Farmers are often referred to as the backbone of most economies, and there is certainly no overstating the importance of farmers to South Africa.
South Africa's agricultural industry is a huge contributor to the country's GDP, employment, food security, and tourism. If you're thinking of buying a farm, you'll be contributing to these factors.
This lifestyle can be very different to the modern office working life. There are a lot of people that thrive working in a beautiful landscape surrounded by nature, with the satisfaction that their work is keeping the world going.
So, if you are looking for a business that has new challenges every day without anything close to a monotonous routine, farming could be for you. Keep in mind that this job will be a complete change in your lifestyle, though!
Here are the most important things you need to consider when buying a farm in South Africa.
Find the right farm
The agricultural industry covers a broad range of specialisations that require different amounts of capital and different kinds of skills. Will you grow crops, raise animals, or a combination of these? Or would you be more intereseted in running a wine farm or dairy farm?
The location of your farm will be a large determining factor of what type of agricultural activity you can do successfully. If you are buying an already established farm, you have the advantage of looking at the previous owner’s books and seeing if it is a financially viable choice.
A pre-existing farm will also be less costly than building one from the ground up if you do your research and choose the right farm to buy.
Due diligence is an essential step when buying any business, particularly a farm. There is a lot to consider when assessing the viability of a farm, so it's important that you take this step slowly and tick off assurances. Here are some things you should account for:
- Has the seller disclosed any disputes with neighbouring farms?
- Are there any pending land claims associated with the property?
- Have you checked permits, and water and zoning rights?
- Is the farm under heritage or environmental limitations?
- Do farm workers legally own their staffing units?
These are just some of the areas you and a professional advisor should interrogate when buying a farm.
Financing options to buy a farm
If you don't have enough capital to buy a farm, there are several financing options if you are considering buying a small-holding to farm.
The LRAD (Land Redistribution for Agricultural Development) provides grants for previously disadvantaged South Africans, giving them access to land for agricultural purposes.
Resource-poor farmers can approach The Land Bank for support. They can offer loans in order to help people who would otherwise not be able to participate in mainstream agriculture.
The Micro Agricultural Financial Institutions of South Africa (MAFISA) supports farmers by offering cattle loans and other low-cost animal services. While not a loan to buy a farm, it's a fantastic service to use if you need management or marketing support, care supplies, and cattle.
You can also approach a commercial bank for a loan. Make sure that you have a very detailed and well-researched business plan before you do this.
Creating a business plan to buy a farm is different from creating a business plan for other industries. This is because your business plan will need to include a production plan that will have to be extremely well researched and detailed.
This section will look at the way your farm will operate and what kinds of products it will produce for market. You will need to understand the type of soil, the buildings, the equipment that is on the farm and what kind of condition it is in and the processes that are used in that particular type of farming.
This part of the business plan will be the most detailed, with information on the capabilities of the land and market research in order to understand whether this kind of farming will be profitable.
The agricultural industry is volatile, so you will need to outline how you have accounted for this through diversification or through farming something that does not have a lot of competition.
Going into farming is going to be different to other businesses as you get ready for a complete lifestyle change. It is not different, however, in how you need to approach making a profit.
Consider these questions:
- What kind of need will your product fill?
- What competition will you face?
- Can you create demand for your product?
- What advantage do you have over your competitors?
These kinds of questions need to be addressed before you leap into the business if you intend to make money farming.
Ready to buy your farm?
While buying a farm is a wonderful route into business ownership, there are multiple moving parts you'll need to manage. Make sure you have an experienced advisor by your side when you decide to start your buying journey.
In the meantime, you can explore farms or other farm-related businesses in South Africa.