Rustlers Valley and agriculture: the rumour (part I)

When I was growing up as a kid near Ficksburg in the Eastern Free State, Rustlers Valley was what its name suggests: a hold out for the lawless; a safe haven from polite society. The local community was scandalised by stories of what transpired behind those there mountains: music concerts, hippies from Jo’burg, dagga (marijuana) …

 

A typical Eastern Free State scene. Photo used courtesy of Brand South Africa.

Anyone who has lived in or near a conservative, rural town will be aware of the tales that become possible from a single anecdote or observation. The occasional person who drifted into town from Rustlers and/or the occasional rumour which blew in across the veld provided a rich source of speculation for the community. (Of course, humanity does this well no matter the pace of abode, and was doing so long before the so-called “post-truth” age linked by some to last year's American elections). Perhaps it is the absence of the relative cover and anonymity offered by a city that leaves the lives of inhabitant and stranger open to inspection and pronouncement in a small dorp.

Decades went by and the change that had been resisted for so long in the country came to pass. White rule - political rule anyway - was swept away. Mandela became president and the sun still came up the next day. Mbeki followed him. And then in 2007, a fire swept through Rustlers, ending an era. I daresay many of the old timers probably nodded their heads and whispered knowingly to each other.

The first I heard of the place again, in the so-called new South Africa (and the new century), was in 2014 when one Gino Govender made contact and came to collect a copy of The Agri Handbook. He, Kumi Naidoo and Jay Naidoo were starting an agricultural enterprise at Rustlers Valley in the Eastern Free State. I was familiar with those names. I had come across Rumi Naidoo several times whilst reading up for previous editions of the agricultural publication. An international environmental activist group like Greenpeace, of which he was executive director, has certain areas of common interest with agriculture – water and energy, for starters, and how the growing of food impacts on the environment. And anyone who lived through the cauldron of the years before the country's first democratic elections in 1994 knew of Jay Naidoo, General Secretary of the Congress of South African Trade Unions (COSATU). Fancy that! It’s a small world, I thought.

Gino Govender, Kumi Naidoo and Jay Naidoo (photo used courtesy of Earthrise Trust)

I paid it no more mind until a colleague, Mike Stuart, brought news of developments at Rustlers Valley in the Free State. Did I know about it?

And so it came to pass on a morning in May 2017 that we met Gino Govender at the Sandwich Baron in Kensington to hear about their work and the developments at Rustlers. 

 

 

 

“Energy farmer”, wins R100 000 funding for project

Thabang Mabapa was announced the winner of the “business pitch challenge” at an event held in Mamelodi, Pretoria, over the weekend. His Limpopo-based project,  Selokong Sa Dimelana, involves engaging local small-scale farmers to grow castor seed crops. This is used for the commercial production of an alternative biofuel. Mabapa (pictured below) considers himself more “an energy farmer than a chemical engineer”. 

Thabang Mabapa who initiated a biofuel project in Limpopo

Mabapa says the castor seed crop takes three months to grow and requires little water. A hectare yields around 1.8 tons of castor beans. He explains the process and vision of the project in a 3-minute YouTube clip here.

The annual competition is a collaboration between Red Bull Amaphiko Academy and the Old Mutual Foundation.

• The Red Bull Amaphiko Academy offers “a powerful launch pad for grassroots social entrepreneurs who are making a positive difference in their community”.
• The Old Mutual Foundation invested over R25-million in community projects last year. 

“Junk” status for South Africa – what happens to agriculture?

To our overseas readers who may not know, the South African president fired several ministers including the respected finance minister and his deputy, and as a consequence, the country’s credit status has been lowered by both Standard & Poor’s and Fitch to the level derogatively called “Junk”. Today, which sees a second day of mass protests, is in a curious irony also the birthday of both the president and the former finance minister.

