and scantily clad babes on the
beach - I can assure you it will be
money far better used than you
wasting it away on a 'fruitless no
hope in hell of success' fish farm.
Putting back on my business man's
suit and tie, and approaching this
as a bank manager, what I would
like to see is your capital spend being minimised, your running costs
being minimised and your production as high as possible. And on top
of all of this I want as little risk as
possible, even though as a bank
manager I don't even know what
the risk is (which makes me even
more nervous to lend you money to
begin with).
Solving risk is what we do all day
every day. It may not be immediately obvious but fish farming is a
mathematically driven optimisation
process. Too much capital for too
little production means the fish
farm will never be viable.
This is an easy sum to do. Say you
spend R1.2M in capital on your
farm, for a 30 ton per year system.
That works out to be a neat R40 per
kg of fish. If we write the farm off
over 5 years that's a cool R8/kg that
we can take out of our fish price (I
am not including opportunity cost
of capital, interest rates or inflation
in these figures to keep it simple).
If I manage to keep my production
costs at around R20/kg (which from
last time is the best case scenario) I
am at R28/kg and if I can sell my
fish at R40/kg (again best case scenario) happy days - R12/kg pure
profit towards my next Ferrari or
diamond tiara.
But, being a bank manager I want
to see what happens in the worst
case scenario. In this case it costs
me R24/kg to produce fish and I
can only sell it for R35/kg - meaning
Swim Up Fry holding tanks - simple as can be.
my profit per kg is just R3 (after I
have added in the R8 for my capital
allocation). Not a lot of return for
all the risk and hard work is it?
Don't be too happy that you've written your kit off after five years. You
will need to maintain it and some
of this annual write off will be going back into replacement equipment, maintenance and hopefully,
Expansion. Expansion is when the
real money is starting to be made.
But starting off as you can see is a
tight line to walk. The pressures on
the initial capital spend are immense. Every rand you save here
will have an impact on your profitability. If you cut corners and lose
time in delayed production, or
worse, lose actual production, your
fish farm will immediately be under
water.
So why on earth do it? Well, that's
the subject of the next article!
Parent stock - still small nets essential to
prevent accidents