Regenerative agriculture offers a new approach to farming risk

You can also listen to this podcast on iono.fm here.

JIMMY MOYAHA: The agricultural landscape in South Africa is certainly shifting with all of these warnings around a more severe El Niño that’s set to affect our agricultural sector.

Taking a look at all sorts of other factors that typically would be concerns for our agricultural industry, we’re going to be taking a closer look at how it is that our sector can better prepare itself, especially when we look at alternative farming methods that are out there.

I’m joined on the line by the head of sales at Nedbank Agriculture, Daneel Rossouw, to take a look at this and see what to make of it. Daneel, lovely having you on the show as always. Thanks so much for taking the time.

The last time you and I caught up, you taught me about regenerative farming, and we got into this conversation around how interesting that was for the agricultural landscape in South Africa, and how that could potentially be a good alternative to how we’ve been looking at farming and agriculture in South Africa in particular.

That seems to be a good starting point for this conversation, because all of the warnings that we’ve been receiving and all of the changes that have been coming our way, certainly have our agricultural sector potentially concerned about what lies ahead.

DANEEL ROSSOUW: Yeah, thanks, Jimmy, it’s always a pleasure having these discussions with you. Interestingly, we had a session at Nampo Cape about two weeks ago, where we had a media session and then also focusing on more the practical side of regenerative agriculture.

So it might be good to share some thoughts and ideas that came from that discussion, really putting regenerative agriculture into practice.

JIMMY MOYAHA: Daneel, let’s take a look at that. When we say putting it into practice, what do we mean by that?

DANEEL ROSSOUW: If you look at regenerative agriculture and the whole transition process towards more sustainable and regenerative practices, you did mention El Niño and the challenges that we face, but from the bank side, we don’t see that this as just a short-term initiative or even an environmental initiative.

For us, as financiers, we really treat it as more around the credit risk, cash flow and asset protection strategy.

So more from a long-term financial sustainability point of view with a commercial objective, obviously, to help farmers invest in practices and technologies, that was also showcased at Nampo Cape.

That reduces production volatility. That’s really important, especially in our rain-fed grain industries.

Also, protecting margins is very, very important – and improved debt service capacity, it’s very important from a bank’s perspective, while also ensuring that the additional capital required for resilience does not undermine the short-term liquidity. This is crucially important for long-term sustainability.

Farmers might recognise the long-term benefits of regenerative practices, but changing established farming systems can require significant upfront investment, and we’ve seen that, and also involve short-term production and financial uncertainty during this transition period.

So at Nampo Cape it was really interesting to get perspectives from farmers, from input suppliers, even from data companies, as well as the retail sector, how to really look at sustainability and regenerative practices, really, in practice.

It was really fascinating, especially from the retail side, that was really interesting for me.

JIMMY MOYAHA: Daneel, you mentioned that farmers are showing an interest in transitioning more and more, and this transition obviously does come with a bit of investment.

I want to take a look at that transition in a bit more detail, because from a farmer’s perspective, from the producer’s perspective, often when we talk about change of this size, it comes with a lot of risk. I don’t know if the change is going to work out. I don’t know if this is the best course of action to transition [to].

I may want to as a farmer, but I might not necessarily be sure if I can afford all the equipment, all of the changes that need to take place. How should the farmers and the producers in South Africa be navigating that transition conversation?

DANEEL ROSSOUW: Jimmy, you’re quite right. I believe that adoption to new technology and working with change is really, really important. It’s also one of the biggest challenges, I believe, from a management perspective, either the unwillingness or the inability to deal with change in a business, but also in an industry.

I think, if you look at possible successes, for me, it’s all around collaboration, it’s all around partnerships across the entire value chain.

We firmly believe that no single stakeholder can solve the challenge.

So we look at the partnership and collaboration between farmers, the financiers and food companies, as I’ve mentioned, more towards the retail side, the input providers and other industry participants, each hold a piece of this puzzle and each need to contribute to assist a farmer to successfully transition.

That was actually the purpose of the panel discussion that we held as well, to really explore what each can do to help share risk, and create incentives and support farmers through this transition. Because we know that it can be frightening and it can be a real challenge from a management perspective, as you’ve said.

I believe that through more and more interactions, farmer days and so forth, and sharing best practices of farmers who are already in the process, really helps other farmers to put their minds at ease to see what can be done in practice.

JIMMY MOYAHA: Speaking of helping other farmers, Daneel, before I let you go, I want to take a look at the role that Nedbank plays in this particular conversation because as a finance house, the typical role that is expected is the bank simply provides the capital.

But from a banking perspective and from a service perspective, you have clients across the value chain, which means you’re also then able to link the different aspects of the value chain in the ecosystem together.

DANEEL ROSSOUW: Yeah, definitely. Obviously, if you look at the farmers themselves, providing solutions, financial solutions, funding solutions and ensuring that we’ve got the correct debt structure in place to ensure cash flow over this period is really important.

But we think that our role extends beyond simply providing finance.

So our line of thinking is by convening stakeholders, and encouraging collaboration, as I’ve mentioned as well, around financing, around measurement. Because measurement is key.

Then also risk sharing – we try to help to explore practical solutions that make regenerative agriculture more commercially viable and also scalable.

So ultimately, supporting a more resilient South African agricultural sector. So it’s not just the funding side, but also the collaboration and being that partner in a business to work with the whole value chain to ensure that we will have success in terms of long-term sustainability.

JIMMY MOYAHA: Ensuring that the agricultural sector of South Africa continues to thrive and continues to adapt to the ever-changing environment. That is what the team at Nedbank Agri aims to do in supporting our agricultural sector.

We’ll have to leave the conversation on that note.

Head of sales at Nedbank Agriculture, Daneel Rossouw, joining us to take a look at regenerative farming, the transition that that comes with and how the Nedbank team is ready to support that.

Brought to you by Nedbank Agriculture.

Moneyweb does not endorse any product or service being advertised in sponsored articles on our platform. 

#Regenerative #agriculture #offers #approach #farming #risk