Agricultural services provider Senwes looked at what the downgrade means for agriculture:

The producer

• A weaker rand will drive up the price of inputs like fertiliser, chemicals and fuel.
• Imported tractors and parts will be more expensive.
• Sustained depreciation of the rand will lead to higher grain prices since these are derived from international prices [more bad news for the poultry sector!]
• Rising inflation levels will put pressure on the producer’s disposable income as their money’s purchasing power deteriorates.
• Interest rates will not be dropped as had been expected. As a result, interest on agricultural loans will remain high.
• Debt will increase and will need to be scrupulously managed by the producer.
• The producer’s ability to pay back loans may be affected.
• The producer’s weakened financial situation can have the consequence of his taking more risks e.g. not taking out insurance.

The consumer

• The same momentum which increased input costs for the producer will have decreased the buying power of the consumer. This will affect consumer demand for agricultural produce.
• Further weakening of the exchange rate, interest rates and higher inflation will place consumer disposable income under further pressure. The poorest of the poor will be affected by this.

Agricultural companies

• The weakening exchange rate paired with high inflation will negatively influence agricultural companies’ operating costs and profits.
• Financing costs will increase, which will see a drop in expansion and investment (and the opportunities which go with these).
• Reduced international competitiveness of South African companies as a result of increased production costs.
• Lower profitability and higher expenses will lead to a shrinking agricultural sector with direct results to job creation in this sector.
• The macro economic environment will be negatively influenced by the contraction in the agricultural sector.

 Find the Senwes Corporate Finance article here.

Double #BlackMonday for the Karoo

There is quite a hullabaloo in the country following a sizable cull of government ministers and deputy ministers. Today is #BlackMonday, and demonstrations are planned for Friday and beyond. Even the farmer-evangelist Angus Buchan is responding to the socio-political toxicity of the moment under the banner It’s Time. 

As serious as this all may be, it has allowed an event of equally (or more) insidious character to slip past under the radar, an announcement by Mineral Resources Minister Zwane of government’s intention to proceed with the shale gas adventure in the Karoo. 

Frackers were turned back at the gates following determined and effective opposition from farmers in northern KwaZulu-Natal and the Free State, and have faced enormous resistance in the KZN Midlands as well as in the Karoo. After Zwane’s announcement, frackers everywhere will be much emboldened. 

The irony is that President Jacob Zuma, in his capacity as Chairperson of the Heads of State Committee on the United Nations (UN) High Level Panel on Water, officially opened the United Nations (UN) World Water Day Summit and Expo in Durban last week. The summit was held under the theme “Water and Sanitation is a human right”.

Watch the documentary Unearthed by farm girl Jolynn Minnaar which exposes the false assurances by multinationals that fracking is a safe technology as she travels among American communities who have (multinational-donated) water carts behind their houses and a visible reluctance to speak about it. (Oh, don’t hold a naked flame any where near the taps in their houses!)  If the first-world Americans can’t help slipping up here and there, what chance South Africa? Speak to farmers and conservationists in Mpumalanga about what happened to farms and wetlands when Zwane's other boys, the mines, moved into the neighbourhood.

Politicians come and go, some with fanfare, some with relief. The potential destruction of an entire region’s water resources will leave a legacy longer than any politician’s and render vast swathes of rural territory a wasteland, sans (drinkable) water, sans humans, sans wildlife.  This is as deserving, if not more so, than any #BlackMonday.

Smart business decisions can have tax advantages for successful farming ventures

See these five tips to maximise your tax returns in 2017

1)   Set your goal to be most profitable, not just to pay the least amount of tax.  Frequently, businesses can focus so much on minimizing tax obligations that they often lose sight of the business’ real focus – maximizing after-tax profitability for this year, and the years to come.

2)   This tax year, invest in your farm. When making the decision to invest, farmers typically have two decisions; either to recognise their profits this year or to invest the profit for a possible increase in profit in the future. 

3)   Maximize capital asset tax treatment with deductions over multiple years. Your investments today can be deducted over multiple years. Therefore, tax planning must also be made with a multi-year perspective. A typical deduction structure would be 50% this year, 30% the next year, 20% the third year. Decisions that you make today will have an impact in the future years’ tax planning.

4)   Right-size your capital investment needs.  The last three years were likely years of underinvestment in your fleets, or other capital assets. This may be the year to catch up on your capital investment plan. However, be careful not to try to put three years of postponed investments into this year.

