AFGRI
AFGRI
AFGRI: Africa’s Agricultural
Partner for Life PRODUCTION: Manelesi Dumasi
The journey to agricultural success starts with a trusted partner, and after many years of success on the African continent and further afield, AFGRI has become recognised as a partner that can support all agricultural businesses as they grow. The goal of this sizeable South African business is to drive food security across Africa. CEO, Tinus Prinsloo and CFO, Jacob de Villiers talk to Enterprise Africa about the company’s success. 2 / www.enterprise-africa.net
INDUSTRY FOCUS: AGRICULTURE
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Not many companies can boast 95 years of success in agriculture – a hard industry that requires constant focus and attention to detail, as well as extensive knowledge and local expertise. But for AFGRI, formed in 1923 as a coop-style operation, the past nine and a half decades have brought major triumph. The company has grown from a smaller regional farming business to become a major force in the continent’s agricultural sector, with operations spanning the entire value chain. The AFGRI reach has also expanded into other nations. AFGRI Agri Services is the servicefocussed arm of the business that looks after everything involved in farming that is not food. The services offered by this division of the wider AFGRI business were consolidated in April 2017 after the group completed a reorganisation programme, as CEO Tinus Prinsloo explains. “We regrouped all of the companies within the organisation. Obviously, we had many companies and we decided to group them into companies that deal directly with the farmer and other companies that deal in the food business. Everything related to the farmer, whether it’s insurance or finance or grain management or retail or equipment or emerging farmer business, is now all grouped together. The foods business; which includes edible oils, animal feeds, milling etc; that is the second group.” This structural reshuffle came into place on April 1 2017 and Prinsloo says that AFGRI has felt very little change.
// WE HAVE A SIZEABLE BUSINESS IN WESTERN AUSTRALIA AND IT’S CLOSE TO THE SIZE OF OUR BUSINESS IN SOUTH AFRICA // 4 / www.enterprise-africa.net
“For our side, not much has changed” he says “but on the food side, they are actively now seeking new opportunities and mergers across the whole of Africa. We are already active in Africa and so the regrouping was important; everything now makes more sense.” The reorganisation is the latest milestone for the company which delisted from the JSE in 2014 before making several important acquisitions in 2016 and 2017. A PAN-AFRICAN AGRI BUSINESS AFGRI Agri Services is active across several Southern African nations. This is largely down to its agency deal with John Deere to distribute its famous and highly valuable machines. “For the equipment business, we are active in Botswana, Zimbabwe, Zambia and Ghana,” says Prinsloo. AFGRI gained the agency agreement with John Deere in 1962, and in 1963 sold just 28 tractors. By 1972, the company was selling more than 500 each year. Growth from this part of the business is helping AFGRI to gain an international reputation as it solidifies its position in Australia. “The big new initiative for the equipment business is Western Australia,” details Prinsloo. “We’ve been active there for a number of years but in the last two years, we have expanded that business substantially. There were
five John Deere agencies in Western Australia, of which we were one and we have taken over three others leaving just one more. If we take that business, we would have consolidated the whole of Western Australia. That business is really performing well and we will try and take the last business in the next six to 12 months, when it suits us and the seller.” AFGRI Equipment has a network of 40 strategically located branches through which it supplies tractors, combine harvesters, planters, balers, sprayers, mowers, spreaders, graders, loaders, post-hole diggers and GPSbased precision agricultural and potato equipment. AFGRI entered Western Australia in 2004 after the purchase of T & H Walton Stores. Soon after, AFGRI acquired several other businesses including Ratten & Slater, Greenline Ag and Jolly and Sons, to further broaden its Australian reach. The acquisition of the final John Deere distributor in Western Australia looks set to happen at some point in the near future and will make for a streamlined approach to the region for John Deere, but Prinsloo says it will happen when it is suitable for both parties. “We will wait until the end of the year and then we will look at the situation again, but we will not go in with an ‘at any cost’ approach. We have a sizeable business in Western Australia
AFGRI
// JD LINK OFFERS BOUNDLESS FEATURES AND BENEFITS – EVEN THE MOST BASIC DATA RELAYED WOULD CONSIST OF EQUIPMENTSPECIFIC METRICS SUCH AS DIESEL LEVELS, ENGINE TEMPERATURE AND FORWARD SPEED. // and it’s close to the size of our business in South Africa. It’s a fantastic business and we want to add to it, but we will not unless it is right for us. “We will not be looking at other countries outside of Africa or Australia,” he says. When it comes to moving the equipment business further into Africa, Prinsloo explains that there would not be much more room for expansion as John Deere agency agreements already
exist in East and West Africa and he does not want to create a cannibalistic environment. “We are becoming too big in the lives of John Deere,” he says. Where African expansion is on the cards, is with the grain business. “It is easier for them to enter new markets, they don’t need a lot of infrastructure and can move quickly.” Already active in South Africa, Zimbabwe, Zambia, Mozambique, Uganda, Tanzania and Congo-Brazzaville,
Prinsloo says there is certainly an appetite for further growth with the grain business. “They will expand into more African countries if it makes business sense and if the opportunity is there. It would usually be off the back of a third party off-take agreement; for example, if AB InBev need us to help them in a new country, we would seriously consider it.” Financial services is also an area through which AFGRI is active in Africa, and another area that will grow as the rest of the company burgeons on the continent. “We have a sizeable book in Zambia and that will grow over time. We have smaller books in Zimbabwe and Congo-Brazzaville. The finance business will always come off the back of the equipment business or the grain business. We would not enter a country just for finance,” explains CFO, Jacob de Villiers.
