By Boipelo Kekana-Mabuza
A caller on one of the radio stations asked for a good Samaritan to assist him and his co-op with a tractor. The presenter tried to offer advice and point the caller in the right direction. Two things stood out from the call:
- There is a general lack of information for would-be farmers.
- Some people may oversimplify the reality of the agriculture space, which always yields disastrous results for those starting up.
Here at XploreAgri, we are committed to answering those burning finance questions you may have before dipping your toes into the agricultural space. Also always remember that farming is a capital-intensive business that requires patience to grow.
Strategic Steps for New Farmers
There are both opportunities and challenges when it comes to new farmers purchasing farmland. While owning land is a crucial first step towards economic empowerment, using it productively requires a methodical strategy, especially when considering financing and market-driven agricultural viability.
To ensure long-term sustainability and profitability, key steps must be taken to secure funding. But first things first – you need to figure out exactly which type of agribusiness you want to pursue. There are many layers in the agricultural space; some are hidden, while others are in plain sight. And trust me, you will change your mind a few times before you find your fit.
Legal and Administrative Considerations
The first step is to establish clear legal ownership or leasing agreements. Securing
investment depends on having the correct title deeds or lease agreements in place,
whether the property was acquired through government programmes, reparations, or private means. Additionally, formalising the group into a private business, trust, or cooperative not only improves funding and finance eligibility but also provides a structured governance framework.
Land and Market Assessment
Before making production investments, a thorough evaluation of the land’s economic and physical feasibility is essential. The selection of crops or livestock should be guided by soil testing, climate suitability studies, and the availability of water resources on the farm and in the region. Consulting private agronomists, local farmers, and other experts in the field can provide valuable insights into the best ways to best utilise the land. At the same time, market research is crucial to identify agricultural products in high demand, potential customers, and competitive advantages. Understanding supply chains, input costs, and potential revenue streams ensures that the chosen farming practices align with market realities.
Financing Options and Capital Structuring
Access to financing is one of the main challenges new farmers face. However, there are various ways to raise capital, including private investments, bank loans, and government grants. The South African government offers targeted support to empower previously disadvantaged farmers through initiatives such as the AgriBEE Fund and the Comprehensive Agricultural Support Programme (CASP). However, there is a general perception that these initiatives often fall short of achieving their intended goals.
While commercial banks may provide credit facilities based on a solid business plan and collateral security, the Land Bank offers a range of funding options, including blended finance and business loans. It is also worth exploring alternative financing options such as private equity partnerships or contract farming arrangements. Securing funding requires a well-prepared business plan. More importantly, you must fully understand your business plan and be able to speak confidently about it. A robust financial model will demonstrate the economic viability of your farming venture to potential lenders and investors.
Business Planning and Operational Strategy
A pilot phase at the outset allows for controlled risk-taking. Prioritising high-yield, low-cost crops or livestock with a rapid market turnaround helps generate cash flow in the early stages. To maximise operational efficiency, infrastructure development such as fences, storage facilities, and irrigation systems—should be prioritised. All these investments must be guided by a thorough cost-benefit analysis.
Skills Development and Risk Management
Agricultural productivity relies heavily on knowledge and skill. Engaging with industry stakeholders—such as AgriSETA training programmes, the Agricultural Research Council (ARC), and mentorship schemes offered by industry leaders—can be highly beneficial for any new farmer.
Research should be your best ally. Farming is a sector that demands a blend of creativity, dedication, passion and knowledge to succeed. As a newcomer, remember that research not only exposes you to the industry but also helps you understand where it currently stands and where it is headed. Key factors in managing risks include agricultural insurance, diversification and sustainable farming practices. Techniques such as crop rotation and no-till farming, to mention a few, help build resilience against climate variability and market fluctuations.
Send your farming-related questions to [email protected]
