THE PERFORMANCE
Material Risks
WEATHER AND CLIMATE RISK
The group is dependent on favourable weather conditions
for sustainable agricultural production and farmer profita
bility. The seasonality of weather and climate changes is
not linked to a financial or calendar year and could therefore
negatively impact the group over consecutive years.
Senwes received below average rainfall for the greater part
of the 2017/18 production season, which resulted in lower
yields and ultimately lower storage income.
Mitigation and control
Senwes is indirectly exposed to income volatility as a re-
sult of adverse weather and climate events. These events
influence the volume of grain produced in the Senwes area
of operation, subsequently reducing storage income and
producer profitability. The income volatility of a catastrophic
climate event is mitigated by using certain derivative instru-
ments and models.
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POLITICAL UNCERTAINTY - LAND
EXPROPRIATION AND CURRENCY RISK
Opportunities
Externalisation or diversification into
new markets or lower risk jurisdic-
tions;
Leveraging innovation and techno-
logical advancement in the agricul-
tural sector, to counteract selected
weather and climate-related threats;
De-risking into other, counter-cyclical
commodities;
De-risking into less or counter-cycli-
cal markets/industries; and
Increased investment in efficiencies
or increased participation in the areas
of the value chain, which are yielding
good long-term results, fits in well with
or compliments our core business ef-
fectively and achieves risk mitigation,
with regards to weather and climate.
The group and the agricultural sector could be negatively im-
pacted by political decisions, civil unrest, high unemployment
rates, volatile exchange rate movements and unsustainable
growth. Various policy changes affecting the agricultural sec-
tor could severely impact the group's strategic intent.
2
Opportunities
The biggest current political threat to the company and in-
dustry remains the policy of land expropriation without com-
pensation. Externalisation or diversification into
new markets or lower risk jurisdic-
tions;
Reorganisation of business models;
and
Complete redesign of product and/
or service offerings.
Mitigation and control Strategic focus areas triggered
Senwes utilises agricultural land owned by producers to se-
cure credit extension to these clients. In the event of agri
cultural land being nationalised or expropriated, without
compensation, the value of agricultural land will decrease
and nullify the value of the security held by Senwes against
outstanding funds. This risk can only be accepted and can-
not be mitigated.
Reorganisation of business models;
Increased investment in efficiencies
in the value chain; and
Externalisation.
For more info on the group strategy see p. 40
Strategic focus areas triggered
Diversification, horizontal integration
and consolidation;
Increased investment in efficiencies
in the value chain; and
Externalisation.
For more info on the group strategy see p. 40
MARKET SIZE AND MARKET
SHARE RISK
The agricultural industry is highly competitive with regards
to inputs, commodity production, mechanisation and retail
business. The limited local diversification opportunities in-
crease the exposure to fierce competition.
Mitigation and control
Senwes Grainlink’s investment in technology and infrastruc-
ture at its silos, resulted in an increase in market share, due
to a more attractive value proposition to clients. Similar in-
vestments are made throughout the group in order to grow
market share.
The retail and equipment service offerings are under pres-
sure, due to a smaller market size. Senwes Equipment is
however, offering competitive financing solutions in order to
maintain and grow its market share.
Strategic focus areas triggered
Diversification, horizontal integration
and consolidation;
Internal integration of the customer;
Increased investment in efficiencies
in the value chain; and
Externalisation.
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SENWES INTEGRATED REPORT 2019
3
Opportunities
Consolidation, expansion and/or diver
sification, in order to identify and exploit
value synergies, obtain critical mass
and achieve market share growth;
Leveraging innovation and technolo
gical advancement in the agricultural
sector, to increase the clients’ share of
wallet spent at Senwes;
Optimisation of current and/or deve
lopment of new products, services
and solutions;
Reorganisation of business models;
Continuous research, innovation, eva
luation and, where necessary, improve-
ment of the group’s core activities, in
order to maintain a competitive advan-
tage to remain ahead of competitors;
and
Sustained, yet focused investment in
the upgrading and/or optimisation of
product and service networks.
For more info on the group strategy see p. 40
SENWES INTEGRATED REPORT 2019
55