We have had a young agriculturist staying with us over the past weekend. In fact, we had a full house as Siobhan Franklin was still with us, much to our pleasure. He was brought up in Northern Ireland, lives in England and has had the advantage of working in agriculture both in the UK and abroad. I was lucky enough to make his acquaintance over a decade ago when he was looking at farming opportunities in Africa, specifically dairying in Zambia as he had worked on the largest dairy unit in the world based in Saudi Arabia. Not exactly the best model for an enterprising young man to consider doing on his own. His experience engendered a feeling that there are opportunities in agriculture outside of Britain. In the UK, land prices are artificial, that is, they are not related to their productive capacity, rather an inflated intangible value likened to cryptocurrency with title. The rules, regulations and bureaucracy are a real challenge in Europe now and most importantly, the farmer receives a very small part of the selling price of his produce on the supermarket shelf. The vast majority of the market is controlled by a few greedy supermarket chains that finance their business through delayed payment to their suppliers. Those very same suppliers, squeeze to death financially on price as well. If the farmer is lucky he/she may get about 20% of the shelf value of his/her product, often much less. In the USA it is only 15% on average. Processing, logistics, packaging and retailing all eat up the major share. All these middlemen have one thing in common, unlike the farmer, their risk exposure is short, often only weeks, not a year or more as is the case of the farmer.
“Farmers just do not have market and price risk. They have the greatest challenge of all, climate risk. A year's work can be written off in a 5 minute storm or a prolonged drought. The retailer or consumer has never recognised or compensated for this risk” - Peter McSporran
By the way, our second visitor's name is Robert Shaw, I hope he does not mind me mentioning his name. What impressed me is that after all these years, he is still yearning to establish his own independent farming business. Much harder now than when I did so. He is presently doing his MBA to increase his job opportunities. Yes, much of farming is now corporate and although of little practical value, in primary production, the more impressive the qualification, the better the job opportunity. This does not necessarily guarantee job satisfaction.
I have veered away from my subject matter already this week. As well as doing his MBA, Rob has applied for a Nuffield scholarship. So many of my friends who are successful in agriculture have obtained this scholarship. Anyway, he arrived on my doorstep to do a podcast with me endeavouring to answer some of his questions about opportunities in African agriculture. Of course, such interviews always give you an insight into the interviewer's own insights, ambitions and perceptions. During the weekend, two subjects kept coming to the forefront of our conversations. Regenerative agriculture and opportunity in African agriculture. My thoughts on opportunity, I will cover over the months on investing in Africa with today's section on that very subject, including the importance of access to title and therefore finance.
Regenerative agriculture is the current buzzword in agricultural circles, especially in what I would call the intellectual academic group of influence seekers. Of course agricultural trends, especially in crop production, seem to have repetitive cycles with some academics seeing opportunity in some fad or another with them not only being the self-proclaimed leading advocate of such practices but also suggesting their organisation or the one they are affiliated to, be the judge and jury in the certification process. Of course, the supermarkets fall over themselves to comply with this, nothing like another certification for sales promotion or a way to create future barriers if necessary on their part, although they do not suffer the pain or cost of implementation.
When I left Scotland in the ’60s, people ploughed the ground. I was amazed to read only recently, over 70% of cultivated land is still conventionally tilled in Europe. An abysmal stat.
