13 March 2024
By: Charl van Rooyen
Understanding the value of money was one of the most important tips from John Devonport, owner of the Devlan Limousin Stud, at the recent African Farming Agri-Development Imbizo held over two days in Boksburg, Gauteng.
John is a chartered accountant from Linksfield Ridge, Johannesburg, and he and his wife, Tracey, a financial and investment planner, own the farm Water’s Edge on the upper reaches of the Vaal Dam. The property comprises six farms with 22 km of waterfront.
He describes it as “a most beautiful farm” that is drought-resistant in that the land nearly doubles in size when the dam recedes. The rich grazing below the high-water mark makes it ideal for cattle farming. The area has average rainfall of 600 mm a year. The sourveld of the Highveld and very cold winters make it challenging for the cattle to adapt and survive.
They run approximately 600 head of Limousin cattle in their Devlan Stud on 1 328 hectares, using regenerative grazing techniques.
John shared valuable farming and management lessons from his experience as a cattle farmer and accountant.
Understand value for money
It is important to understand what “value for your money” is when you make purchases. Do not spend more than you earn. Only do what you can afford. Little bits that eventually add up to a big bit finally lead to success; it’s called the law of marginal gains.
Allocate your money wisely so you can make a return on your investment. If the payback period is three years, then go for it; for a solar investment, for example, take into account the tax breaks and future Eskom increases.
John described the financial mistakes farmers make. They dream big, want it immediately, don’t save up for it, don’t understand the risks involved (for example the economy, interest rates and weather forecast), don’t take out insurance to reduce the risk, over commit and ultimately pay the price, as they cannot afford the instalment. Then the asset is repossessed.
Financial advice for upcoming farmers
Upcoming farmers must ask themselves what the capital requirements are when they embark on their farming journey. Roughly one-third goes for the purchase of your land, one-third for improving your land to get it in a position to farm (you need tractors, implements, buildings, new fences, kraals and irrigation systems) and one-third for working capital to run your farm (labour, feed, repairs, seed and fertiliser).
Make sure your assets are in the right corporate/trust vehicles so that when you die you prevent estate duty of 20%, capital gains tax of 18% and dividends of 20% on the remaining assets in your corporate vehicle.
Consult a good financial planner who can help you trade in the right vehicle to reduce your risk of losing your assets if things go wrong.
Your financial planner will also help you with a will and life, disability and dread disease cover.
Find a competent, skilled mentor who can guide you, show you the ropes and prevent you from making big financial mistakes. Use him or her as a sounding board to ensure good decisions.
Work out a formula that works and keep repeating it.
Don’t worry about uncertainties you cannot control; rather worry about the costs and income that you can control.
Employ the right staff with the skills you need and place them in positions they enjoy. Inspire them by making them part of the decision-making process, discuss the goals and dreams openly with everyone, and encourage their feedback. Open and honest conversation pays off in the long run.
Bigger is not always better
Bigger is not always better; in fact, the saying goes: Less is more. “Or doing more with less,” John said.
For example, use electric fencing in cattle farming, improve your soils and run four times more cattle on the same piece of land with intensive grazing systems and by doing regenerative agriculture. “You can always rent land and expand your herd or increase the size of your crop plantings.”
Your two biggest input costs are maize and silage, and you can produce them at 50% of the retail price. Then you add value by putting them through your cattle, and you will have a competitive advantage over your neighbour.
In winter, plant cover crops under the pivots, use electric fences to breed your cow herd on green feed and improve the fertility of your herd.
By having fewer staff, but with competence, you can achieve much more as they are easier to manage.
‘You need to dream’
John described what made him successful. “You need to dream. Then eat, sleep and live your dream. Your need to have a passion for that dream and love what you do. Work hard and persevere with all the challenges that you face from unexpected places.”
Think out of the box and make your processes more efficient. The trick is to be sustainable and profitable.
From a cattle farmer’s perspective, you must farm with cattle that are adapted to your environment. The cattle must be functionally sound. The fertility of your herd is a huge profit driver. How many cows exposed to the bull wean a live calf? That is the important question. Farm with a herd with longevity. John and Tracey have one cow that was born in 2005, has produced 16 calves and is currently walking with the bull.
