Farmer’s Weekly (Uitgawe 17023 – 23 Junie 2017)
Deur Glenneis Kriel
Diversifying beyond agriculture
“Farmers need to diversify during prosperous years and be in a position to expand production during the tough years. It is the basics of economic trade; you buy when others sell and sell when others buy.” This was the message from Hein Kruger, CEO of Kruger International, speaking at the Canning Fruit Producers’ Association (CFPA) information day recently held in Worcester.
Diversification should not only take place into non-agriculture-related fields, but also beyond the country’s borders. Kruger warned that the weak exchange rate helped buffer export farmers from poor local economic conditions, but cautioned that businesses should not be built on a weak currency. A portion of the foreign income generated through exports should be kept offshore to help diversify risk.
Farmers should also not become confused by supply and demand prices on the Johannesburg Stock Exchange (JSE), as well as the foreign currency exchange. “What happens with the JSE and Forex has very little to do with us, as 80% to 90% of the companies listed on the JSE enjoy international exposure.“
The same applied to the value of the rand. “Spikes are not [an] indication [that investors have] faith in our economy, but is the result of people using the rand to hedge themselves against their own currencies. The rand has been categorised as one of the top 20 most tradable currencies in the world,” he said. Buying US dollars and keeping them in a safe or investing in the money market were not good long-term investments, since they did not generate any [significant] returns, he said. Kruger said he would also not invest in any government-owned enterprises in South Africa or overseas, as in many of these countries interest rate cuts were used to stimulate growth during and after a recession. The share prices of these companies would be negatively affected once interest rates returned to normal, he said.
Wealth management was similar to farming, he said: “you buy when prices are low and keep the investment for the long term to give it time to produce returns. You do not sell when prices are high, because then you lose rhythm.”