“Every successful farmer knows the importance of soil conservation. If we saw the cultivation methods very prevalently used in Europe applied in Africa, few would survive. Their soils would be either in the ocean or making sand dunes.” - Peter McSporran
When I arrived in Rhodesia, outside of livestock there were two main types of cropping farmers. Grain farmers and tobacco farmers. The grain farmer ploughed or ripped his land every year with heavy disc harrowing before planting. There was mono-cropping in grains, specifically maize. That is, it was maize after maize with some monocotyledon weeds becoming huge problems. Who remembers the Couch grass and Shamva grass in those days? Who remembers the giant clods of compacted red soil hard as a brick? Those days are mostly long behind us. In 1973 a soya bean variety, Oribi, was released from the Salisbury research station to break this cycle while improving soil fertility through nitrogen fixation and allowing for the control of grass weeds. Even though the soybean yield was under a tonne, the farmers knew the benefit of growing ”Sorry Beans” in rotation. In tobacco, they had always had a long rotation. Tobacco was highly susceptible to nematodes, so to avoid this, a long grass rotation was included with a nematode-resistant grass that had been developed for the purpose. Katambora Rhodes Grass. As tobacco was grown on sandy soils to both maintain fertility and retain moisture, it was essential at the end of each grass rotation to ensure as much of this organic matter was returned to the soil as possible. The rotation would typically be one year of tobacco, followed by one year of maize to benefit from the residue of tobacco fertiliser, followed by three years of grass. The grass received only a little top dressing with phosphate and nitrogen allowing the seed to be commercially harvested or the grass made into hay. The grass in the final year would be left ungrazed and all the vegetative growth ploughed in. Water retention was essential as tobacco then was grown before the advent of irrigation and was typically water planted a month before the rains to ensure good root development leading to improved yields. That is, as much organic matter had to be retained in the soil as possible. In a way, this was the basics of what is called regenerative agriculture, the only issue being the use of ploughs. By the time I was thrown off my farm the conventional plough had long gone, replaced by chisel ploughs with all the crop residues remaining under and over the surface. By ridding ourselves of the disc harrow, we also reduced soil erosion. I should mention that all our fields with more than a 2% slope were contoured. I may stand corrected but the 2% rings a bell. The Dumpy Level was a very important farm tool. Where do you see this in Europe? The preceding practices were carried out not because they sounded like a good idea, it was because our soils benefitted thus producing better crops. We were way ahead of Europe. Our production was fairly balanced with the market, before we found ourselves, even in Africa, as the primary producer being squeezed as global marketing conglomerates took over. Therefore, to increase returns we upped fertiliser to feed hungrier high potential yielding varieties, we reduced rotations and introduced high levels of chemicals to control pests and diseases, the latter flourishing in intensive cropping agriculture. Some grain farmers, especially soya bean producers, cut out the plough or subsoiler of any kind, using only the heavy disc harrow to enable larger areas to be cultivated in a shorter time, simultaneously reducing the early weed challenge while cutting fuel costs. Huge areas of the world are lightly surface cultivated like this with wind and water erosion a common theme. This is frequently now seen in Africa, both on commercial and subsistence farming operations. Large tractors and large cultivators were introduced to reduce unit cost to satisfy a consumer that annually continues to pay less of their weekly income on food. Disastrous long term effects. Erosion, compaction, soil structure breakdown and organic matter disappearance.
So I see regenerative agriculture as just a way of saying let's return to good agronomic practice. I have no problem with this. The solution is to look after the soil, reducing our heavy reliance on fertilisers and chemicals in a sustainable financial manner. The advocated practices will lead to the rise in the cost of production for this so-called ecological friendly produced food. Who will pay for this? Doubtful the consumer, the majority of these will still want and choose the cheapest on the shelf. In many parts of the world, they have no choice. I believe, therefore, for regenerative agriculture to be a sustainable option, the whole value chain from field to pot must be on the same page. When has that ever happened? Let's be honest, few people would farm at the present margins. Farmers will continue to disappear and integrated corporations will introduce bigger and heavier machinery onto our green land. Let's hope the implementation of regenerative farming does not lead to the demise of many more good farmers. The very opposite of the desired intention.
