The iZindaba Zokudla Farmers’ Lab this coming Friday will discuss investment and investors in agriculture.
Investments in any productive enterprise has always revolved around the idea of property ownership. This translates to collateral that anyone would have to offer as security to the investor, so the investor is protected in some way. The right to property is the cornerstone of all economic activity, as you would need to hold some property of something, like the “factors of production”, in order to commence with the creation of a product or service. You would need premisses or equipment, or you need to pay someone for their time to accomplish this.
In this Farmers Lab we will examine the opportunities available to gain investments, not only from outsiders, but also from yourself, in your farming enterprise.
In this Virtual Farmers Lab we will juxtapose two entrepreneurs with a financing company and also allow an academic to comment on this juxtaposition and interaction.
As the convener of iZindaba Zokudla I am confronted often by farmers who seek an investor, often to gain access to capital to say, buy equipment or technology to overcome a particular blockage to production. In the endeavour to gain an investor, farmers can do many things to make this easier. In this editorial I will speculate on what a farmer can do to gain such interest from an investor. I however, want to make the point that the farmer should be the first investor in her own enterprise. There are ways to make your enterprise attractive to investors, and this should be explored and realised before a farmer, or any entrepreneur, starts looking for investment from outside. Many urban farmers and entrepreneurs however do not have access to property rights on their lands, and may not be registered. This does not mean that you cannot be looking for people who could “invest” in your enterprise. There are ways in which one can attract “buy-in” into your business without attracting “capital”.
Also note that investors are always looking for returns. If you have an enterprise with proper systems and if you are able to make money and show records for this, you will find an investor merely by the fact that you can guarantee a return on this investment for her. In this sense, if you are unable to find someone to invest, it means your business is not or does not look profitable. Only if you are able to develop the right systems that leads to a net positive effect – profit – will this be possible. Looking for investors cannot substitute for the prior work that you need to do to establish a viable enterprise. Investors will not fix your enterprise.
So how can we then build our enterprises so that they will attract interest? This would include non-monetary “investments” if you are not registered (yet) and do not own the land you are working on. If you are looking for capital investments and you are compliant and trading, we will have to listen to our presenters as they will offer solutions.
However, please allow me an opportunity to make a few bold suggestions on how emerging farmers can attract attention to their enterprises. I am making these suggestions as business is changing and many are exploring non-property-based means of financing farmers. For farmers in this space and for any other entrepreneur, please note the following:
Be very clear on what kind of investment you want and what you want to use it for. You could finance only one part of one piece of equipment in this regard. Be clear what you want to accomplish.
Think of your record keeping. If you have records of trade, you will immediately appeal to an investor, and if you can account for your profits, you may be investable. If you are not investable, consider the following:
Start keeping records, and maintain them and keep them up to date. Before anyone will invest in you, you need to invest in yourself. If you do not have records of your expenditure and income, you will not know if this is worthwhile to pursue.
Think of your own competitiveness: Perhaps you need to invest yourself in a supplier, even if it is making some kind of arrangement or contract to buy inputs from this supplier over a period of time. If you are able to buy volumes, you may pay less and in this way streamline your business. The same goes for a buyer. Negotiate a good price in return for investment in your enterprise. If a buyer buys a lot, they may finance a packaging machine that you use to supply them. This will depend on your negotiation and persuasive skills!
Think of customers as stakeholders you can invest in. Invest in their education about nutrition, and you may convert them to buy fresh foods from you. Invest in technology in their houses, like food waste technology or even beehives on their premisses. This will guarantee supply of compost or honey and if you spread the benefits, you may secure your own supply or distribution lines.
Think of your customers and stakeholders as means to improve your competitiveness. Close relationships with them can streamline many aspects of your business. Pay attention to your own processes, and make sure there is a logical and efficient flow of materials in your enterprise.
Start trading and keep records. This is really important and once you trade, start tweaking your enterprise all the time!!!
Seek non-financial investments in relationships, exchanges and flows of goods, so people “invest” in you in order to buy from you at competitive process.
The dynamics of investments in agro-ecological and regenerative farming enterprises is also a new issue we need to confront. Regenerative or syntropic farming systems depend on the manufacture of own inputs from the ecosystem, and by optimising the functioning of ecosystems on the farm. In this regard, finance will not be to establish the farm, as we have hitherto done, but rather to finance the “apex” outputs of the farm. If you can get your own internal systems optimal, it creates an opportunity to invest in the top end of your enterprise, perhaps in a mill to produce an attractive regenerative product like organic flour. Finance only this aspect or “apex enterprise” of your farm. This means you could consider setting up a new ancillary independent enterprise and get this financed on the basis that it feeds off the underlying regenerative processes on the farm. This would be a lucrative investment for an investor, as the ecological functioning of the farm is almost guaranteed and will improve over time. In this sense think of the benefits to investors if your farm includes climate smart infrastructure, permaculture design, contouring, water storage and cover crops. Note that with climate change abnormal weather will be the norm, and without climate-smart infrastructure, no farm is investable.
Please click the link: https://www.facebook.com/events/364335415221933
Please do meet our presenters below:
Corné Barnard is an entrepreneur and aims to launch the company North by North East soon. This will be a social, for profit that will work with and focus on the establishment of marginalised and emerging farmers. They are based in the Tzaneen area and have been trading Bamboo products grown on the old tea estates for a number of years. Corné Barnard is available at market-al@outlook.com
Fazlur Pandor, the a co-founder of Urban Fresh. Urban Fresh is active in Alexandra since 2016 and they are also now farming in the Midrand area. Urban Fresh is focused on farmer development and organic production of Herbs and Leafy Greens. They also operate a fresh produce distribution business called ADX Fresh, which supplies shops and restaurants in JHB and Pretoria. ADX is focused on developing reliable and fair markets for farmers.
Please contact Fazlur and URBAN FRESH on 081 283 6609 and www.facebook.com/urbanfreshza.
Zaheer Dindar is the Managing Partner & co-founder at BeyondSoil. He has spent the bulk of his career in banking & strategy consulting. Recently he changed his career trajectory to focus on impact. For the past 4 years he has focused exclusively on agriculture and ‘Ag-SME growth’ related analytics.
BeyondSoil has developed an innovative 'co-investing & co-building' model to grow small businesses and scale them to commercial level. This model is based on the 'venture builder' model, which is coupled with an Alternative Debt Vehicle. Venture builder models have seen great success in supplier development programmes and the tech start-up world. His contact details are as follows:
m: +27 (0)71 567 4893 | e: zaheer@beyond-soil.com | w: https://beyond-soil.com/
Marno Booyens is a Lecturer in finance and Investment Management. He has expertise on credit and banking, planning, the real estate market, and agriculture and game property.
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