COVID-19 Africa Watch talks to Mbali Nwoko, CEO of Green Terrace, about how COVID-19 is impacting small-scale farming in South Africa.
The following are a few of the main takeaways from COVID-19 Africa Watch’s conversation with Mbali Nwoko, CEO of Green Terrace:
- The pandemic and related lockdown policies have generated a lot of uncertainty and fear in farming communities in South Africa.
- Revenues are falling for many farmers, and there has been related pressure from suppliers to accelerate typical procurement timelines, putting additional financial pressures on buyers. Some farmers are heavily indebted.
- When it comes to support for farming businesses, there is a missing middle that fall outside of criteria for participation in COVID-19 funding schemes.
- As economic conditions worsen, many farmers and agribusinesses will not be able to maintain their businesses, and their closure will have long-term impacts on food security.
- As technology continues to shape the farming industry, those businesses that are agile and innovative will be better positioned to survive.
The interview was conducted by Kennedy Mukuka, an IFC-Milken Institute Capital Market Scholar from the Central Bank of Zambia. A transcript is available below.
My name is Kennedy Mukuka from the Central Bank of Zambia, and a scholar with the IFC Milken Institute Capital Markets Program. Today, I am pleased to welcome Ms. Mbali Nwoko, who is joining us to share her insights on the COVID-19 crisis in Africa. Ms. Nwoko is Chief Executive Officer of Green Terrace and based in Johannesburg, South Africa. Thanks for being with us.
Thank you so much, Kennedy.
What is Green Terrace, and what challenge has COVID-19 posed for your business and generally for the agri-business in South Africa? More especially for the small and medium-sized farmers?
Green Terrace is a primary agricultural business primarily producing vegetables, sweet pepper being the dominant of the crops. And as you mentioned, we are based in Johannesburg, South Africa, and we currently supply to leading retailers, fresh produce markets, as well as food processing companies nationally. It’s unfortunate that the pandemic and the lockdown measures have happened at a stage where we were currently developing a farm, and putting up new infrastructure. What that has done is delayed certain service providers to be able to come work on the farm to help us, and allow us to be on time with our summer production. And a lot of uncertainty and fear amongst farmers, and still noting that at the end of the day, we are still parents, brothers, sisters, siblings, we are major contributors in terms of income in household. So people have feared whether they will be able to just continue life as normal during the lockdown measures and I think that is one of the constraints and challenges that we as farmers and small scales farmers, just farmers in general, have experienced during the lockdown period.
So with that in light, what specific activities have you put in place to respond to the pandemic, and ensure continuity of the business?
I have had to definitely negotiate with the clients that we are currently servicing, or supplying produce to. Negotiate with them to maybe halt our production for the winter period, and only resume in the summer production. So that definitely means loss of income for winter. However, still try to be within the supply chain or in the supply program, come the summer season. So these are the aspects around production and selling my products that I have had to negotiate. Other things have been having to procure input supplies at a much sooner timeframe than I would ordinarily procure them. For example,
similar to what we see in other communities where people rush to the supermarkets, and start buying in panic, that has been the case with me, as one of the relationships I have had with my input suppliers, because they said, “We don’t know how long this COVID-19 pandemic will last, therefore to ensure business continuity, and to ensure that you continue to produce even during the summer period, maybe right now would be the best time to start ordering the seeds, ordering the fertilizers, and whatever else is needed for your business.”
And looking at agri-business in general, most of the small-scale farmers, you mentioned the issue of financing: How has the ability of the small-scale farmers in relation to financing or repaying back of loans, for instance, affected the businesses? And have there been any interventions in the sector to ensure these businesses stay afloat?
I know our Department of Agriculture during Level Four, I believe, or late in Level Five of our lockdown, they announced that they will be supporting small-scale farmers financially, especially those who fit within the criteria of annual revenue generation of about minimum 20,000 rand to a million rand. However, just because you applied doesn’t mean automatic acceptance. So even if you might have applied and met the criteria, there is a limitation in terms of the funds that are available for the small-scale farmers. And what they did then, the Department of Agriculture has only allocated about 50,000 rand per farmer, per small-scale farmer for this funding. So, it might come as boost for others, and for some it may be just too little to even continue business production.
From a Green Terrace perspective as well, we are financially under pressure, simply because we’ve had to use funds that would ordinarily be used for the next coming months. We’d have to use them right now, immediately, to procure the goods, that will help us in the future. And also, because of the fact that certain service providers aren’t working during COVID-19, we’ve had to seek external service providers that maybe fall outside the agricultural chain to be able to support the business currently. Definitely, as an entrepreneur, I have tried to source different avenues. For some, again, I don’t meet the criteria, maybe because I fall slightly above the funding or financing criteria that institutions are offering, or I just fall below that. So I find myself as the missing middle, and it’s just been quite tough to try and think of innovative ways and how to ensure business continuity, especially from a finance level.
I know some experts are speculating that the pandemic can lead to a global food crisis due to the unknown extent and longevity of the crisis. Is this something you have considered at Green Terrace, and how are you responding to this?
As the owner of the business, I’m doing everything in my capacity to ensure that my business continues to exist post-COVID-19. And unfortunately, for some of the farmers and welders as well as business individuals, entrepreneurs and other businesses, they’ve had to make that tough decision of having to close their doors. Going back to the agricultural industry, the same applies. Some farmers right now are heavily indebted and they have no contingency plans to recover from the COVID-19. So then, what that essentially will do is that it will force a number of other farms to close down as well. So, where food security is concerned, I think South Africa is at a fortunate stage to be very food secure at this point in time. However, the same could not be said for those countries that were already food-insecure prior COVID-19.
“What I see for the future is that the food security will definitely be at risk, as a number of farmers exit the industry.”
What I see for the future is that the food security will definitely be at risk, as a number of farmers exit the industry. The barriers are going to be quite high because as we see now, lending and financing models are becoming more stringent, even though interest rates, especially from the case in South Africa – you know that our reserve banks are finding innovative ways to maybe reduce interest rates, et cetera. But for the fact that our South African agricultural sector still imports a number equipment, machines, tools, seeds as well, any production input costs would definitely put a spike in prices and it makes it very difficult for new entrants coming into the agriculture industry to make a success of their new farming businesses.
Post pandemic, what is your vision of the future?
I’m hoping that we could really grow and become stronger as a business, start farming in different geographical regions across the country, just to take advantage of climate change as well. I foresee also Green Terrace employing a different type of workforce going forward. Instead of being a business that predominately employs blue collar workers, I see Green Terrace becoming a business that employs individuals across diverse skillsets or careers. For example, engineers, industrial engineers, to be precise, or mathematicians and more scientists onto the business, because of the way technology is shaping the farming sector.
My vision for the future as well is that I hope to see more agile and innovative businesses that will come up through the business environment, as we’re really seeing them popping up now. A lot of people are coming up with great solutions to continue life post-COVID and start a new way of doing business and thinking and interacting as humans and as individuals.
Thank you. The Milken Institute and I thank you again for your insights.
Thank you very much, Kennedy, and have a good day.
More analysis from COVID-19 Africa Watch:
COVID-19 Africa Watch tracks major developments and policy announcements from across the continent and also offers a curated selection of analysis on how the pandemic will impact African economies and development efforts. The site is a project of the Milken Institute’s Global Market Development Practice.