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Political risk in agriculture needs calm heads

2018-06-21 10:25
This post and content is sponsored, written and provided by NAMPO for News24

There are many things that a good business person would find strange. Market volatility is certainly not one of them.
However, whenever market volatility strikes, it causes pain for some and a boon for others, depending on whether they are beneficiaries of the up- or downswing.  Pain is caused by the fact that no businessman can accurately predict when a downswing will negatively affect him.
But it is ingrained in any sound business person to anticipate risks.  Some risks in the market are caused by factors beyond human control – for example, the 2016/17 drought that wreaked havoc in the southern Cape and other parts of South Africa had a huge negative effect on farmers. Many are still counting their losses. As the drought recedes, maize farmers are facing the risk of a downward pressure on prices.  Some risks are man-made. For example, the uncertainty by the proposed policy of expropriation of land without compensation. Many farmers are justifiably emotional, because they do not know what the future holds for them and their properties. It’s a risk that causes them sleepless nights.
Commercial banks – the big creditors in the sector – might begin to doubt whether land that potentially stands to be expropriated is bankable. This has a potential to affect long-term planning and investment on the land.  But if the government promised to implement the policy without impacting on food security and other sectors of the economy, this means land under production shouldn’t be expropriated. It sounds like a logical proposition, doesn’t it? Unfortunately, farmers are not in control of the process. Yet, this is not a reason to panic.
The most common denominator of risk mitigation is not panic. What is important, is focusing on the long term, staying the course and seeking advice from institutions that have made it their job to extend a helping hand.

Like a skilled surfer, a good farmer is one who sees the skyline, even when visibility is poor, and the tides seem impossible to navigate.