ZZ2 Farm Land

ZZ2: ‘Strive for exemplary performance in agriculture’

As first published by: https://www.agriorbit.com/zz2-strive-for-exemplary-performance-in-agriculture/

There is a future in agriculture in South Africa, despite various constitutional problems and challenges. This was the primary conclusion of Tommie van Zyl, chief executive officer of the ZZ2 Group, during a special lunchtime webinar recently held by the University of the Free State (UFS). The webinar was hosted in partnership with Standard Bank and the Mangaung Chamber of Commerce and Industry.

Van Zyl was joined by Wandile Sihlobo, chief economist of Agbiz, and Nico Groenewald, head of agriculture at Standard Bank. They gave their input on how producers can respond to opportunities and challenges in agriculture. Sihlobo discussed the state of South Africa’s agricultural economy and policy, while Groenewald provided input on the reconditioning of businesses to stay in the game.  

Van Zyl said there are challenges facing the industry, but there is a future in agricultural endeavours, especially with opportunities in exports, superfoods and technological innovation.    

The importance of agriculture

Van Zyl said in order to have realistic expectations, it needs to be taken into account that agriculture makes up less than 3% of South Africa’s gross domestic product (GDP). “Even if we pedal hard and we overperform, we have to remember from a financial perspective that the agricultural impact on the GDP is relatively small.”

Despite this, he still believes that agriculture plays a significant role in terms of job creation, food security, creativity and innovation. The sector also plays a role in rural reconstruction and maintaining stability in these areas of South Africa.

Institutional problems

According to Van Zyl, institutional problems in South Africa lead to constraints and challenges. One of these challenges is increasing energy costs for farming enterprises and the value chain. Unreliable energy supply and logistics constraints, especially in rural areas, are also challenges. The deteriorating national fresh produce markets and the weakening sales agent system, epidemic safety and security concerns, administrative inefficiency (licencing and regulations compliance), and an inflexible labour market, are also challenges.

He said the lack of efficient state research and development programmes makes South Africans increasingly dependent on creative solutions from outside the country. “The licence to operate in South Africa becomes expensive and cumbersome to acquire, and the lead times for performance by government increases while they decrease everywhere else. “  

Van Zyl said South Africa’s success in terms of price signal, which drives source allocation and the endeavours of a farming enterprise, are threatened by negligence of institutions which are run by government. He added that the price signal phenomenon has been efficient in South Africa and resulted in the country still being one of the most productive agricultural sectors in the world, while price competitiveness of South African products globally is also testament to this.

The country’s success in this regard is, however, threatened by unsanctioned trespassing on state and private property. His suggestions to address this predicament are self-help, the development of risk mitigation plans, and a continuous strive to exemplary performance.

Awaiting opportunities

Van Zyl is of the opinion that the industry must have an urge to strive for exemplary performance through efficiency and productivity. He explained that the South African market for domestically consumed fruit and vegetables is saturated, with thin margins.

This includes tomatoes and onions, while there are huge possibilities for the production and export of avocados, cherries and blueberries. “To be competitive, we work closely with the productivity ratio that was presented to South Africa by the National Productivity Institute two decades ago,” said van Zyl.

In terms of productivity, he said operational expenses need to be considered as this is not always just a cost-cutting effort. Cost sometimes needs to be increased in order to have a higher income. “We also need to think of resource optimisation. It is part of our job to work with the authorities, for instance to fix roads and create capacity for government.

“The industry will also need to think about alternative energy resources and the management of physical constraints like roads or trade, legal and environmental constrains, as these are part of the industry’s duty if it wants to be exemplary in its doings. All of this is in the productivity ratio. We must have higher outputs in relation to our inputs to improve our performance,” he said

Geospatial niche

Van Zyl believes the country’s geospatial niche needs to be revisited in striving for exemplary performance. He elaborated on this point, saying South Africa has a travel time of 18 days from the Durban to a country like Hong Kong, while the travel time from South America (Peru), which is South Africa’s main competitor, to Hong Kong, is 31 days. The travel time from Chili to Singapore is 38 days and from South Africa to the same destination, only 13 days. Van Zyl believes all the superfruits wanted in these up-and-coming markets should be a very strong focus for South Africa going forward, especially when it comes to products like avocados, blueberries, cherries and even apples and pears.

Digitalisation in agriculture

Van Zyl said the era of digitalisation is important when looking at the future and striving towards an exemplary performance as many of the challenges facing the industry will be mitigated by this development.

“We have the ability with the Internet and with digitisation and information technology to have real-time data, information and knowledge in a transformation process that enhances our decision-making abilities.

“We have decreased lead times for decision-making, and we have the reappearance of near perfect markets where supply and demand determine the value, resulting in trustworthy price signals.” The industry now has logistics and production optimisation by linking rate-of-sale at retail level throughout the value chain to the farm.

“We also have the ability to optimise resource management by the integration of complex datasets like water levels and quality, climate data soil maps and plant-specific data.”

The industry also has the enhanced ability to manage enterprises as increasingly complex matrix systems and the ability to acquire, share and maintain knowledge, said Van Zyl. – Christal-Lize Muller, AgriOrbit

ZZ2: ‘Strive for exemplary performance in agriculture’

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