When we talk about business, and when we talk about agriculture, I think the question of adaptation is critical. Remember that expression “adapt or die”? Well, a lot of people actually “die”. Business is a game. You have rules – and competitors who can wipe you out. The most important thing is to choose the game that you play. It’s no point being world’s best player of a game like badminton, because you won’t earn much money.
Many farmers play badminton. They have to change their game if they want to make real money.I did a session up in Nylstroom once with several farmers who were growing tobacco. They decided they were playing badminton and so they changed the game. They merged their farms to form a game farm, which they marketed to the Germans. Germans are wary of catching malaria, so these farmers made their byline: “See the Big Five without catching malaria”. This led to massive profits. By changing the game the farmers turned themselves into serious business people.
Adapt or die
It’s critical to look at how the external environment is changing and how you need to adapt the purpose of your business.Through my strategy sessions with farmers I’ve found that many are looking at diversifying their businesses geographically. For example, six months ago we did a session with one of the country’s largest vegetable producer, who has bought a huge estate in Vietnam.
They’ve realised the Chinese are turned on by their particular product, and Vietnam is China’s China – in other words, the cheap alternative. This producer is going to become the largest producer of this particular vegetable in Vietnam and export it to China. I’m currently doing sessions with a farmer who’s deciding where he’s going to put his next R100 million. He’s considering buying a very large farm in Mozambique, because the government there is offering serious incentives for South African farmers to move there. The point is, you’ve got to adapt.
You have to consider your options.
One of the other things we have to do to remain in the front rank of world economies is develop our pockets of excellence. In government, for example, the SA Revenue Service (SARS) is as good as any revenue service worldwide. If they’re used as a benchmark to raise the performance of other ministries, then we’ll move forward.
What do farmers have to do to move forward? I believe farming in this country is divided into three tiers. On tier one you have agribusiness, producing about 80% of the country’s output. On tier two are commercial farmers and on tier three emerging farmers. If we want to unlock the whole land reform puzzle, tier one farmers have to take tier three farmers under their wing, to enable them to grow into tier one and two farmers.
When I was working for Anglo in the mid-1990s we started a project called Zimele, which means “doing it for yourself”. It was a social responsibility initiative to get the mines to subcontract non-core business to small businesses. We thought we might achieve a target of R100 million to R200 million. The figure last year was R23,5 billion.
Zimele has grown so big for a simple reason – the mines realised these small-scale businesses were far better at providing clothing, food, security and so on than the mines themselves. Instead of being charitable,subcontracting is now part of the mines’ business model. Zimele has a venture capital fund attached to it. When we award contracts to small black suppliers, we invest in their businesses so they can expand to fulfil our particular contract.
It works like a charm – and I strongly believe it could work in agriculture. As in mining, we need to keep production as high. The only way to do it is to follow this sort of model, where the tier ones act as an umbrella for the tier threes. My co-author Chantelle Aubrey has been doing a lot of work with the KZN Sugar Association, and that’s precisely what they do. Small black farmers feed their produce into the large sugar mills, which handle their marketing.
You have the economies of scale where you need them.But it’s vital we identify the real entrepreneurs, and not the guys who sit on the side. If we identify the top 25 000 entrepreneurs in this country and support them so they can enter the formal economy, we could meet Jacob Zuma’s target of creating 500 000 jobs – much more sustainably than with public works programmes paid for with taxpayers’ money.
E-mail Clem Sunter at [email protected].