After graduating from the International Hotel School in Sandton, Lesedi Masebe was busy building a career as a professional chef in Australia and New Zealand when, in 2016, her mother, Tshidi, asked her to come home to help her run the family farm. Tshidi, who had been working hard on establishing a 100-hectare farm near Sebokeng in the Vaal Triangle since 2008, had health problems and needed help running the business.
Today, Masebe Farms produces vegetables such as peppers, spinach, lettuce, radishes, tomatoes, potatoes and various herbs on 20 hectares on the farm Rietfontein. They supply supermarkets through food companies like Fresh Line and Harvest Fresh. Lesedi also grows yellow maize on 50 hectares, and raises sheep and goats on the remaining portion of the farm.
We asked Lesedi for her advice when it comes to running a farming business:
How do you track your farm’s income and expenses?
We use Sage accounting software to keep track of what’s coming in and what’s going out, versus our weekly and monthly budget.
What kind of budgeting method do you use for your farming operations?
We use activity-based budgeting, or ABB, a method that involves thoroughly analysing activities to predict costs. In ABB, there are three fundamental steps: pinpointing cost drivers, estimating total units, and calculating the cost per unit.
How do you manage cash flow during off-season periods?
I reduce everything to the most important elements, starting with staff cuts – since staff are the largest expense – and concentrate solely on urgent tasks at the location.
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How do you manage debt and loans?
In the off season, I repay the minimum required amount, and in peak season I try to make larger payments to potentially lower future premiums. I also visit the bank to explore options for restructuring my payment plan to try to reduce my monthly premiums.
Do you use any financial software or tools designed for farming?
I do not. I use traditional systems such as Sage and QuickBooks, and I have an accountant.
How do you determine the prices for your crops or livestock?
We price primarily based on current market trends, with a small markup due to our enterprise’s size. Occasionally, the prices in the market are lower than what I invested in production. So we have to establish a baseline price and add a reasonable markup to stay solvent.
How do you assess the financial viability of a new crop or farming technique before implementation?
Research, research and research! Once that is done, we will analyse a report to determine if our profit margins will exceed or fall below 20–25%, which will influence our decision to proceed.
What measures do you take to mitigate financial risks associated with farming?
This is an area where I think we can improve. Our farm is not as diverse as I would like it to be because we are still focused on vegetable production. We only focus on one or two types of crops per season. We make use of technical experts who advise us on risks and how to avoid them. In addition, I regularly send my staff for training.
How do you plan for long-term investments in infrastructure?
Saving money during peak season helps. I also look for grant programmes that are in line with this. It’s very expensive to maintain and develop infrastructure, so if I can find free money to fund it, it’s a bonus.
Can you share how you’ve diversified your farm’s income sources?
I haven’t, and this is something I need to work on.
What role do government subsidies or grants play in your financial planning?
They assist in boosting us during the low season to stay afloat.
How did you obtain funding for your farming operation?
We cast our net widely by applying to as many programmes as possible, such as grants, soft loans and commercial funding. This way, we’ve managed to get various funding opportunities, which have helped us to get to where we are today.
Who assisted in the process?
Our accountant, other farmers, and government extension officers played a role in these processes.
What challenges have you faced in securing financing for your farm, and how have you overcome them?
We had to make the financial management accounts more stringent and enlist the accountant I’ve referred to. After completing that task, it became simple to implement.
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How do you manage your taxes and insurance for your farming business?
Our private banker and our accountant assist with this.
How do you evaluate the financial performance of your farm annually?
By going through our financials and records with the assistance of our accountant.
Can you discuss any succession planning or financial preparation for future generations?
I have yet to do that. Once I’ve got my head above water, I’ll start thinking about that.
Do you have a financial mentor?
No.
What are the biggest financial lessons you have learnt?
There is no such thing as too much planning, and you can never have enough money saved.
What is the biggest financial mistake you have made, and how did you manage to recover from it?
Never put all your eggs in one basket. We had a setback when a packing and distribution company backed out of a deal, leaving us in a tough financial situation. We had to restructure and operate with limited resources, and sell our produce at reduced prices just to cover our costs. It’s been a few months, and we are still working on recovering from the impact of that situation.
Also read: ‘How to build a sustainable farming enterprise’ – Success Mdluli, Schoeman Group
