South African agricultural producers need to future-proof their businesses by moving beyond just primary production and adding greater value to their customers, and even end-consumers, through increased participation in the agri-value chain.

This, according to Carel Serfontein, CEO of the Sernick Group, a diversified agricultural and agricultural processing company based in Kroonstad, Free State, is the future of agriculture in South Africa.

“The return on investment in traditional farming is marginal, but the return on investment in further processing and marketing agricultural products is substantial. Adding value and selling it to the consumer is where the market is, where the stability is and where the profit is. This approach ensures a more profitable agri business that is robust and more resilient to fluctuating market conditions,” Serfontein explains.

Owning the value chain

He uses the current drought to showcase the merits of producers being active further along the value chain.

Right now, because of the animal food shortage as a consequence of the drought, beef farmers are forced to sell their cattle, resulting in an oversupply in the market. This is driving down the prices farmers are getting for their cattle. Serfontein believes if primary producers could take ownership of some – if not all – of the functions in the value chain, they could ringfence costs and significantly augment their overall profits at times like this.

The same, he says, applies to the devaluation of the rand. “This is another market challenge beyond producers’ control that could be turned into a positive opportunity if handled correctly. There are massive export opportunities available, but these remain out of the reach of the farmer who doesn’t add value,” he notes.

Serfontein speaks from experience as head of one of South Africa’s few agricultural producers that doesn’t only participate in the value chain, but owns it, from farm to plate.

This visionary approach to agriculture has seen the Sernick Group grow its turnover from R170 million in 2006 to more than R1 billion in 2015, despite tough prevailing market conditions. It’s a model the group has taken years to perfect, and one it hopes other local producers will learn from in creating a more sustainable local agricultural sector.

Eyeing the end-consumer

The Sernick Group was established in 1983 with just 30 Bonsmara heifers and 250 hectares of land by Carel’s father, Nick Serfontein, then a consultant engineer.

“I was passionate about farming,” he recalls, “but quickly realised being merely a producer wasn’t going to be enough; I needed to get to the consumer. I knew I had to cut out the middleman, own the value chain, and become the price maker not the price taker, which is the unfortunate position many of our farmers find themselves in today. But there was no model for me to follow, so with plenty of blood, sweat, tears and courage, I found my own way.”

Over the years that included developing a comprehensive value chain through establishing a 5000-hectare farm (1200 hectares of cultivated pastures, and the balance natural grazing) with a Bonsmara stud of 500 breeding cows; a fully automatic bull testing station (for Sernick bulls and those of other breeders); a feed factory that produces an average of 6000 tons of animal feed including beef, lamb, dairy, chicken, pork and game feed (of which two thirds is sold and the balance used internally); a feedlot with the carrying capacity of 8000 cattle; an abattoir with a full deboning and processing facility; and four Sernick Country Meat branded retail butcheries (two in Kroonstad and two in Gauteng).

Through these business units, the Sernick Group today employs more than 400 people.

Expanding operations

To remain competitive and grow profits, the company has a firm expansion plan in place that builds on the success of its end-to-end model by optimizing all entities along the value chain.

Currently, the bulk of the farm’s meat is sold to wholesalers, but the company intends developing its own wholesale distribution network as well as increasing its number of retail outlets to at least 10 by 2017.

The group’s abattoir recently received export status, and as such the company is in the process of investigating opportunities in the export market. Branding their Bonsmara meat is also on the cards.

Supporting emerging farmers

At the heart of the Sernick Group’s approach has always been sustainability – sustainability of its own operations and of South Africa’s agricultural sector as a whole.

It was against this backdrop that the group launched its CSI programme under the leadership of Patrick Sekwatlakwatla – South Africa’s first black cattle judge. The programme aims to uplift emerging farmers through ongoing training, assistance in procuring financial resources, and the supplemented feeding of emerging farmers’ animals. This is in addition to the Sernick Group’s ongoing financial support of local community churches, NGOs, sports teams and educational activities at its farm school.

Media Source: www.farmersreviewafrica.com