Solidarity and co-operation

Spreading risk across the supply chain

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In the course of time, it becomes clear that agriculture is exposed to many negative influences that affect its sustainability. TAU SA’s economic sustainability committee has appraised the current situation and decided to hold a conference to which the role-players in the value chain are all invited. If the lack of security and certainty over land tenure are added to the current economic pressures, it becomes difficult for farmers to keep their heads above water or keep a positive attitude.

TAU SA has sent an open invitation to various value-chain role-players whose continued existence depends on productive farmers staying in production. If the primary farmers founder, the ripple effect will be incalculable.

Today South Africa is afflicted with tremendous unemployment and poverty growing every year. Policy uncertainty and security problems are scaring investors away. For as long as this is the case, the pressure points will not be addressed. The focus should be on the economic growth that South Africa so desperately needs. Unfortunately, current government policy, statements, legislation and proposed legislation are having precisely the opposite effect.

At some point we have to be honest about the facts and stop pursuing failed policies. The economy is unforgiving: failure to observe economic prescriptions will result in the downfall of individuals, institutions and the land itself. Government has already shown its unwillingness to support the commercial sector in times of crisis. We as farmers must understand that we ourselves are entirely responsible for our economic stability.

Since October 2018, TAU SA has begun engaging role-players in the value chain in order to enlighten them as to the pressure that farmers are under and emphasise that unless something is done, there will be increasing risk of the primary commercial farmers will incur such heavy losses that input providers and food processors could also feel the pinch. Efforts should be made to spread the risk more equitably so that the primary producers do not bear the brunt of the risk. The cotton industry has managed to get the value chain to join hands and ensure that the source of everybody’s livelihood, namely the primary producer, stays in production. Every commodity organisation should analyse how they can keep the source that supplies the commodity for their specific industry in production as well as possible. Profitability is essential to ensure that a business will still be there next year.

As the final link in the value chain, the consumeer also plays an important role. It is high time that better bridges were built between farmers and consumers. TAU SA’s Pretoria Farmers’ Market is an example of where farmers can provide fresh produce directly to consumers.

Primary producers are the only role-players in the entire value chain that are price takers, with the result that farmers also undergo the greatest concentration of risk. Since the value chain depends on productive, profitable farmers, it is time for the value chain to cast a fresh eye on everybody’s role and responsibility in keeping agriculture alive.

A former minister of agriculture once said they didn’t need commercial farmers’ food because they would import it–a level of short-sightedness that defies belief. The contribution of farmers is not limited to providing food but extends to keeping the rural community alive. Just think about their financial contribution in terms of providing work. Some 650 000 workers earning R3150 a month amounts to R2 047 500 000 or R2 billion a month.

Primary producers also need to examine how they individually run their farms. In many cases, production units have marginal economy of scale – any deviation caused by hail, drought, low prices or disease could land the farmer in a cash-flow dilemma very quickly. Farmers must weigh up the benefits of collaboration, which can be done in many ways. When a group of farmers restructure themselves into a single business identity like a co-op, they have so much more leverage in terms of procurement and marketing. Equipment can be shared. It’s time for farmers to think seriously about their future on an almost marginal farm as opposed to running a mega-farm in conjunction with others. Without going into details, bigger businesses have certain advantages such as the capacity to improve security, leverage finance and overcome disaster. It becomes possible for farmers not to have to leave their farms in the case of financial setbacks. Farmers interested in the details of the various scenarios being modelled are welcome to contact TAU SA. 

Bennie van Zyl, General Manager. TAU SA

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