Introduction
Any agriculture business goes through different phases, starting with the pioneer phase. The pioneer starts the business and grows it over time, guiding it through to the next phase where the business is stabilised and starts becoming sustainable. With continued strong growth, the business starts changing shape and the original successful recipe starts to show shortcomings which normally stunt growth or even regression of the business takes place if not addressed.
The South African agriculture sector is dominated by family businesses, where the patriarchs are normally the original pioneer who established the business successfully. Over time, the next generation starts to join the family business, and in most cases, it becomes more difficult and intricate to manage the business successfully. It even becomes more difficult when the third generation starts to join the business. The third-generation curse is especially feared by family businesses, and if they do not introduce changes, they are setting themselves up for failure during this or later phase.
Agriculture Businesses
Agriculture businesses are operating in a challenging environment especially the feeling of insecurity due to the political and economic environment, potential land reform impact with the normal agriculture risks of weather, as well as the volatile product prices. Despite these challenges, the agriculture sector is flourishing and continues to play a critical role in local rural economies.
If the agriculture businesses are further evaluated, it is clear that only a small percentage is really successful, with the important statistic that 20% of the agriculture businesses produce 80% of the agriculture product. By previously being involved in supporting farmers including providing extension services, it was clear that in any farming community, the top 20% producers are performing very well with the next 40% at acceptable levels with average yields but most of them are still sustainable. The bottom 40% is normally the group that struggles to survive.
There is always the view that this group requires a lot of support through extension support which normally is a wastage of resources. The bottom group normally has other problems, mostly being too small in size, which results in a challenging financial position and then not being able to implement best practices.
The challenge, therefore, is how can more of the middle group join the top group? The other challenge is how could a business in the top group leverage itself to also become one of the mega farmers? Normally the limitation is not the application of a recipe which yielded good results so far, but the ability to move to the next level. It requires the repositioning of such a business and the introduction of the necessary changes. With new entrants from the family into the business, pressure is put on the business to grow so that the additional family members could be supported by the business. A step change is normally required to financially accommodate the next generation.
Repositioning an Agriculture Businesses
It is necessary to fully understand the business history, the current phase of the life cycle it is in, and to then identify the next phase. It is also important to identify and evaluate the business processes of the business including the consideration of its footprint of the total value chain it is participating in. The business itself, the management process, and the governance framework is evaluated. At this stage, a clear picture starts to emerge of why the business has been successful so far but also what the limiting factors are that should be addressed.
At this stage, Giraffe Consulting facilitates a process where the critical members of the business participate so a common and clear plan can be drafted for implementation, including new opportunities. The difficult part is ensuring a change in the management and governance process because normally this is the major limiting factor in these businesses. The business has simply outgrown its old ways of doing things and although it is important to continue using the part of the recipe which will continue to contribute to future success, while it is difficult, it will be of critical importance to also make the changes which will move the business to a higher level.
Any change is exceedingly difficult, but the rewards could be tremendous. It is not only about the successful repositioning and growth of the business, but also about the impact on especially family members. I have witnessed fathers and sons hugging each other with tears flowing. This normally happens when the business does not adapt quickly enough under these circumstances and frustrations start to emerge with the impact on relations between family members. In participating in the development of a common view or vision, objectives, and an implementation plan release the frustration with the business and the family members benefitting from that due to a renewed common focus. The easy part of such a process is developing the new vision and plan but the more difficult part is to actually implement such a plan. Giraffe Consulting will continue to be involved to support implementation if required as well.
Giraffe Consulting
Giraffe Consulting is not only involved in supporting agriculture businesses to reposition themselves but also supporting water and land reform initiatives.
The Minister of the Department of Water and Sanitation (DWS) wants to implement the 1998 water act fully which means that Irrigation Boards (IB) have to transform to Water User Associations (WUA). Due to a challenging process for IB’s, Giraffe Consulting have been appointed to facilitate the transformation of IB’s to WUA’s in the Inkomati with 23 IB’s (90 000ha) and with 7 IB’s (20 300ha) in the Lower Olifants catchments, IB’s and government water schemes in the Marico, Mooi River and Schoonspruit catchments as well as providing support to the irrigators within the Letaba catchment. The WUA proposals were forwarded to the DWS and the next phase of the actual establishment of the WUA’s should now get attention.
While there are requirements from the DWS that need to be adhered to, it is more important to understand the water users’ requirements and design the new water management institution to ensure a balanced and professional approach to water management at local level. The continued existence of IB’s is unsure and there is now an opportunity to ensure that water users are not caught without the professional distribution and management of water at local level. There are still a lot of IB’s that should go through such a process and Giraffe Consulting is available to support them.
There is also huge frustration with historic DWS payments for irrigators where the DWS are not able to address the administrative problems which contribute to wrong invoices. This results in the non-payment of these invoices and the build-up of the DWS historic debt. DWS is putting a lot of pressure on irrigators to pay the historic debt and are willing to write-off the interest but they are rarely willing to address the real administrative issues contributing to the wrong invoices. Giraffe Consulting is also supporting groups of irrigators to address these issues which inter alia could lead to declaring a dispute.
Giraffe Consulting is involved in partnerships and working closely with land reform financial institutions to redevelop and support land reform projects to achieve sustainable land reform. Many agriculture industries and businesses require support for successful projects. We have developed a philosophy and process where the 4 main reasons for land reform failures are managed and addressed creating the opportunity for sustainable projects. With more than 15 years of previous experience in the day-to-day management of various land reform projects, Giraffe Consulting is placed in a position where we fully understand all aspects and requirements of land reform projects. With a capable team available, we can contribute and support financial institutions, land reform farmers and communities towards sustainability.
Giraffe Consulting is based in Strand, Western Cape and Malelane in Mpumalanga. With a highly experienced team on stand-by, Giraffe Consulting wants to expand its area of operation outside of the current Mpumalanga and Limpopo areas. The focus is to create and implement solutions for its clients.
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