[SPONSORED] Agriculture partnerships are coming to the fore. Nedbank's John Hudson outlines what the bank is doing in this regard. Moneyweb farming
CIARAN RYAN: The contribution of agriculture to the South African economy was highlighted yet again by Finance Minister Enoch Godongwana in his medium-term budget. Last year agriculture grew at a rate of 8.3%, second only to mining which grew at 11.8% on the back of a commodity boom.
So whether it was rising input costs, whether it was the cost of freight, whether it was continuation of the disrupted supply chains, this impact converged on farmers all at once. And then, of course, if I bring it up [to] where we are now, interest rates are starting to rise or have been increasing, and we expect that to continue.
JOHN HUDSON: That’s a good question, and I think this is not the first time we’ve had this margin squeeze. The margin squeeze has played out for many years. If I look back over time, yes – there are times [when] margins open up, and then they squeeze again. But if you look at the long-term trend, there’s been a continuation of this margin squeeze.
I’ve mentioned that we are in a positive weather phase, if you want to call it that, but no doubt climate change is still going to play out and droughts will come down the line. I think what I’m really saying is that, yes, [there’s] innovation, [and] I think farmers by nature are really good at this because of the challenges they face. But the adoption of technology has really helped them combat their cost-price squeeze, and that keeps them in the game.
CIARAN RYAN: One of the things we are reading about, for example, is renewable energy with the Eskom crisis that we are experiencing at the moment. Are a lot of [them] implementing renewable energy solutions as a power source for farming? So you start to see that the impact of load shedding goes far beyond just having blackouts. It really impacts the profitability and the long-term sustainability of these businesses, and therefore the uptake is certainly there.
The latest partnership that we are looking at currently is with Hohm Energy. Hohm Energy really is a one-stop shop in terms of renewable energy from end to end. Because farmers are looking to banks to add value, to address these key risks in their farming businesses and therefore the finance we can provide drives this positive change. In this case, renewable energy is certainly top of the list.
Certainly from a Nedbank point of view, we’d like to think that we are really good at lending money and looking after people’s money – but we are not necessarily the expert when it comes to renewable energy or water efficiency, etc, and transformation. If you look at another one in the water space, Agrico is a company that makes centre-pivot irrigation. They’ve been in business for 116 years. We are partnering with them to bring a funding solution for irrigation and, in this case, centre-pivot irrigation. Again, this talks to water efficiency going forward and so on. The smart boxes they apply on their centre pivots really start to talk to that precision farming that I mentioned earlier, and the focus on water efficiency.
As we started out – you mentioned the medium-term budget speech – well, there’s so much in that which is a positive in my view, but much of it requires partnerships to really implement it and bring it to life.
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