David Mthombeni is something of a trailblazer and a hero in the black farming community. Born in Mohlakeng, Randfontein, during a time when a black man could not even own land, he dreamt of becoming a commercial farmer.
Today, he owns Gegana Farming, a mixed farming enterprise on three farms spanning 2 162 hectares in Greylingstad, Standerton and Evander in Mpumalanga.
Farming Operations
David oversees a diversified farming operation that includes broilers, cattle, small stock and grains on the three farms. Soya and maize provide the mainstay of his crop farming, and he plants sorghum when the market is right for it. He employs 30 full-time workers and 50 temporary employees.
Succession Planning
Since he has been a farmer for more than 20 years, succession planning is top of his mind. His son Thubelihle joined the family business full time in 2017 after completing a diploma in animal production at Glen Agricultural College in the Free State; he is now the operational manager.
David’s second son, Tholo, is pursuing a BSc (Agric) degree with a focus on soil sciences, agricultural economics and agronomy at North-West University, and will join operations once he has completed his degree.
“Future financial planning is critical in a business to maintain sustainability,” David says.
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David’s Farming Philosophy
1. Financial Tracking
Income and expenses are tracked through an accounting system that provides daily spending updates. Gegana Farming uses Sage Business Cloud accounting software.
2. Budgeting Methods
Budgeting methods include cash flow, accrual and enterprise budgets.
3. Off-Season Cash Flow Management
During the off-season, cash flow is managed through budgeting, inventory management, reducing expenses, cash reserves and short-term financing.
4. Debt and Loan Management
Debt and loan management systems include cash-flow planning, debt consolidation, loan prioritisation, risk management, budgeting and cost control, and regular communication.
5. Pricing Strategy
Crops and livestock are priced through market research, supply and demand, production costs and price elasticity.
6. Financial Viability Assessment
The financial viability assessment of new crops or farming techniques includes research and data collection, cost analysis, revenue projections, break-even analysis, risk assessment, pilot projects, trials, review and refining.
7. Financial Risk Mitigation
Measures to mitigate financial risks include diversification, risk management plans, budget and cash-flow management, keeping financial reserves, monitoring and review of farm operations, and asking for professional advice.
8. Diversification Strategy
Diversification has included adding broiler chickens, diversifying crops, and offering farm-related services and logistics.
Also read: Diversification strategy shields South African farmers from trade shocks
9. Long-term Investment Planning
There is ongoing planning for long-term investments in infrastructure on the farms: “We set our business goals, do an infrastructure needs analysis, do capital budgeting, and ask ourselves what our priorities are and whether the investments are sustainable. Then we look at risk management, do regular reviews and updates, and manage our cash flow to pay for the investments.”
10. Professional Financial Support
The business employs an accountant who handles all taxes, insurance issues, and loan or financing requirements. The annual audited financial report from the accountant allows David to assess the financial performance of his farms. His bank’s financial advisors and accountant help guide all his business decisions.
Also read: Increasing profits through diversification