5)   Use VAT back loan payments to increase your farm’s financial resilience. Reclaiming your VAT payments is key to successful cash flow management of an agri-business (big or small). In the purchasing of capital assets the VAT payment can make up a significant part of the value. By structuring your loan repayment on your capital investment to include your VAT refund, you can accelerate your repayment, and ensure the financial resilience of your business.

An excerpt from a John Deere press release, February 2017.

The future of land reform in South Africa – the next 15 years

Land Reform Futures Scenarios bring a fresh perspective and new hope on discussions on land reform - a press release

As pressure mounts for the acceleration of the land reform programme, stakeholders in land reform held a roundtable session this week to discuss possible scenarios.

The roundtable was hosted by the Vumelana Advisory Fund, a non-profit organisation that helps beneficiaries of the land reform programme put their land to productive use by establishing commercially viable partnerships between beneficiary communities and investors. The roundtable was attended by representatives from the media, from AgriSA, the Department of Rural Development and Land Reform, the African Farmers’ Association of South Africa, the European Union and the Bela Bela Communal Property Association (CPA). 

Discussions focused on four land reform scenarios that can possibly unfold in South Africa over the next 15 years: 

1. Connection & Capture; 
2. Market Power & Concentration; 
3. Occupation & Confiscation; 
4. Hard Bargaining & Compromise. 

The Land Reform Futures or Scenarios were developed over a period of two years by 40 people who approach land reform from widely differing perspectives: policy makers and administrators, traditional leaders, communal property institution leaders, activists, business people, academics and consultants. 

Speaking at the roundtable, Brian Whittaker, director and strategy advisor at Vumelana Advisory Fund explained that the scenarios are not predictions or proposals. They merely provide a perspective on how things can possibly pan out. 

“The scenarios are not exhaustive, but tell stories about how South Africans might respond to the challenges and what the outcomes of their responses can be,” he said. “In the case that one scenario is applied, it provides insights on what could possibly happen as a consequence to that scenario, and this speaks to the economic and social perspectives.”

The scenarios can be used by any institution as a reference point in planning around land reform. They present an inclusive and structured way in which to look at what could possibly happen and can therefore help with decision-making and planning in the land reform space, he added.

• Scenario 1, Connection and Capture, paints a picture of what can happen should government allocate land arbitrarily to shore up support ahead of the 2019 elections. Such a move is likely to benefit the politically connected to capture land reform for their own purposes.
• Scenario 2, Market power and Concentration, describes what can happen should government decide to accelerate land reform through community-private partnerships. Such a move would lead to a substantial transfer of commercial farmland to black South Africans, but would not necessarily bring about the necessary reform; it would change ownership, but not the structure of agriculture.
• Scenario 3, Occupation and Confiscation, describes what can happen if South Africans opt for land invasion in the face of deepening hardship.
• Scenarios 4, Hard bargaining and Compromise, describes what can happen if South Africans agree to equitable land sharing. In such a scenario, land reform would become a shared responsibility among a wide range of actors, supported by an enabling state that is committed to pro-poor land and agrarian reform.

“Scenario 4 presents an ideal approach,” Annelize Crosby, AgriSA’s legal and policy advisor, said at the roundtable. “However, there is still need for engagement on it.  The hard bargaining and compromise process leaves the country with no choice but to engage. To say we are going to expropriate 70% of land within a year or two is extremely disruptive – if it happens within the next two years, it will be very disruptive indeed.” 

Crosby believes that the right frameworks are in place, though people within these frameworks may not be truly empowered. “While having land reform committees is a good concept, the way in which it is being rolled out is not perfect,” she noted. “Certain interventions must be made by national government, and that’s not only on land - there has to be an understanding of what people want. In some cases, people just want their lives to be improved, they want a better life for their children, and this may or may not include land.”

The majority of participants at the roundtable supported the view that the fourth scenario presents a plausible solution to addressing some of the current land reform challenges. Aggrey Mahanjana, secretary-general of the African Farmers' Association of South Africa believes that a combination of scenarios four and two will help South Africa achieve the target of one million jobs in agriculture by 2030.

