In South Africa, large-scale commercial farming and concentrated upstream inputs and processing are the norm. This has been the topic of various studies and is confirmed in the latest Competition Commission Essential Food Price Monitoring Report.
According to Nedbank’s Maluta Netshaulu, senior manager: agriculture client value proposition, this is often a result of the limited business resilience of the smaller farming units when faced with prolonged years of drought , reducing margins , bankruptcy , poor management, and lack of succession planning.Planning for and protecting against the loss of human capital
At Nedbank, under a key-person life insurance policy, the business owns the policy, pays the premiums and is the beneficiary. If a key person dies, the business then collects a death benefit. It assists the business through the payment of a lump sum that can be used to replace lost revenue as a result of temporary business disruption ; it can also be used to accelerate the search for a replacement or to attract the required level of skills.
“If these things are not in place, often when a person passes away there are various external financial shocks around taxation and estate duties etc that result in a big monetary knock. [This] could even necessitate you [having] to scale down operations just in order to keep farming,” he says.Farmers have to plan for tough times because they are coming, says Netshaulu. Factors like climate change could result in prolonged climate shocks that will have to be weathered.
Netshaulu encourages farmers to also put money aside in savings and investment solutions whenever possible.
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