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INDUSTRY FOCUS: AGRICULTURE
In the future, the company is considering pushing into Western Australia with its grain business. Both Prinsloo and de Villiers agree that there is massive potential for AFGRI and its grain ideas in Australia but “it is still in the very early stages and there is nothing concrete, but we do see big possibilities there.” JD LINK & EACCOUNTS In May, AFGRI Equipment division announced the launch of a new real-time telematics system connecting all makes and models of agricultural machinery in the field with the farmer’s office and mobile devices. A partnership initiative with John Deere, this system is becoming an invaluable tool for commercial-scale farming operations. “It’s part of a new technology that we are looking at and we rolled it out
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in South Africa with some of our bigger clients,” says Prinsloo. “It was accepted very well and we want to expand it into all areas. It gives a benefit to individual farmers as they can get more out of their machines. It is a step in the right direction and is something very new. The first few farmers we have worked with are very happy with it and we will eventually roll it out across all of our African operations.” The JD Link system helps collate telematics and a wide range of data from all machines. Vital downtime preventing information is now available at any time to the farmer and this helps to further improve efficiencies. “The solution enables customers to keep track of their fleet, monitor work progress, manage logistics, access important machine information, analyse and optimise machine performance, receive alert SMS
or email messages, perform remote operator support and automate data exchange,” details Prinsloo. “JD Link offers boundless features and benefits – even the most basic data relayed would consist of equipmentspecific metrics such as diesel levels, engine temperature and forward speed. “Second, and probably most exciting, is the efficiency data that becomes available such as hectares completed, average hectares per hour, hitch position and wheel slip. Equipment can even be geo-fenced and time restricted to alert owners of unauthorised usage,” says Prinsloo, who has been in the agricultural industry for his entire career and with AFGRI for more than 12 years. Technology is a big driver of growth AFGRI and partnerships with the world’s top tech providers help the entire
AFGRI
operation to flourish. Aside from JD Link, the company is also fine tuning its new eAccounts system. “We have developed an electronic banking system, eAccounts, and it works similarly to any other banking platform,” says Prinsloo. “We don’t have a banking license so we do not call it a banking platform but it allows people to log into the system, discover the best price, sell maize or pay a deposit on a tractor, and pay the balance to the farmer or our equipment division. Everything is linked and all of the systems talk to each other. It puts us ahead of our competitors as no one has anything as sophisticated as this.” De Villiers explains that eAccounts will probably need another 12 months of development before it is a complete project. “We have been running with the project for the past 18 months and we have had R9 billion through the system.
Development continues and we will be busy for another year, fine tuning what we offer on the platform. “When we started the project eAccounts we budgeted for development costs of R10 million. It was designed for the finance division to do online payments and create accounts. Since then, we have involved all other divisions and the project is much bigger.” FERTILE ENVIRONMENT The unpredictable and erratic nature of the South African economy has resulted in challenging trading conditions through 2016 and 2017. But the start of 2018 saw most businesses given a reason to be positive following the appointment of business-friendly President Cyril Ramaphosa. However, since taking the reins, Ramaphosa has reignited the fiercely
contested debate surrounding expropriation of land without compensation, saying it could “add an injection to the growth of our country.” Prinsloo and de Villiers are concerned. “While we do feel more confident – it is definitely an improvement from the previous leadership – there have been concerns. Unfortunately, since December when land expropriation without compensation became a topic, we have seen much concern in the agri sector. We are following the debate closely and we believe, taking out the emotion, this is a debate that should be had in South Africa. We are seeing a more cautious approach from farmers and, in some cases, it has had a negative impact on the value of land. we are also closely watching the situation around nationalisation of the Reserve Bank,” says de Villiers.
