The key to profitable performance – African Farming

A common purpose and effective communication are crucial to good succession planning in agriculture. Family succession has a positive effect on profit and the financial performance of a farming business, as the asset value depends heavily on continuity. 

There is a natural progression in the handover of technical agricultural skills from one farming generation to another, says Nico Groenewald, head of Standard Bank’s Agribusiness division. However, he adds, “when you move to the finances, which are at the heart of the business, the older generation seems to think that level of decision making should stay with them.” 

The incoming generation has to be trained in financial decision-making and in the strategic direction of the business, he advises. This is where difficulties often start, as it is part of the human condition to want to hold on to the critical decision-making role that will determine the long-term survival, or otherwise, of the business. Letting go of the reins is part of facing one’s mortality and very few people anywhere want to be reminded of this. Groenewald says there may be times farmers could benefit from outside guidance to get over these humps. 

Historically, generational succession on farms has provided a framework for farmers, and their farming sons and daughters, on which they have built strong and profitable agribusinesses. Direct, clear and effective communication between the retiring generation and the incoming generation is vital if the vision, goals and strategy of the business are to be shared and continued.

It may be equally true that poor communication and a reluctance to talk about the future could result in the loss of the asset. Succession planning should be looked at as giving opportunities to the younger generation of farmers who bring energy, skills and a fresh perspective to the business. 

Agribusinesses operate in challenging landscapes and farming families who want to succeed should carefully consider and discuss how to plan and implement succession. 

For more information, visit www.standardbank.co.za/southafrica/business/products-and-services/business-solutions/industry/agribusiness