Vice of crisis grips Western Cape farmers

21 Jul 2000 - By Staff reporter

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Fruit exports face bleak future as farms tumble like skillets, writes Ray Smuts

Worst affected are farm
workers on
liquidated farms who earned between R400 and R900 a month and who face a bleak future

THE Biblical admonition - that good years will be followed by bad - appears to have been largely overlooked as an increasing number of Western Cape fruit farms tumble like skillets under the auctioneer's bidding ball.
While bank executives commute between Johannesburg and Cape Town to assess the gravity of the situation at first hand, a source close to the agricultural sector admits he would not be at all surprised if Absa and First National, two banks deeply involved in farm financing, are owed more than R1 billion in the Western Cape alone.
As I write, up to 40 deciduous Boland farms, some financed to the hilt, are in liquidation, one a Ceres operation where R40 million is owing.
Consequently, banks are faced with the options of running the farms by themselves which is not really their function and a costly one at that, or simply biting the bullet and selling at prices up to 60% below actual value.
Then, as if this is not in itself a sad enough state of affairs, there are possibly 100 or more farmers who, while not yet at liquidaton levels, are so squeezed by high bonds they can no longer meet their commitments and are forced to sell.
A sombre mood was palpable
at post
card-pretty De Doorns in the Hex River Valley recently when 300 farmers garthered for the first liquidation auction in almost 30 years. Three farms were sold for R9,3 million, all
of it going to banks.
The sale translated to
R80 000/ha, whereas the going price a year ago was about R200 000/ha.
De Doorns is caught firmly in the vice of the crisis in the fruit export industry, mostly as a result of low prices in foreign markets and businesses have taken a huge knock due to the sharp decline in buying power.
Worst affected are farm workers on liquidated farms who earned between R400 and R900 a month and who face a bleak future. We don't know what to do or where to go. The farmers say their money is finished, said a disconsolate worker.
The Bible talks about seven good years followed by seven bad years and not providing for the latter during buoyant times is exactly what can be said about this (Hex River) area, says Cape Town auctioneer Rael Levitt.
Pointing to major repercussions for communities like De Doorns - what he terms the stack of cards effect - as farms go under, Levitt, chief executive officer of Auction Alliance, largest auctioneer of farms in the Western Cape, tells FTW: It is the same scenario. During the good years farmers borrowed money to service debts rather than pay them off completely.
Levitt readily admits to not being a farming man but he knows a thing or two about the business to realise that, borrowing aside, farmers must realise they do not have it all their own way as South Africa faces increasingly stiff competition from other international markets.
Furthermore, he believes farmers have not kept pace with international trends by planting in-demand varieties like the Pink Lady rather than the Granny Smith apple. (Replanting is an expensive business, though, costing about R100 000/ha, and it can take four years before the first harvest is realised).
A case in point is the Hex River Valley with
its white-seeded grapes which are becoming less popular worldwide as
consumers display a preference for earlier seedless varieties like Thompsons, grown in the Orange River.
We must realise that all sectors, whether it be gold or real estate, go up and down so there is a time to get in and go out but this is actually the time to get into farming, says Levitt, who has realised farm sales of more that R150 million so far this year.
He dismisses speculation that the glut of farms on the market is fuelled by fears of a Zimbabwe-style farm invasion in South Africa but concedes would-be international investors could be deterred. (Another property company recently lost an R18 million sale when an apparently jittery overseas buyer backed off).
Recalling the slump in the ostrich market two years ago - during which an enterprising farmer bought up a good number of farms at rock bottom prices - Levitt points out that the industry eventually recovered. Likewise, he has no doubt the same will apply to fruit farming in the Boland.
It is very sad for farmers and their labourers as many farms have often been in families for generations, but while the market pulse is weak at the moment it's cyclical and will not stay like this forever.