Sustainable agriculture and successful farming are prosperous businesses in South Africa. We show you how to create the best business plan for your crop production needs.
You should take advantage of the resources at your disposal and bring food from our fields to the table. I’m talking about crop production in South Africa.
The fact that food production, and therefore food prices, are affected by weather, pests, and other unpredictable factors, makes this industry an exciting and opportunistic field for business.
Agriculture is an important regional driver of rural development, job creation and poverty alleviation. Focus on innovative ways to reconnect our food system with our economy and gain profitable yields in the process.
South Africa is divided into a number if farming regions according to climate, natural vegetation, soil type and farming practices.
- Grain and oil seeds: The grain industry is one with the largest in South Africa, producing between 25% and 33% of the country’s total gross agricultural production.
– Maize is the largest locally produced field crop, and the most important carbohydrates in the Southern African region.
– Wheat is produced in the winter rainfall areas of the Western Cape and the eastern part of the Free State.
- Sunflower seeds: Produced in the Free State, North West, and Mpumalanga Highveld and Limpopo province.
- Groundnuts: Are mainly grown in the Free State, North East and Northern Cape.
- Sugar: South Africa is the world’s 13th largest sugar producer. Sugarcane is grown in the Eastern Cape, Kwazulu-Natal and Mpumalanga.
- Fruit: This industry’s export earnings represent about 12% of South Africa’s total earning from Agriculture.
- Vegetables: Potatoes make up about 40% of vegetables farmers’ gross income, with tomatoes, onions, green mealies and sweetcorn contributing about 38%.
- Cotton: Grown under irrigation and in dryland conditions. Cultivated in Mpumalanga, Limpopo, Northern Cape, Kwazulu-Natal and North West.
- Tea: Honeybush has become a commercial crop, with the production of more than 100 tons of processed tea per year. Rooibos tea is an indigenous herb produced mainly in the Cedarburg area and Western Cape.
- Wine: South Africa is the ninth largest wine producer in the world. South African wine export rose from 22-million litres in 1992 to almost 314-million litres in 2007.
Overall the production of field crops in South Africa has increased. In the twenty-first century the growth of yields from all these crops increased due to a shift in consumer preferences. Consumers are now demanding more locally grown produce, especially if organically grown.
Agriculture as a percentage of GDP has increased over the past four decades, currently contributing around 2%. This implies that our economy is maturing, moving towards the secondary and tertiary sector.
The government plans to exploit South Africa’s competitive advantage that will place South Africa among the top 10 export producers’ in high-value agricultural products.
Financing is available from the Industrial Development Corporation to encourage development within the food, beverage and agro industries. To approve for this financing or any other for that matter you’ll need an exceptional business plan.
Agriculture business plan
Those with little or no farming experience will find crop production difficult. Many factors must be considered to ensure the success of your business venture. A strong business plan is essential.
Basic components of a business plan:
- Executive Summary or Business description: Highlight the major factors regarding your crop production services. You should only complete the summary after the business plan has been completed. This will be about two pages long and it should give a synopsis of what you want to achieve.
- Introduction/Background: This part gives an overview of your business vision and objectives. Start with a business overview to establish where you are, where you’re going and how you plan to get there. Follow this with your business mission statement. Then list your objectives. There must be more than five and comply with the S.M.A.R.T principles. See Resources as the end of this article.
- Proposed products and services: Describe the products and services that your business idea will produce. Motivate why you believe a need exists and why this particular venture should be selected and financed. Analyse the current agricultural situation in South Arica and assess the proposed venture within these frameworks. Remember to write what you think the future long-term possibilities may be.
- Marketing plan: The more research you do, the better equipped you’ll be to navigate the road ahead. Describe why you believe there is a gap in the market and who your likely target market will be. Including size and extent of market share aimed at for the medium and long term. This is also where you will describe your potential competitors, their strength and weaknesses compared to your own. Forecast potential sales and be realistic about time frames. Also describe long-term product development strategies and research into your product’s life cycle. Show your competitive advantage through thorough marketplace research.
- Management and Operations/Production Plan: This includes your organisational structure and personnel. Define how you propose to structure your company and determine the span of control. Describe how you would manage and run your business and how you would delegate authority. Identify who will manage the day-to-day operations and delivery activities. It’s important that you also describe your administrative and record-keeping systems and procedures.
- Human Resources plan: How you will staff your company and what expertise will your employees have? Provide personal and professional details about yourself as the principle entrepreneur, your staff and suppliers. Compile a workplace skills plan and recruitment policies. Include training and employment standards.
- Legal requirements: Justify the location and size of your premises, for example Sugarcane only grows in certain parts of South Africa and requires a specific land mass for optimal production. Include maps, photographs and illustrations. It would be a good idea to supply site alternatives.
- Financial plan: Here you must state how much money you will require in total. Break this down into cost type and indicate at what stage you will require the money. State the quantities required.
