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Farmers and agro-processors need a collaborative, forward-thinking approach to mitigate risk

Deloitte Western Cape Consumer Business leader, Michael van Wyk. Deloitte Western Cape Consumer Business leader, Michael van Wyk.

WITH spiking labour and fuel costs and challenges in exporting, I believe Western Cape agriculture absolutely depends on innovative, informed management of risk down the value chain. 

This is the only way we can protect our global competitiveness, jobs, growth, economic and labour stability, food security, foreign direct investment.  

Agro-processing, including wine, is one of the biggest economic drivers in the Western Cape economy. It currently creates over 50,000 jobs and contributes almost 5% or over R12bn (value-added) to the provincial economy. In 2011, the province’s global exports of prepared food products totalled R3.5bn and its exports of beverages, including wine, totalled R6.4bn.

One can expect some political and labour turbulence to hit the sector in the election year, with weaker, bigger unions and more radical, smaller unions also operating in the Western Cape agricultural sector. Policy uncertainty around things like the youth wage subsidy - supported by government and the Democratic Alliance, but opposed by the unions – and the use of labour brokers – supported by business but again opposed by the unions – will also impact the sector.  

The European Union (EU) also remains one of our most important, but challenging export markets. Its highly protective agriculture policy puts in place subsidies, designation of origin trademarks and food safety rules to block our citrus, ostrich and other meat imports. All while attempting to register South African originals such as rooibos, honeybush and Karoo lamb. 

It is encouraging that the Department of Trade and Industry is taking steps to safeguard these South African trademarks, and that the Western Cape government works with the Dutch government to boost local agro-processing by increasing exports to the Netherlands. 

However, at home agri-business owners need to take a critical look at how they manage risk on things they can control to stay stable and profitable.

Of course there needs to be constructive communication among stakeholders: agri-business owners, ordinary consumers, buyers, importers, the media, national and provincial government, civil society (especially unions,) certification bodies and industry organisations for fair farming practices. 

Research by my colleague Deloitte national agri industry leader Omri van Zyl has shown that that certain factors are key to survival in the sector. Farmers and agro-processors need a contextual understanding of the political, industry, economic and environmental risks at play, if need be through knowledgeable partners. The industry also needs to move toward collaborative funding models that look at the entire farm to fork value chain, to benefit both the big and little guys along the value chain. Thirdly, the industry needs to use proven technology to build effective collaboration in the industry and to help turn good data into intelligent project planning for the future.  And lastly, never underestimate the value of experience. The industry needs skilled management on the ground to execute business strategy down the value chain. 

Proper risk manage-ment in this sector is more than self-protection. It is a responsibility towards society. For the sake of our economy and people, this sector is too important to fail.

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