In conversation with FNB Agric

In uncertain times communication is a critical commodity that should be used in abundance. Agriculture is currently in a vice grip due to high input costs, challenges around infrastructure, and increasingly restricted access to credit, says Theo Vorster of Galileo Capital.

In August Theo Vorster of Galileo Capital was involved in three sessions hosted by FNB Agric in various regions of the country, aimed at communicating with farmers about the challenges and prospects within the agricultural sector.

Although the sessions took place in three different agricultural regions, (Ceres in the Western Cape, Kirkwood in the Eastern Cape and Letsitele in the Lowveld), there were a few recurring themes that came up.

He said it was heartening to get con­firmation from FNB Agric speakers that agriculture is a preferred sector for financiers. Two of the key factors that make the industry so attractive to banks are the historically low levels of debt write­offs, and that agriculture balances a bank’s lending book.

Agricultural cycles are not correlated to the rest of the economy. Therefore, when other sectors struggle, agriculture is more than likely experiencing an uptick, and vice versa. The covid­19 pandemic was just such an instance – South Africa’s GDP shrank, while agriculture still showed growth.

“Crumbling infrastructure in terms of roads, the rail network to our ports, and of course energy, came up time and again as a major challenge. It was clear that the solutions lay in communication as a starting point, and that both the agricultural sector and the authorities realise they are interdependent.

“While the agricultural sector can’t accept responsibility for the upkeep and maintenance of the rail network or ports, the ports need the import and export volumes of agricultural products in order to remain viable.”

Another topic receiving much attention was the relationship between commercial agriculture, and rural farming communities – specifically the poorer communities that are dependent on local authorities to provide basic services.

“This discussion was especially relevant during the session in Kirkwood, against the backdrop of the recent devastating unrest in that region. The lessons are however equally relevant for the rest of the country, and strong emphasis was placed on the need for good relationships, but also on creating oppor­tunities for communication.”

“The core message I took from these engagements, was the confirmation that agriculture is still an attractive sector for banks to lend to, and secondly that the solutions lie in cooperation between farmers, the autho­rities and rural communities,” says Vorster.

“The presentations by Agbiz and BFAP demonstrated the importance of communi­ cation and active involvement by all role­ players to discuss both serious challenges (of which there are many) and future plans (of which there are even more), as we strive for a better future for all of us, from the consumer right through to the person planting the seed.

“To quote Oom Kallie Schoeman, ‘If you are not at the table, you are on the menu!’ For South Africa to truly work, the agricultural sector must flourish as an asset for all its people!”

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