Hanks Saisai
Many livelihoods in Namibia rely directly or indirectly on agriculture and the products that reward the hardworking men and women who farm as a way of life.
It is important to note that the journey of a farmer requires hard work, determination, dedication and a sense of innovation.
One must always be aware of common mistakes that are often overlooked by many, until they lead to the total failure of an agribusiness.
The most common mistake many people make when starting farming is underestimating the fact that farming is not only a business, but also a science.
Successful farming requires knowledge, skills and an attitude of perseverance.
The business side of farming requires one to realise that when an investment is made to purchase inputs such as seeds, chicks, goats or sheep, the initial aim is to be able to make additional money from the originally invested amount after sales proceeds are received.
Therefore, when embarking on establishing a farming enterprise, consider the following approach: Firstly, identify a problem, and establish your farming enterprise to solve that problem.
For instance, as a nation, we still import about 96% of the fruits that are consumed in Namibian households.
So, if one sets up an orchard, he or she stands a chance of penetrating this niche market by supplying a needed commodity.
Secondly, one must offer clients a benefit.
For example, distance is a major operational cost for many retailers and wholesalers.
Therefore, a farmer must offer the product while reducing the transport cost for the buyer.
Lastly, when negotiating for markets, a farmer is urged to understand the market trends of the special commodity one aims to offer the client.
Once the business aspects are in order, a farmer must also consider the scientific approach to farming.
If one aims to solve the problem of fruit imports, is it crucial to understand the specific climatic and soil requirements of the fruit trees that one aims to grow?
Ensure that the area where you plan to grow your fruit trees has the right weather conditions for the type of fruit you want to grow.
Additionally, it’s important to understand the soil in which these trees will be planted.
Does it have the necessary soil conditions to provide the root systems of the trees with essential nutrients (such as nitrogen, phosphorus, potassium, calcium, sulphur, magnesium, boron, zinc and molybdenum) in adequate quantities throughout the growing period?
It’s also crucial to understand the water requirements of the trees, and establish an irrigation schedule that addresses this need.
The second common mistake that farmers in Namibia make is attempting to produce everything that appears to have a high return on investment.
Before you fall victim to this trap, ask yourself a few questions. Do I have the know-how to undertake this business venture?
Do I have the capital to fully invest in this venture?
Do I have reliable marketing channels for my products? And what are the legal and compliance requirements for me to operate in this venture?
Many farmers tend to run several ventures at once, e.g., livestock production, poultry production, charcoal production and crop production.
In each of these ventures, only a small financial investment is made, and the skill sets are usually limited as well.
This scenario leads to underdeveloped ventures that fail to reach their full potential and become self-sustainable.
To achieve success, one should start small in one venture, understand it fully, and allow it to become self-sustainable before investing in another venture.
Specialising ensures that you will be able to supply the market with a high-quality product in quantities that address market demand.
The third common mistake is the failure to allocate financial resources based on the needs of the farming business.
Often, farmers fail to allocate a wage or salary to themselves from their farming business.
This creates a problem of misappropriation of proceeds from farm sales, which in turn leads to poor reinvestments in the business.
Additionally, it is essential to understand that one will incur fixed costs and variable costs in the farming business.
After production, one must determine the unit cost of the product.
For example, if one ventures into broiler chicken production, one chicken will cost about N$57.00 for production over a 42-day production cycle.
A farmer must know that if that chicken is sold at N$57.00, the business can break even (meet its operational costs without making a profit).
Therefore, to make this a profitable venture, the farmer must sell the chicken at N$65.55 (a 15% markup is always encouraged at the farm gate price).
After production sales, the priority should be to reinvest in the business by honouring the financial commitments of the business, paying their salary from the profit per unit of the product sold and saving the extra funds for rainy days.
The last most common mistake in farming is the failure to keep records.
These can be financial records that highlight the amount of money circulating in the business, and how it is allocated over the year of doing business.
Additionally, one must keep production records that address what activities are undertaken to produce a certain product.
Furthermore, one can highlight the challenges or risks (drought, veld fires, pests or disease outbreaks) faced during production, and their impact on the desired production.
After the production cycle or year, one can compare how financial and production records directly affect the business.
Based on these records, a farmer can evaluate their business strategy and make informed decisions on issues like reducing costs and improving production efficiencies for maximum return on investment.
Remember, your farming operation is both a business and a science; hence, it needs to be treated as such for one to achieve success.
It should always start small to give you vital lessons before you scale up.
And always remember, if you are in a trial or experimenting phase, it is best to utilise your resources (funds) before you gamble on the risk of a loan that must still be paid even if your project fails.
*Hanks Saisai is Agribank’s technical advisor on crops and poultry.