“Scenario 4 will contribute towards the development of the country without messing up the country, however there needs to be a clear framework of implementation in applying these scenarios,” he noted. “And we need to make sure that partnerships are not skewed where our people are ripped off. Government has to intervene to make sure that we strike a proper balance in terms of policy to make sure that both parties involved in the partnerships benefit.”

Elton Greeve, chief director of strategic land reform interventions at the Department of Rural Development and Land Reform highlighted that many people don’t fully grasp land reform’s economic and social consequences. 

“They see land reform as acquiring land and distributing it,” he pointed out. “While that’s an element of land reform, it is a small element; there are economic and social impact issues and other elements. We need to have the right framework and get people to understand that there is a difference between redistribution and restitution, as this deals with different elements.”

According to Greeve, government cannot resolve land reform on its own, there is a need for partnerships. “It’s encouraging to see that the 80 partnerships that have been formed with white farmers, are voluntary partnerships.  We have farmers now coming up to say we want to partner, help us to do it. We need more of this kind of non-coerced partnerships.”

For more on the Land Reform Future Scenarios, visit www.landreformfutures.org

Davos and a reference point for 2017

With inequality lurching wider every day, the middle class thinning out, one percent of humanity as wealthy as all the rest put together etc, one cannot but give a slight frown when viewing a gathering such as that of the annual World Economic Forum (WEF) at a ski resort in Switzerland earlier this month.

Davos 2017 is over. For several days articles and blogs have surfaced about the event and will continue to do so as the year proceeds apace.

• Ashburton Investments defends Davos as “not just an elitist talk shop”.
• The South African BizNews editor, in introductory notes to the daily newsletter this week, reported feeling “greatly encouraged” about the country’s prospects afterwards.
• Fortune magazine writes that “the decline in American importance … was palpable”.
• The Guardian pointed to the ability of Chinese president XiJinping to fill both the conference hall and also the overspill room.

In preparation for the annual event, the WEF released its Global Risks Report, identifying certain challenges. The report warned of economic, environmental, geopolitical, societal and technological challenges.

Prof Jonathan Michie (Oxford University) believes that, to have the desired effect, the report should have been debated elsewhere, “in working class hubs like Sunderland in the UK and Michigan in the US” (as opposed to London, Washington – and Davos). Will any sincere movement towards addressing the challenges singled out in the report result from the ski resort in Switzerland?

We thought it would be useful to list the challenges set out in the pre-conference report here, as a marker or reference point for us, as we navigate the year. 

Rising income/wealth disparity

• The growing mood of anti-establishment populism suggests that reviving economic growth needs to be accompanied by adding reforming market capitalism to the agenda to “remedy fractures in society”.
• How to make economic growth more inclusive?

Increasing polarisation and intensifying national sentiment and, linked, facing up to the importance of identity and community.

• Cultural schisms which have arisen from rapid changes in areas like international cooperation, gender and race, multiculturalism and sexual orientation which have led to people feeling left behind in their own countries. These are “testing social and political cohesion and may amplify many other risks if not resolved”, the WEF warns.
• How to reconcile growing identity nationalism with diverse societies?

Managing technological change

• Technological change can be highly disruptive, particularly if occurring simultaneously with other challenges to social and political cohesion.
• New technology = new risks. Cyber attacks highlight the vulnerability of companies and nations.
• And how tightly does one regulate? How do you implement new technologies at a time of “significant unemployment”?

Protecting systems of global co-operation

• There are institutions which are meant to encourage global co-operation, such as the International Criminal Court. African countries like South Africa are withdrawing from it. Others like the USA and Russia were never part of it.

Environment-related risks

• Extreme weather events, failure of climate change mitigation and adaption and water crises feature as high as ever on this year’s WEF report.

Government crack downs on civic space

• Surveillance of digital activities, restrictions, even physical violence has affected academic, philanthropic and humanitarian entities.

“An issue underlying the rise of disaffection with the political and economic status quo is that social protection systems are at breaking point”, the WEF points out. Individuals are increasingly shouldering costs from economic and social problems like unemployment, exclusion, sickness, disability and old age.