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INDUSTRY FOCUS: AGRICULTURE
// WE ARE VERY PROUD OF AFGRI, IT’S A REMARKABLE BUSINESS // “The land debate is the one area where there is a lot of uncertainty. They are trying their best to calm everyone down, but it does have an impact on the psyche of a farmer who owns land. We hope the debate will sort out an issue that has been there for the last 25 years. The whole idea of commercial farming is based on title deeds to land and the ability of a famer to borrow from banks against that land as security so if you take away that ability, it will have serious repercussions on food security and our President does not want that.” For now, the uncertainty has not derailed the business and AFGRI remains a picture of health. “We are performing well and growing the business,” admits Prinsloo. “Aside from a few political issues, I am personally very optimistic about the future. We have discussed all of
the issues with the leading farmers in the business and we see a lot of uncertainty, but we remain optimistic.” Even the recent drought in the Western Cape, and the dry weather period from two years ago did not managed to slow the pace of this innovative and exciting business. AFGRI is operative with grain mainly in the northern regions of the country and in the season following the dry spell of two years ago, AFGRI delivered a record crop. The only impact felt from the recent drought in the Western Cape was slow sales of John Deere equipment immediately after AFGRI purchased the agency rights there. “This season we are optimistic about sales. We are not as big in the Western Cape as we are in the north, but we are optimistic because things
Tinus Prinsloo - AFGRI CEO
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can change so quickly,” says Prinsloo. As the rainy season begins, there is an expectation that farms will produce strongly again without major disruption. GROWING WITH M&A Currently, AFGRI Agri Services employs around 1700 of the Group’s more than 3000 people. De Villiers says that this figure will very likely grow in the near future as AFGRI’s reach continues to grow, and as the company looks to improve its BBBEE rating. “There is a new initiative from the President called YES (Youth Employment Service) where the intended outcome is to incentivise companies to create jobs for the youth, which is anyone below the age of 35. AFGRI will participate in that programme by identifying various areas where we can take in interns or
AFGRI
Jacob de Villiers - AFGRI CFO
// LOOKING AT BBBEE, THERE ARE NOT MANY AGRICULTURAL BUSINESSES THAT CAN MATCH US, BY THE OLD CODES OR THE NEW // other staff members so that we can help young South African’s to improve their skills. We do have a focus on diversifying our employment base and that will be a continuing focus,” he says. Prinsloo agrees, saying: “The workforce will expand as we expand the business. Looking at BBBEE, there are not many agricultural businesses that can match us, by the old codes or the new. We are a Level 3 and that is very good compared to any other agri business in the country. We have addressed that issue very well so far, and the idea is to improve our level over time.” Will there be further M&A activity before the year is out? Prinsloo says
that the company is always working on plans for growth but cannot say whether things will happen that quickly. “Our M&A activity has been tied with the growth of our equipment business because of the John Deere agency arrangement – if you want to get into a country, you have to get the agency agreement. From a grain point of view, we can enter a country without M&A activity. We don’t only grow through M&A activity, we can go in and set up with our existing skills or through offtake agreements.” Back in 1923, who would of thought that the group of 29 original members of the Oos-Transvaalse Landboukoöperasie
co-op would have started an organisation that would spread across the continent and become a leading contributor to Africa’s food security? “Doing business in Africa is a challenge and it differs from country to country. Part of our strategy is to be in Africa, helping with food security across the continent but it is a challenging environment; it certainly isn’t just sunshine and roses. We are always learning,” says Prinsloo. “We are very proud of AFGRI, it’s a remarkable business,” concludes de Villiers. .
WWW.AFGRI.COM
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AFRICA
THE BUSINESS MAGAZINE FOR AFRICA’S INDUSTRY LEADERS
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June 2018
www.enterprise-africa.net
AFGRI: Africa’s Agricultural
Partner for Life Exclusive interview with Tinus Prinsloo (CEO) and Jacob de Villiers (CFO)
ALSO IN THIS ISSUE:
SATIB / Tintswalo / Table Charm / Chemprotech
AS FEAT UR ED IN
ENTERPRISE AFRICA
J UNE 2018