Home » Industry News » Agriculture » Kaap Agri’s bountiful harvest

Kaap Agri’s bountiful harvest

An old Swartland-based farmers’ co-operative – which a dozen years ago barely churned R30m in profits – now looks set to list on the JSE with profits of more than R210m in the year to end September 2016.

Kaap Agri – which now has a distinct and dashing retail focus – is one of the great unsung success stories in the Western Cape platteland.

While most co-operatives made the change to commercial entities in the nineties, many continued to plough the same old furrows. Not the dynamic Kaap Agri – which can trace its corporate roots back to the merger between Boland Agri and WPK Beleggings.

The record will show that this former co-operative – which now generates annual turnover in excess of R7.6 billion – has already been dubbed the ‘Boere Massmart’…a moniker that recognises how the business has successfully diversified into new specialised retail channels.

Kaap Agri’s big revenue spinner is retail outlet Agrimark, which currently comprises around 72 stores. But this core retail venture has been supplemented by convenience stores, liquor stores, building supplies and – most importantly – a rather rapid roll out of fuel service stations (which now number 37). Aside from retail, there is a substantial fruit packaging materials business, 14 grain silos, three seed processing plants and irrigation services.

What is most impressive is that Kaap Agri’s presence – while still largely Western Cape rooted – extends as far as Namaqualand, the Orange River, Sundays River Valley and Namibia as well as Limpopo, Mpumalanga, Gauteng and the North West province.

Basically Kaap Agri has a presence wherever there is irrigated agriculture.

A large share of Kaap Agri’s sales is executed in cash – having risen from just R300 million in 2006 to R2.2bn in the last financial year. The company processes one million transactions a month.

The 15% increase in bottom line profits in financial 2016 came at a time when large agricultural areas where suffering the effects of a prolonged drought.

Kaap Agri MD Sean Walsh said retail growth had been strong off the back of improved offerings, targeted range growth and improved logistics.

He pointed out that the past grain harvest delivered a yield per hectare below the long-term average – but at a good quality and higher price.

Despite the driest season in decades, Wesgraan, – which comprises Kaap Agri’s grain handling, storage, marketing and trading as well as seed processing services – delivered only a marginally reduced profit contribution compared to the preceding year.

Walsh said this was done through effective cost management and the storage and handling of other grains and wheat from outside Kaap Agri’s traditional areas.

Although much of the revenue gain in recent years has been generated through aggressive expansion, Walsh pointed out that real turnover growth in financial 2016 was a commendable 7,1% (with comparable stores growing turnover by 7,2%).

Fortunately for Kaap Agri agricultural conditions in the key Swartland grain production areas were favourable and an increased yield on prior year has realised for the 2016/2017 season.

The listing on the JSE is a critical growth step for Kaap Agri, and it will be interesting to see how much fresh capital the company wants to raise from investors.

Walsh has indicated that capital expenditure into revenue-generating initiatives would continue in financial 2017. “The focus will be on improved retail and fuel offerings that will deliver increased results.”

Anthony Clark, an agribusiness expert at Vunani Securities, estimated that around 80% of Kaap Agri’s business could be classified as general retail with the fastest growing areas being its Agrimark stores, Fuel and Expressmark convenience stores.

He said planned capital expenditure to expand the company’s retail footprint would top R300 million in the 2017 financial year.

Clark said Kaap Agri has a 2020 target of R500m in operating profit – which he believed the fast growing company could actually attain in 2019.

In a recent presentation to investors, Walsh said Kaap Agri had entered a ‘4 M period’ – “more places, more clients, more products, more margin.”

There is clearly an emphasis on expending the fuel outlets – so much so that Kaap Agri has its own branding under ‘The Fuel Company’. Walsh said the expansion into fuel has exceeded all of Kaap Agri’s expectations – pointing out that the 146 million litres of fuel sold in 2014 had grown to 187.5 million litres in 2016.

“We’ve seen double digit growth in our fuel sales over the last three years, and we think it will continue to do so…”

Walsh said fuel sales expansion will come from converting existing sites, making acquisitions in clusters and pursuing some greenfield sites.

While Kaap Agri seemingly has plenty on its plate in terms of expansion opportunities, the question of why a listing is being pursued is pertinent. Is the company about to make a big acquisition?

Walsh confirms the listing is a way of preparing for some game changing transactions in the future.

But he stressed there was nothing to announce on possible deal flows just yet. “It will come in time. The listing will make it a lot easier for us to grow into new spaces. We don’t need merger and acquisition activity to continue our growth…our medium term focus areas will certainly secure our medium term growth prospects.”

To enquire about Cape Business News' digital marketing options please contact

Related articles

SA’s agri sector could create a million more jobs

SOUTH Africa’s agricultural sector has more than doubled in value and volume since 1994, thanks to improved productivity. Yet the sector, which employs about...

Calling all Cape Farmers

Following a successful Nampo 2023 show in Bothaville in May, BMG will be exhibiting at the Nampo Cape Show for the first time. This...


Two SAB plants get R5.8 billion upgrades

The R5.8 billion investment commitment made by South African Breweries (SAB) has been utilised to increase capacity at two of its plants. The company said...


Cape Business News
Follow us on Social Media