’t recognised. However, further consolidation will need to take place as economies of scale are required in most industries. I also feel the agricultural segment will transform further over the next five years, with various new farming groups being introduced to the segment via government and private sector initiatives.
How do you think soaring food prices will affect South Africa’s farmers?
Food prices in general were undervalued over the past few years and what we see now is an adjustment in the market. The problem is not only the adjustment but the rate thereof, which is causing a year-on-year increase that’s more than double the inflation level. The risk is that consumers might develop a resistance to certain food categories that are deemed more luxurious. We might also see some consumers “trade downwards” to more affordable food categories. Remember, 60% of the population still earn below R2 500/month, with their food expenditure totalling more than 50% of their income. I think we’ll see more investigations into value chain components to establish if margins are added “fairly”.
Do you believe commercial farmers must “get big” or “get out” or that there’s still a role for small commercial farmers?
The global trend is towards large-scale operators, especially in commodity-type production systems. However, we shouldn’t generalise, as various smaller players have managed to outperform larger operators through excellent management and superior market access. To improve chances of survival and long-term sustainability, small-scale farmers might need to follow a type of cooperative principle to benefit from improved bargaining power, pooling resources, etc.
How does Nedbank approach BEE?
Nedbank is committed to playing a significant role in the agricultural industry’s transformation. We evaluate each project on its merits and have key criteria for assessment, such as profitability, formal representation of “new” entrants in decision-making, formalisation of skills transfer, tangible returns to project beneficiaries etc.
Have you met the targets set by the financial sector charter?
We will meet our financial sector charter target set for December 2008. Over the past few years we’ve invested significant resources to ensure we’re involved with viable projects across industries. We also sponsored R1 million towards the development of suitable funding models for land reform in the wine industry. Our one unique offering to the BEE market also includes a compulsory financial training component for beneficiaries and newly appointed trustees/directors. We use external training companies and carry out before and after evaluation to measure the skills transfer that’s taken place.
What do you believe to be Nedbank’s “edge” in the agricultural market – why should a client come to you and not go elsewhere?
Our empowered and decentralised regional teams, which include agricultural specialists, provide guidance and support on all agriculture-related requests, ensure continuity, accessibility and quicker decision-making. These teams have a full understanding of the agribusiness value chain and can match a flexible product offering and tailored solutions to customers’ unique needs. We also partner with leading academic institutions to keep abreast of the latest research developments and emerging trends in the industry. Most importantly, we believe that as the smallest player (out of the big four banks) in the agricultural financing area, we have a well-managed and balanced portfolio of clients. We are not currently overexposed and are therefore open to new business, and are very well positioned to cater for the agricultural boom that we believe is starting to take place.
As a bank, how are you helping to give back to the agricultural community – in terms of sponsorships, and so on?
We have a full range of commercial sponsorships in the various agri industries. These range from national and regional to farm level events. We strongly believe in focusing on long-term sponsorships over two to three years and not on once-off support. We’re also involved in corporate social investment through the Nedbank Foundation, with various initiatives such as farming community upliftment, training and education. E-mail Nedbank’s agriculture division at [email protected]. |fw
