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While a holistic package that takes the full value chain into account is needed to make a success of farming, it is the farmers themselves who have the biggest impact on feasibility.
The person in the driver’s seat determines the business’ success or failure
“We see across the board with enterprises that have failed that it is the jockey [farmer, or person in control] that is the problem,” Themba Rikhotso, CEO of the Land Bank, told Farmer’s Weekly at the Nampo Harvest Day in Bothaville in the Free State.
Rikhotso was speaking about the overall state of the agriculture sector’s finances. He said that while farmers’ finances were still healthy, there were many that were struggling, leading to consolidation in the industry, which was set to continue.
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“Many have not figured out how to mitigate agriculture’s risks holistically. Risk can’t be mitigated in a silo. But there is a golden thread that runs through all the successful and unsuccessful farming businesses – the jockey. They either have the right support, mentorship and a full value chain approach in place or they fail.”
Correct players must be matched
In terms of supporting more black farmers to enter and remain in the industry, he noted that the Land Bank had made much progress in creating partnerships to ensure holistic, sustainable growth.
“Farming is an eco-system and there are many players that must work together for the farmer to be a success. As a financier, we need to ensure that the correct players are matched together for the best result. This is why we have started focusing a lot more on building sustainable partnerships, where there is an offtake agreement, input suppliers, a mentor, land access and the right farmer in place.”
He explained that part of the reason why the Land Bank’s performance had improved was because of the greater focus on public-private partnerships.
Farmers need more than financial support
Meanwhile, Jane McPherson, manager of the Grain SA Farmer Development Programme, said that there has been a trend of large agricultural companies scaling back on farmer development financing, due to the high risk factor.
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“Companies are worried about the security of their loans. But farmers need far more support for these loans to be successful. You can’t simply deposit R8 million into a farmer’s bank account and expect them to know how to manage it well. They need financial management support. When the loan is not paid back, financiers are surprised.”
She lamented that such scenarios set the industry back since companies became hesitant to provide development financing, while it was desperately needed to bring the level of transformation needed in the industry.
While financing new entrants to agriculture remained challenging since these farmers often had no track record, or land to put up as security for the loan, Rikhotso said that the amount of effort put into a business plan was telling.
“You can see someone’s worth based on the clarity they have about what is needed to make the business a success. We can provide the eco-system where skills, knowledge, input suppliers and markets can be linked where the farmer has none. Much of the risk in farming can be mitigated by putting these systems in place. But we ultimately need to back the right jockey to be successful.”
