08 September 2023
By: Lucille Botha
While South African farmers’ face “rough and uncomfortable” challenges, their competitors have an almost perfect playing field. That’s why agricultural economist Prof Johan Willemse says farmers must pay attention to five rules for generational sustainability.
“The world is geopolitically and economically unstable, and South Africa’s economy is in trouble,” Willemse said at Agri Technovation’s Innovation Stations farmers’ day near Durbanville.
“There is unemployment and poverty, and about 50% of the population depends on government grants, of which they spend half on food. Crime will not decrease. South Africa’s infrastructure is crumbling and the government is running out of money.
“South Africa has socialist and race-driven policies and we can’t change that, but the demand for food continues to grow and exports are necessary,”.
The oil price and the rand are weakening together, said Willemse, so fuel will continue to become more expensive.
Have a plan
“In this environment, you need to have a plan; you can’t just say ‘we’ll take it as it comes’,” he said, explaining his first “rule”. He emphasised that farmers should not “camp out” with the problems but come up with plans.
“It’s not about whether you’re doing precision farming or applying traceability; it’s about how you will phase it in over the next few years. Have a family meeting about what you want to achieve over the next three to five years.”
Planning is also important when it comes to the farm’s cash flow. “Farmers don’t get into trouble over assets but over cash flow,” he said.
“How long will the wheat price keep falling, and what will your cash flow look like then? Talk to your financier early if you think you might get stuck.”
Build reserves and focus on the right things
Willemse’s second rule is about the cyclical nature of markets. “You have to plan for the tougher times and build reserves for them.”
He also encouraged farmers to invest in reserve funds and support schemes for when times get tough.
“There are tools to protect your money, but a Land Cruiser is not one of them.”
Willemse’s third rule is that farmers should not focus too much on negative things but concentrate on the “right things”.
Compete with the best
Fourth, he says farmers must find strategies to compete with countries such as Russia – the largest wheat exporter and therefore the country that determines wheat prices – and Brazil, which will produce 100-million tons of canola this year compared to South Africa’s 2.7-million tons.
“Australia exports 80% of its products. You have to be able to compete with that because the government won’t help you,” he said.
“You can’t face the Olympic Games barefoot; that’s why you need the best technology you can afford. That’s the only way you can compete. And if you don’t invest in it now, you will fall further behind, and in five years you’ll realise you can’t make the leap any more.”
Don’t get stuck in the middle
Willemse’s fifth rule is about economies of scale. “The person in the middle gets squeezed. Either you have to get bigger or you have to become a part-time or niche farmer, but the worst place to be is in the middle and not do anything about it.”
Economies of scale are not just about hectares but about achieving more with less, he said.
He told the story of how, during a visit to Poland, he visited a Jewish family farm that has survived for five generations, negotiating World War 2, the Cold War and the fall of the Berlin Wall.
“When we asked them how they managed it in that environment, their answer was, ‘we focused on our business’.”
