Finances
Banker’s essential tips to overcome the impact of drought
D
rought conditions currently disrupting the agricultural sector in South Africa have made it imperative for the
industry to review its farming practices and overall approach to risk and management, says FNB.
Dawie Maree, head of information and marketing at FNB Business
Agriculture, says in the past few years the farming industry has
certainly dealt with a multitude of challenges, ranging from land
reform, currency fluctuations, changing legislation, labour and
wage issues, as well as livestock and fruit diseases, amongst
others. However, the current drought, being escalated by a strong
El Nino and global warming, has had the biggest impact on the
income and survival of farmers since 1992.
Moreover, it has had far reaching consequences for the greater
South African economy as it impacts on food prices, inflation and
even employment.
Sustainability
Maree says the drought has left farmers and stakeholders with
invaluable lessons that will impact on the future and sustainability
of the industry. It has now become imperative for the industry as
a whole to adopt modern farming techniques and strategies in
order grow revenue. For small-holder and subsistence farmers, it
is now survival of the fittest.
“Regardless of the losses incurred, farmers need to be resilient
and focus on the future by implementing survival strategies to
deal with disasters, such as the drought,” advises Maree:
ff Drought management strategy – every farm, big or small
should put in place a detailed disaster management strategy
that should be updated regularly as circumstances change.
For example, a livestock farmer can use this to keep track
of herd numbers, knowing exactly when culling should be
done.
ff Cash flow management – losses and damages incurred
as a result of a disaster can severely affect the farm’s
cash flow. Regardless of the situation, farmers are advised
not to abandon their cash flow principles, but continue
to manage and keep track of finances adequately.
“Should problems be foreseen, it is important to involve your
financial institution or bank as soon as possible – prevention
is better than cure,” advises Maree.
ff rrigation strategies – if you are not keeping up with industry
standards, now is the time to update your irrigation system.
It is imperative that we use available water optimally in a
water-scarce country such as South Africa.
ff Diversification – diversification of crops and livestock
becomes extremely important during drought conditions.
Remember, farming is a business. If you miss planting
season, you should identify other means of generating
income.
ff Seed and fertiliser strategies – planting fields that have
been affected by the drought may require a much different
application of fertiliser. It may also be worth considering
using seeds that are more resistant to the drought and
provide better yield.
ff Risk management strategy – the overall farm risk
management strategy should factor in elements such as hail
and crop insurance, with accurate details of how to process
claims resulting from a disaster.
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ff Information gathering – up-to-date information is essential
to make informed business decisions in periods of disasters.
There are a number of social media platforms such as
Twitter and Facebook that keep farmers updated on the
latest developments in their regions.
ff Soil preparation – soil testing is highly recommended as it
changes following a drought. This is necessary to ensure that
you get the most out of your crop.
ff Managing farm costs – carefully managing farm expenses
is critical during times of uncertainly. Even the last rand can
go a long way.
ff Farm feed storage – one of the lessons learned from the
current drought is that the amount of feed that livestock
farmers kept was not enough. Because of uncertain weather
conditions, storage capacity will have to be reviewed and a
detailed fodder flow plan needs to be kept at all times.
“Although these strategies are by no means conclusive, they
will go a long way to help farmers to deal with the impact of
disasters, like the current drought, when incorporated into a wellmanaged farm system. The farming industry in South Africa has
been through several hurdles and survived, there is no doubt
that it will continue to thrive, even beyond the current drought,”
concludes Maree.