Agri Value Chain Virtual Discussion Series – Finance

The session is once again anchored by Dr John Purchase who leads a panel that includes Nico Groenewald from Standard Bank, Dawie Maree from First National Bank, John Hudson from Nedbank, Roux Wildenboer from Absa and Gielie Swart from Santam.

The conversation starts off with a discussion around financing agricultural business. Nico Groenewald informs viewers that from a historical perspective, funding in agriculture was focused on production or farm gate level. As things evolved and focus shifted towards understanding the value chain, financing also changes. Nico explains the different factors that have affected the changing finance trends within the agricultural sector. He references the 90s movie Jerry Maguire’s concept of “follow the money” to illustrate where finance in agriculture is moving to. “When it comes to financing, we need to understand the workings of the value chain very well”.

Roux enters the discussion encouraging people to gain a more holistic view and a broader understanding of what the economic drivers in the agri sector are. “From a risk point of view, there have been a lot of developments in the past couple of years that have altered how we determine risk in the agricultural context.” He goes on to detail the different factors that influence a decision on risk in business. “We like to see clients who are able to device a proper strategy when it comes to debt and investment administration.” He noted that agriculture by nature is dynamic and cyclical and acknowledges that this effects producers substantially when it comes to acquiring financial backing.

Speaking on finance as an enabler for growth in the agricultural sector, John Hudson dispels some of the myths and misconceptions that exist regarding understanding finance and lending patterns in South African banks. “If we take a broad look towards the end of 2019, the total debt came in around 200 billion.” He proceeds to provide stats that display evidence of how banks continue to invest in the agricultural sector. John pronounces that with new regulations being introduced, banks are now in a far better state than they were in 2008. While pointing out specific sectors in agriculture that are showing exponential growth, John adds that perceived risks in agriculture, banks are still able to do good lending.

The panel discussion shifts towards the predicted negative impact that the Covid-19 pandemic will have on the broader agricultural sector. Dawie Maree speaks about scenario planning and how different possible scenarios may affect the agricultural sector. “We’ve taken a look at various industries on a case-by-case basis and looked at how clients will be able to afford financial assistance.” He assured viewers that they will be carrying on business as usual and each application will be evaluated on its own merit and the pandemic will not change that.

Expectation before the outbreak was that agriculture and tourism will be the biggest drivers of economic growth in the country. With Covid-19 devastating the tourism industry, the government is looking primarily at agriculture to grow the economy. This is a lot of pressure on the sector. The panel acknowledges that at this juncture, agriculture is most definitely the best possible sector to be in at the moment because while yes, everyone will feel the impact of the pandemic, the agricultural sector sits in a much better position than most industries. The panel encourages us to learn from the current state of events and take away opportunities and goodwill and harness them going forwards.

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