- Risk Management strategy: State the potential internal and external risks that may arise with the start-up and implementation of your business plan and the likely consequences. Describe your risk management contingencies and include SMOT analysis if necessary.
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Where to get farming training:
Agricultural training will teach you thebusiness and economic principlesbehind running agricultural businesses. You need to find an institution that integrates business, management, and economics with solid technical knowledge in production agriculture and skills in communication and problem-solving.
Formal agriculture training is available at colleges, technikons and universities. The Agricultural Research Council (ARC) regularly present various specialised training courses and information days which are attended by farmers and delegates from South Africa and neighbouring countries. See more information in the resource section.
The development and adoption of best management practices, incentives, guidelines and training in farm business and risk management are necessary to enhance farm provability and promote the adoption of agricultural practices that are both sustainable and productive.
The South African Society of Crop Production (SASCP) annually awards two bursaries to deserving students who study full-time in the broad area of Crop Production at a South African University.
What farming regulations govern the agricultural industry?
Effective measures are needed to maintain high standards of quality and safety within the agricultural industry. Through, for example, the prevention and controls of epidemic diseases and effective inspection and diagnostic services.
Due to the agricultural sector being continually subjected to changes in the production and marketing environment, the policy and legislative environment that governs the sector, need to continually adjust through amendments and sometimes replacement of legislation. See resources for more information regarding agricultural legislation in South Africa.
Government funding and other funding for agriculture
In the mid-nineties government reduced funding in the commercial sector in a bid to improve the efficacy and productivity of this sector. Government also started to support small-scale farming sector which continued even at the advent of democracy.
Micro Agricultural Financing Institution of South Africa is a financial scheme to address financial services needs of the smallholder farmers and agribusinesses.
Mafisa provides capital (loans) to enhance agricultural activities. If you are historically from a disadvantage group and a South African citizen, older than 21 with a household monthly income less than R20 000, then you can apply for this fund.
It’s a maximum loan of R500 000 per person and must be used for the purposes for which it was applied.
Standard Bank offers structured advances and loans, which takes the effect of cycles into account.
Small Farm Funding Resources:
The Rural Information Centre (RIC) have compiled this funding resource from a variety of private, state and federal online funding database.
The National Sustainable Agriculture Information Service. The list features sustainable agriculture-related funding information updated weekly and searchable by date and keyword.
The Department of Agriculturehas entered into a partnership with Khula Enterprise Finance to extend financial services to South Africa’s emerging farmers and agri-businesses.
A business-to-business partnership focused on inviting South Africa’s farmers to join hand with Eskom in a national drive toward establishing smart energy use, as one of the most effective weapons in the fight against rising operating costs.
International Development Corporation focuses on identifying projects in the Agro-processing and Agriculture industry that will expand local production capabilities, replace import and enhance competiveness. They provide funding of up to R1 billion tailored to suit the needs of the applicant.
What you need to know when employing farm workers in South Africa
As an agricultural employer, there are certain obligations you must meet. These include ensuring your worker’s pay and working conditions meet the minimum requirements.
A farm worker includes any person who is involved in farming activities, including a general worker on a farm, all domestic workers who work in a house on a farm and also security guards how is employed to guard the farm.
A written contract must be issued to every farm worker as a preventive and precautionary measure for both parties, so that they both know what exactly is expected of them.
Issue a permanent contracts if the farm worker is permanently employed for an undetermined period or a fixed term employment contract if your farm worker I employed only for a specific fixed period of time.
What must be in the contract?
- Place of work
- Working hours: A farm worker may not work more than 45 hours in any week, and nine hours on any day of the week.
- Wages/payment: R2 740, 82 per month or R525, 00 per week. These wages and rates must be annually escalated in accordance with the relevant determination.
- Overtime: Any work done by agreement that exceeds the 45 hour limit. A rate of 1.5 times the normal wage must be paid for overtime.
- Deductions from salary: Certain compulsory deductions such as UIF and PAYE must be made.
- Leave: Annual leave, sick leave, family responsibility leave, and maternity leave should be included in the contract.
- Termination of employment: A farm worker must give notice if they wish to end the employment relationship. If employed forsix months or lessthe notice period is one week. If employed formore than six monthsthe notice period is one month. If the employer wishes to terminate the contract, it must be done in accordance with the Labour Relations Act.
Health and Safety is a key concern for agricultural businesses. As the employer, you are legally obligated to take measures to protect the health and safety of your workers. Carry out a risk assessment to identify any aspects of your business that could pose a risk.
Providing training to your workers can help increase their productivity. This in turn can help make your business more competitive and efficient. It can also help ensure workers carry out the work in a safe and competent way.
Successful farming and sustainable agriculture requires extensive knowledge, expertise and commitment. You cannot open an agri-business on a whim. You will need to do extensive research, write an impressive business plan and be a proficient manager.
There are still great agriculture opportunities in South Africa and if you’ve got your heart set on farming be sure to treat you workers fairly and contribute to improving our land.
Source: Standard Bank