The importance of serious homework when expanding a business – African Farming

Dineo Mokgoshi, a successful farmer who manages 48 000 layers on a 17ha poultry farm, likes to dream big – she plans to bring that total to 173 000 chickens soon. Lindiwe Sithole, host of African Farming Season 2, was inspired by Mokgoshi’s passion to learn more about farming during her visit.

Sithole talks to Keneilwe Nailana, manager of Agribusiness at Standard Bank, about Mokgoshi’s plans to expand. “Dineo is planning to expand her business aggressively,” Sithole says. “What is the advice you can give her to plan for the future successfully?”

Nailana says she believes the reason behind a farmer’s decision to expand, will help them to plan better. It is important to do serious homework before expanding and then continue to do so during the operation of the project.

“Have you identified a new market? Or are you expanding because your neighbours are doing it?” She says expansion costs a lot of money, therefore a farmer needs to do thorough research before embarking on such a project.

“It is crucial to understand the value chain you want to get involved in and also make sure you learn enough about all the other role players in the value chain. What does the market look like and why do you think expanding will work?”

The cost implications could be huge, Nailana explains. “You need working capital, capital to invest in more land or in building a processing plant, or if you want to export you need trade finance.” According to her, partnering with a reliable financial advisor will help to steer the project in the right direction.

“You also need to decide if you are going to expand vertically or horizontally – all of these important decisions will determine the success of the project.”