Final College Days
As the final exams drew near I could feel the stress levels rising, especially amongst my housemates. It was becoming harder and harder to find someone to drive me home from the pub. I often retired late from the college library on my own. The nice thing about the college library was it was right next door to the Students Union. The only way when you're young to deal with stress is to have another beer. It also improves memory, my results are proof of this. I do remember that final year the weather was particularly good which allowed visits to the beach and we enjoyed long balmy evenings. I suppose we discussed our future plans, with me deciding there would be enough time once we had our results to make any decision on what we wanted to do. I did not have the option to return to farming on Mull. In my mind, I still very much fancied Africa or some other offshore opportunity. I did look at agronomy advisory opportunities but as it was at the end of colonialism, many Government sponsored overseas jobs were disappearing. I could forget my dream of driving around in a green landrover, smoking a pipe while watching the wildlife roam and the cultivation of vast plantations. I wanted to be my own boss, and from all the business models we had done, the best chance of that meant going dairy farming if I remained in Britain. Having spent time on my uncle's dairy farm as a child and seeing dairy farming first-hand on my practical in Ayrshire, I was not keen on this career path. Of course, when we did our management consignments we all made a profit, no matter what farming enterprise we looked at. I have found this as a good practical lesson, it has always been easier to make money on a spreadsheet rather than on the land. Mind you, there were no spreadsheets in my time, only hand-generated cash flows and a good eraser. It amounted to the same thing. It's just that you can generate a positive business model much quicker on a computer.
To my surprise, probably actually to all my peers, I was chosen after finals to travel down to Leeds University to take my NDA. At that time, this was the best recognised agricultural management qualification offered to the better students in BSC, HND and a few of us OND students. Most people used to fail it. A further surprise was that from our course, three were selected from Highfield, the predicted failures a year earlier; Willy, Mike and myself. We cannot recall if there were any others. So on completion of our finals, we took off for some fun at Leeds University. Terrible beer is my memory of the place along with my first encounter with extreme socialists. Every pub you entered, some long-time professional student would want to lecture you on the virtues of Marxism.
I found the written exams very hard, maybe my poor writing confused the examiners. I do remember one engineering question was drawing the final drive of a tractor. Why that has stuck in my memory I do not know! Mike and I got a lift down to Leeds with an English student returning home and stupidly decided to hitchhike back home. What a cold miserable night on the road that was. I can remember sitting freezing on the steps of a stationery shop in Dumfries or Moffat, I cannot remember which. We sat there until we were rescued about 0430 am by a truck heading North. All three of us from Highfield must have done alright in the written exams as Willy, Mike and myself were asked back at a later date to take the orals. More cursory revising as we had no idea of what the questions may be, nor could our lecturers advise, as they also seemed to be in the dark as much as we were. Another trip South. I remember one of the questions in the oral had me stumped. It was, “Make up a dairy ration using carrots”. I clearly remember answering the question, “I am from Scotland, who the hell feeds their cattle carrots?” He was as big of a bullshitter as me. He informed me it was common practice in England. For the next 6 months, I worked on a farm in East Anglia where many carrots are grown and I never saw one fed to the cattle unless it was nearly rotten. Yes, cabbages, potatoes and sugar beet tops but no carrots. I have since learned you can feed carrots, but a limited amount as it may colour the milk and cause scours if overfed. Anyway, the other answers I gave must have mitigated my failure to answer the carrot question.
After my orals, I set off with an English friend, who was not doing the NDA, to Norfolk to work for his cousin in the interim. The interim of what, at the time, I did not know. I had no clue what I planned for my future. In my mind, it was better to see if I had actually obtained some reward for my tireless time between the pub and the Students Union. I thought a break from this would be good, arriving in Norfolk to immediately start rugby training. This was serious, it was only late June.
