Q&A: How we help agriculture businesses

Challenges Agribusinesses face

What are the unique needs and challenges that face agribusinesses in South Africa?

Agriculture is a specialised sector with more than 30 sub industries, and a vast field of knowledge is required to understand each subsector and how each of these industries’ cycles are integrated.

Additionally, everything that is produced within agriculture is based on nature and the climate, which adds another level of complexity to factor in over-and-above the normal business cycles.

Financing needs

The industry is highly dependent on debt in order to run operations and maintain profitability – more so than you may find in other sectors, for various reasons. 

The barrier to entry is quite high for new farmers, as a result of the capital requirements and production costs involved in producing annual and long-term crops.

There are various types of funding required by an agribusiness. These include property finance to fund the land in which to grow the crops, production finance for planting and growing annual and long-term crops, and working capital requirements for financing vehicles and equipment, irrigation systems, and even financing for chicken houses and packing facilities for fruit.

Exporting overseas

Also, many agri sub-sectors, like the nut industry, export products overseas and require the right Foreign Exchange and International Payment solutions to assist with their foreign trading.

This includes the ability to guarantee payments and hedge foreign exchange variances.

How we can assist your Agribusiness

Describe Standard Bank’s approach to the agriculture sector

We understand what support is required within each sub-sector of the industry.

We don’t believe in simply selling a product to our clients. What’s important for us is to understand the unique needs of the business first before determining which financial solution is right for the client.

We also understand that your needs will be based on the specific geographical area you operate in. A farm business model in Mpumalanga, for instance, would be different to an agribusiness in the Western Cape.

We have 35 in-field agents located in all provinces who are experts in those specific geographical areas and we’re able to assist with cash flow and financial planning.

Our specialist advisors also have a sound knowledge of the agriculture sector and can assist our clients with business banking solutions, and also advise on strategic planning and expansion programmes.

Financial planning

When assisting with financial planning for your specific business needs we conduct a ‘stress test’ to evaluate the implications of the funding on your income.

We also conduct a full analysis of our client’s property and the business model to understand the debt capacity the business could accommodate.

This allows us to help the client mitigate any risks of defaulting on payments, which would potentially harm the business.

Understanding the full value chain

Standard Bank plays a role across the full agribusiness value chain, from what happens on the farm and beyond the farm gate, right up to when the farm’s product reaches the retailers’ shelves.

Because of this, we understand the full agriculture ecosystem and the trends and risks across the sector, and we’re able to give guidance on the right finance, insurance and working capital solutions at every stage.