Petrus “Happy” Letsitsa farms maize, sunflowers, soya beans and livestock on two adjacent properties covering just more than 1000 hectares of land on a lease in Hennenman in the Free State.
In 2015, he decided to leave his job in banking to become a farmer. In six years, he increased his grain yield from 250 tonnes to more than 1 000 tonnes. As one of Grain SA‘s New Era Commercial Farmers, this allowed him to graduate into the prestigious 1 000 Ton Club in 2022. He currently produces just more than 1 500 tonnes on 550 hectares, and hopes to one day buy his own land.
How do you keep track of your income and expenses?
I continually monitor my expenses, keep track of tax invoices and watch my credit, and then I escalate everything to my bookkeepers.
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What kind of budgeting method do you use for your farming operations?
I use zero-based budgeting to monitor all earnings and expenses, and I prepare well in advance. A zero-based budget benefits businesses by allowing them to identify and eliminate unnecessary costs, manage spending efficiently, and focus on only high-profit endeavours.
Happy supplies sunflower seeds for the production of margarine. Most of Happy’s maize harvest is taken up by FarmSol for beer production.
How do you manage cash flow during off-season periods?
I sell cash crops and livestock on the informal market. I also speculate with livestock by buying animals from farmers or auctions and then reselling them. I also sell wood whenever I clear land, especially in winter.
How do you manage debt and loans?
I try to plan ahead and avoid taking out loans, especially short-term ones. After harvesting – the only time I get a large lump sum of cash – I create an emergency account to cover all temporary costs, forecasting 10 months in advance.
How do you determine the pricing for your crops or livestock?
For the grains, we usually depend on SAFEX pricing, and I hedge where I can with companies that have offtake agreements or contracts to buy from me. Hedging is a tool employed to minimise or eliminate price uncertainty. SAFEX allows for exchanging future contracts involving grain delivery at a specified time. The contract details the time, delivery details and conditions under which a specific item is to be handed over. With livestock, I check the weekly national red meat prices.
Also read: Early sunflower can have many benefits for farmers
Do you use any financial software or tools designed for farming?
No, I use an accountant.
How do you assess the financial viability of a new crop or farming technique before implementation?
I do my research and speak to other farmers who are also producing that specific crop. I would also first trial a product to establish its feasibility on a small scale before going bigger.
How do you mitigate the financial risks of farming?
With risks within our control, we do everything according to the book and never cut corners. For us, “prevention is better than cure.” Especially with crop planting we don’t ever take short cuts. We also take out insurance, do soil tests, and work with input suppliers to properly plan the use of their products.
Do government subsidies or grants play a role in your financial planning?
Government grants are handy; they act as a cushion, especially because the prices of production inputs are so high. Having some free money or free inputs given as a grant helps improve profits. If used properly, they can help one grow the business and build enough capacity to stand on one’s own.
How did you obtain funding for your farming operation?
I’m a former banker; I worked in an agri-finance unit. This taught me a lot about positioning myself for a quality bank production loan. I started my business small and grew with my skills and capacity. I have acquired finance through Land Bank’s blended-finance programme.
Who assisted in the process?
I did it myself.
How do you manage your tax affairs and insurance?
My accountant handles those.
What challenges have you faced in terms of securing financing, and how did you overcome them?
In the beginning I used consultants, who were more interested in their own businesses than in the development of a small farmer. Realising this, I cut out the middlemen; I now deal directly with funders or input suppliers.
How do you evaluate the financial performance of your enterprise?
At the end of every financial year I review my financial statements with my accountant, and I speak to my business’s financiers, the input suppliers and my mentors.
Do you have a succession plan?
My eldest son, Prince Letsitsa, is already learning the ins and outs of the business. He is a third-year student in information technology, and he aims to bring those skills to the business. I am currently scaling up the business to ensure we grow enough to accommodate us all in the future. My plan is to have at least 2 000 hectares under grain production.
Do you have a financial mentor?
Yes, I do, but I would rather not mention the name.
What is the most important financial lesson you have learnt?
Pay bills on time. Your name and financial reputation are very important in business, and tarnishing your name as a bad payer harms you.
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What is the biggest financial mistake you have made, and how did you manage to recover from it?
Skipping payments and overspending on non-essentials in the business. Now, I record everything and only buy something when I really have to.
