Although the South African economy is pinching, there are still more than enough opportunities locally, further up in Africa and globally for farmers to be successful. This is the opinion of Prof. Johan Willemse, an agricultural economist and consultant, who acted as a speaker during TLU SA’s annual congress earlier this week.
He pointed to the irony that the government with its socialist policies cannot fulfill its role, which means that for all practical purposes the country is privatizing.
“The playing field is not easy and will not become easier over the next three years, but if farmers understand the rules of the game, they will reap the rewards. Agriculture also looks positive and is one of the few sectors that is growing.”
According to Willemse, the biggest risk South Africans are currently facing is state collapse. “The announcement this weekend that the state has no more money does not bode well and could end in a death spiral. Money flows out of the country and the economy weakens. As many as 42% of South Africans are unemployed and 62% of young people between 15 and 24 are out of work. Today, R350 billion of the government’s money goes to 28 million people and half of that is spent on food.”
He believes that farmers should start focusing on the opportunities offered by the export of agricultural products.
“There are many hungry people north of South Africa’s borders, because their governments’ policies are wrong; they do not have property rights and there are no market forces present. This creates a great opportunity for farmers in the midst of the falling rand, but also means that the Land Cruisers and John Deere’s are becoming more and more expensive.”
“There is a market for our products and it’s not just in South Africa.”
He says 50% of the country’s income comes from exports and this can be increased to 60% and 70% by utilizing the Brics agreement.
He referred to the recent breakthrough when Saudi Arabia reopened its borders for South African red meat and the avocados that are on their way to China.
“We export corn, soybeans, mutton, beef, game, avocados, berries, citrus, grapes, nuts and soft fruit, but then you have to know what you’re doing and have the right tools to meet that market.
To thrive, says Willemse, you must understand your business, have a solid business plan and healthy cash flow and your budget must match reality.
“Farmers must also realize that markets move in cycles and put money away for the lean years.” He warns that now is the time to put money away, because the three fat years are now coming to an end with the weather pattern La Niña now giving way to El Niño. “You have to be ready if El Niño cuts your income in half.”
Finally, he says farmers must focus on the right things and realize that they are in a highly competitive environment. The right tools are needed to produce more with less.