Macro-economic factors beyond the group’s control contribute to lower revenue prices earned from sale of the group’s agricultural commodities. This is particularly prevalent in the banana and macadamia industry, which is demand and supply driven. In South Africa, the Recoverable Value (RV) sugar price is governed by legislation.

Mitigating Measures

The group is conducting banana export trial-runs to the Middle East in an effort to unlock new revenue markets for its bananas. Likewise, further markets for macadamias are being explored. There are signs that the lucrative Chinese dry-nut-in-shell market may slowly be returning, which bodes well for export revenue at hard currency prices. The removal of the additional sugar industry levy on growers has already seen an uptick in the South African RV sugar price in recent months.

Farming Input Costs

Geopolitical and global events beyond the group’s control can push up the costs of fertilizer and agrochemicals (herbicides, fungicides, insecticides). In the months following the Russia/Ukraine conflict, the group has experienced double-digit cost increases across most categories of its fertilizer and chemical purchases.

Mitigating Measures

The group is conducting banana export trial-runs to the Middle East in an effort to unlock new revenue markets for its bananas. Likewise, further markets for macadamias are being explored. There are signs that the lucrative Chinese dry-nut-in-shell market may slowly be returning, which bodes well for export revenue at hard currency prices. The removal of the additional sugar industry levy on growers has already seen an uptick in the South African RV sugar price in recent months.

Shipping And Fuel Costs

In the advent of the COVID-19 pandemic, most major shipping lines increased their shipping and freight rates significantly. The group exports a significant portion of its deciduous fruit crop to Europe and the United Kingdom. The higher cost of shipping resulted in dramatically lower net revenue earned on the export sale of the group’s deciduous fruit. Higher fuel costs further increased the group’s road delivery costs.

Mitigating Measures

Global shipping and freight rates are slowly starting to come down, and we are seeing this benefit through higher net revenue prices earned on our 2023 deciduous crop. Fuel costs are contained where possible, through reduction of vehicle hours to more efficient levels.

Loadshedding

Loadshedding impacts on our farms being able to meet its irrigation demands and forces us to irrigate during peak periods when the cost of electricity is high. Not being able to maintain a consistent atmospheric-controlled temperature in our deciduous fruit cold storage facilities, results in a risk of spoilage of fruit needed to be kept cool at consistent temperatures. The requirement for generators and diesel to power them results in additional cost pressure to the group.

Mitigating Measures

To combat the effects of loadshedding, irrigation has been rescheduled to ensure the crop demands are met with particular attention being paid to irrigating off peak where possible. Generators and inverters are used to provide an uninterrupted supply of electricity to the packing facilities, workshops and offices.

Climate Risk

Extreme weather events such as wind, hail, floods, drought with dry-hot conditions, severe cold and frost, can cause damage to our sugar cane roots, tree orchards and crops. These extreme weather phenomenon’s adversely impact the quality of our crops and result in lower revenue earned. Following a wet three-year La Niña phase, an El Niño phase is predicted to return. Drier conditions are forecast for southern Africa.

Mitigating Measures

To ensure sufficient water availability at the irrigated estates, water storage reservoirs have been established to provide water during extended dry periods. Shade nets are used in high hail areas to prevent bruising of banana fruit. Fire and peril risk cover over irrigation equipment and infrastructure will be increased where necessary.

Foreign Currency Price Risk

South African Rand, Zambian Kwacha or Mozambique Metical weakness against the US Dollar and Euro, results in an increase cost of certain types of fertilizer and chemicals that are imported. A weak Rand against the US Dollar also makes the servicing of our US Dollar term-debt at our Mozambique macadamia operation more expensive.

Mitigating Measures