I suppose some of the joys in life are universal, others are personal: the life of Nelson Mandela, for example is an instutionalised source of pride for South Africans: a crushing defeat (or any defeat for that matter) of the All Blacks is cause for national celebration, or closer to reality, a thumping victory for the Proteas over the Australians, tickles the lot of us. Closer to home, a granddaughter’s performance in a school play, a “home-run” for one of our school students, or a rousing win for a first-timer, all these things get us up in the mornings. The one thing that’s often troubled me though, is whether I made the right call in giving up the law for a life with the “gee-gees”. In the end, it was an indulgence of a passion, a soft decision you might say, led by the heart, not the head. Not only was farming in the seventies, when we first invested in Summerhill, a notoriously marginal pastime, the timing of the decision to get involved full-time in 1989, was precarious. The world was in turmoil, the Berlin Wall had just come down, the Tiananmen Square massacre was raw in the memory, and unbeknown to most of us, the government of the day had only just started talking to Nelson Mandela. Cheryl and I had very little, but what we did have, we gave up for this farm, for this life and for what many thought was a ticket to hell. The country was on a knife-edge, money was seeping out of the national coffers at an alarming rate, and here we were, committing our futures to the top end of the luxury goods market when discretionary income was in short supply.
Many farmers in our district, wracked as it was by the internecine wars between adherents of the IFP and sympathisers of the ANC, just wanted to sell up, move to town, build a high wall mounted with razor wire and drive a diesel golf. I guess the only consolation was, if your hunch was right, you bought your farm at the bottom end of the market, with little to lose and much to gain. In that context, here we were swapping our Hillcrest home for the glorious history of Hartford in the dead of a very cold 1989 winter. Remember, it was the farm next door (to Summerhill), and “next door” for a farmer is worth two or three times as much as a farm with one in-between. Life was tough, and for the next twelve years, the Summerhill team sweated, sacrificed and prayed it would turn out okay. The same went for those who kept their horses with us; they were in the trenches alongside, come hell-or-high-water. The lesson is, if you want it badly enough and you’re surrounded by a combination of the best people and a “never-say-die” mentality, by the grace of God and a lot of good luck, you can muck your way through. But that doesn’t make the decision to go farming the right one in the first place, given that there are much easier ways of making a living, though its questionable if any of them are as much fun. When you’re young and daring, you never really allow these things to bother you, but with the benefit of age and a bit of hindsight, I suspect the spectre of bankruptcy tapped us on the shoulder many times in those days.
Imagine my relief then, when on Sunday I heard the sage of CNN’s Future Money programme, Jim Rogers, proclaiming the virtues of an investment in farmland, the third such prophecy I’ve come across in recent weeks. Jim Rogers is a former partner of investment guru, George Soros, and a moneymaking legend in his own right. He acknowledges that for the past thirty years, investing in farms might not have been the brightest idea, that enrolment at an agricultural college is no longer on the bucket lists of many kids graduating from school or university, and that prices for agricultural produce, are, in relative terms, no better than they were three decades back. So what’s this all about?
The underlying rationale behind investing in farmland lies in the growing wealth of citizens in the emerging economies from Asia to Latin America: as populations grow wealthier, they want to eat more and they demand increasingly divergent food, and the world’s capacity to meet their demand is being stretched. A year ago, the Kiev Post reported that China was acquiring a lease on up to a million hectares of farmland in Eastern Ukraine, an area the size of Belgium, in order to meet the growing appetite of China’s 1.35billion people. With that region now in ferment, it remains to be seen what becomes of that investment, though it’s a safe bet that China will be doing everything it can to safeguard its interests, and this could of course have some bearing on President Putin’s game-plan, as wishful as that may sound.
In his articulation of this theme, Rogers makes the point “If you want to get rich, you should be buying farmland. The farmers, the producers, are going to be in the captain’s seat when prices go through the roof”. Buying farmland, your pound or dollar goes a lot further in some countries than others. Saville’s, the UK property group, reveals that in 2012, a hectare of arable farmland (not irrigated) in Britain cost £15,000 (roughly R300,000), £4,000 (R80,000) in Brazil and shame, our pals have got to make a fist of working with flies, drought and ordinary dirt, but the Aussies can buy a hectare for £1,000 (R20,000). I guess when you think that arable land under irrigation in our district now costs more than R50,000 a hectare, we could’ve bought the whole of Summerhill in 1979 for the modern day equivalent of just 5 hectares! It’s possible we might have made the right call after all, thirty-five years ago (the time-value of money notwithstanding).
The one thing the current Ukraine situation illustrates, is how political uncertainty bedevils investment in less developed markets, given that it sometimes comes with associated challenges, poor infrastructure, corruption, extreme weather and other natural disasters. In fact, Ukraine and China are among a handful of countries where ownership by foreign citizens in not allowed, a parallel we’re on the brink of adopting locally in the form of a new law enabling foreigners to enter the local agricultural market only by way of long lease. Just recently, our Minister Of Lands proposed the notion that farmers should give up half their land to their long-serving staff, without providing any solutions to the question of who would take responsibility for the indebtedness of the farmer or the security the land represents to lenders. While we have it on the good authority of the inner sanctums of the governing party, that this is simply not party policy, (borne out it seems by the same Minister’s recent retreat from that position,) it’s another indication of sovereign risk interfering with the question of whether you are in or out of business from one day to the next. That this intelligence has obviously reached local farmers is evident in the purchase in the past month of a couple of farms in our neighbourhood for as much as R60million, the best indication that perhaps Jim Rogers has a point.
Whether international investors will be deterred by government’s new approach to land ownership remains to be seen; already the Minister of Mining had cause to retreat from the ruling party’s position on the mining and energy exploration fronts, and that may be followed by a review on the land policy as far as foreign investment is concerned. What they do know is that institutions and sovereign funds abroad have sacks of money, they know there are valuable tax incentives for agriculture in South Africa, and while it may not apply to all the land in this region, they also know that in this strip of the country in the lee of the Drakensberg, we have some of the most prized stock country on earth, and one of the best climates to go with it. Nations once laid down their lives for it.
Writing in British Airway’s Business Life, Ian Bailey of Saville’s says the picture for farming looks good across the board. Saville’s Global Farming Index shows annual growth of more than 20% between 2002 and 2012, while in the UK, farmland has beaten almost every asset class in the last fifteen years. Farmland performs well in “necessary times”, says Bailey, and to quote Rogers for a last time “it won’t be long before farmers will be driving the Lamborghinis, while stockbrokers will be driving taxis!”. I doubt we’ll see that in my lifetime, but you could do worse than learn to drive a tractor if you can’t already, no matter your age. After all, we’re still planting trees, and while we won’t see them through to maturity, maybe our grandchildren and those who have made the sacrifices for us will.