Opportunity
The other issue Rob Shaw raised was; did I think there was still opportunity in African agriculture? There is always opportunity, no matter where you are. What is hard, is to recognise it for what it is and more importantly, does it suit your own ambitions? Of course, there are some entrepreneurs that can benefit from any opportunity. I am not one, being limited by capability in agriculture. Nowadays the agricultural opportunities in Africa at face value appear to be only as employees on large crop or corporation owned plantations, or on some project owned by high-value individuals wanting to lose the excess money they have made in IT. Another opportunity is with managed funds of various forms, whose funding partners want to see their money invested in African Agriculture. Luckily, these individuals are always exceedingly wealthy as generally, they find in Africa, as do donor governments and NGOs, that Africa can eat cash very quickly, for no substantive visible gain. The old players who have been in Africa seem to survive until they make an exit to some of the new money. To me, the new money wants to start too big, wants positive results too quickly and has little understanding or wish to understand the culture of the people. They prefer what is written on an excel spreadsheet to good practical advice.
“Opportunity always comes with risk in agriculture. Carefully measure the opportunity against the risk. If possible, mitigate against the risk rather than lose the opportunity. Opportunities are lifetime gifts.” - PeterMcSporran
Back to opportunity. I think it is still available to the clever young entrepreneur. I would do it again if I was young and I am not even clever. Maybe that is why. Unfortunately, a number of things have not improved, or in fact, become worse in Africa from the time I arrived. Firstly, access to title is not always possible and land may only be accessed through the lease. In some countries, this is fine, such as in Zambia, where your lease is secure and both your land and improvements can be secured by the bank or sold on. Zambian state leases are normally ninety-nine years. In most countries, the leases on offer do not provide this security. In Tanzania for instance, you can get the title under lease but cannot hold it. The Tanzanian Investment Centre does so, therefore you cannot use it as collateral in any lender’s eyes, no matter what the state officials say. In Mozambique, you can also lease after following a title-long procurement process but then only the improvements belong to you; the land does not. The land must be handed back to the Government if you sell or go bankrupt. What are the benefits of improvements for agriculture if you do not have the land to support it? Once again, a real problem. In most African countries, just identifying the titled land that is available is difficult, never mind finding the rightful owner. Often where title exists, ownership is in dispute.
“Very few householders maintain, let alone improve their dwelling if it is a leased property. Why should a farmer be any different, yet in much of Africa this is expected. This is the single major hurdle in both attracting long-term agricultural investment in Africa along with attracting young risk-taking agricultural entrepreneurs. Title and its security is critical.” - Peter McSporran
Beyond secure tenancy or ownership, the next great hurdle is finding a bank manager willing to lend you cash, even if you have title or some other source of finance. The bank manager of my day has long disappeared. Most decisions are now made at the end of a computer terminal in London, Dubai or some even more obscure centre inclined only to send out signals rather than receive and digest. Therefore, if you have limited self-funding, your startup will be very small. Not a bad thing from a management side if coupled with a lucrative niche local market. Meat, milk or vegetables to luxury hotels or lodges for instance. However, those that manage funds, who have control of most of the investment going into Africa will find you too small to be attractive. Anything under approximately $3m, they are unlikely to look at. If it is “Greenfield Primary Production” then it is even more highly unlikely. The only alternative is to be able to market your idea to a high-worth individual, taking him on as a partner. Rob’s MBA is not essential but hopefully, it will allow him to present a good digital sales pitch.
I also think there is nothing wrong with becoming a professional manager starting in the lower rung. With experience and promotion, you will have time to identify opportunities and others may well see you as an essential ingredient in an opportunity they have identified but cannot manage themselves. Nothing like training on the job at another's expense. In Africa the commercial agricultural community is small, any good operator will soon be known. This means you have to have tenacity, a family willing to live in Africa and a love for farming. Of course, being hardworking and well informed is taken as a given. You also have to be a risk-taker, essentially a canny risk-taker if you know what I mean. No balls to the wall, with about half the ingredients for success at a later date. Make sure everything is in place for success. Soils, climate, logistical access, utilities especially electricity, good communications, service providers, water for irrigation and finance. If you have the finance, ensure you are the right manager for the job. Having good ideas does not necessarily make you a good business manager.
Disclaimer: Copyright Peter McSporran. The content in this blog represents my personal views and does not reflect corporate entities.
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