Mei 2014
32
StandardBank predicts reorganisation
of agricultural industry
NICOGROENEWALD,
head of Agribusiness, StandardBank
S
outhAfricamay need to restructure its agricultural industry
in order to boost economies of scale for smaller players in
the industry. This will create opportunities for them in an
environment that is constantly changing.
A new approach is needed to operate successfully in what has be-
come a highlydynamic agricultural environment.
It is Standard Bank’s view that something akin to collaborative
efforts of the co-operatives of the past – although refined to meet
currentmarket challenges –will be needed for smaller scale agricul-
ture to thrive. Singleplayers aregoing to find it increasinglydifficult
to achieve the economies of scale necessary to improve margins
while at the same timeboostingproduction.
Sustainability, food security and self-sufficiency have become in-
creasingly prominent in recent years. These themes have added
to the usual agricultural challenges of market and consumer shifts,
exchange rates and the enduring responsibility of environmental
curatorship. All of these are geared towards ensuring the physical
healthof citizens, developingcommunities throughsmall scale farm-
ing activities, aswell as the continued focus on efficiencies in com-
mercial agriculture inorder to reduce the reliance of Africannations
on imported food.
The pivotal economic role that agriculture has always played has
nowexpanded intoamuchdeeper social andpolitical responsibility.
As a consequence, agricultural role-players need to reorganise the
way individual operations are structured in order to minimise risk
and increaseprofitability in this new landscape. Thiswill prompt ag-
ricultural financiers to rethink their own risks and develop the will,
as well as the means, to finance new types of agricultural entities.
Co-operatives of the past tended to focus on storage andmarketing
via theconfinements that prevailedat the time. That focus is toonar-
row for today’s agricultural sector.
Theemphasis for agriculture in thenext fiveyearswill beonsize, be-
cause that iswhere the economies of scale andnegotiation strength
lie. That does notmean that eachproducer has to scaleup. Collabo-
ration confers size farmore easily.
An example of this typeof collaboration is that of a groupof 36pro-
ducers, eachwithdifferent input needs, banding together tobe able
tooffer suppliers a singlebig client withmultiple requirements.
There are also vast untapped opportunities in the value chain. The
only realisticway for producers to increasemargin in any significant
way is tohave a shareof themargins of everyone in the value chain.
Producers are encouraged to consider the options available to add
value to their product themselves – and to even extend that thinking
to developing their own brand. By doing so, they can get a direct
share of the consumer’swallet. Agriculture has no choice but to re-
structure at farm-level, and alsoup anddown stream.
Restructuring is best done from an already successful, productive
base.Anygrowth froma flawed foundationwill be short-lived. Being
excellent before yougobig is the road to sustainability.
At Standard Bank, we see ourselves as not just a financier, but also
as an integral role-player in the development and transformation of
the agricultural sector. We believe in the importance of bringing all
stakeholders together to ensure food security for the future.
The collaborative approach of the past needs refining tomake bothbig
and small players competitive
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