Five years ago, Earle van der Watt decided to start a financial advisory firm that offers chartered and management accountancy services to a variety of clients, from family farms to some of South Africa’s largest grower-exporters.
The firm is based in Stellenbosch, Western Cape, and a satellite office in Upington, with clients mostly in the Western, Eastern, and Northern Cape, producing table grapes, apples, pears, citrus, blueberries, avocados, and dates (as well as poultry and nuts).
Earle van der Watt, Gert Kotzé and Suné Brummer (photos supplied by evdw)
“Apart from accounting and budgeting, we also do long-term feasibility studies – financial modeling is a large part of our work,” he explains.
Their clients also include investors from the United Kingdom and Europe who prefer to work with Africa-based accountants on projects in Tanzania, Zambia, and Botswana.
“We bridge the gap between corporate investors in the UK and Europe and Africa,” Earle says. The evdw team - Gert Kotzé, Suné Brummer, Ruan Walters, Donnae du Preez, and Zahn Venter – is young and energetic, used to traveling within Africa from their base in South Africa. Earle remarks that he was in Zambia seven times and three times in Tanzania last year.
They are involved in the development of a very large pecan nut enterprise and cattle farming in Zambia, while the interest in Tanzania covers a wide spread of cash crops like barley, hops, maize (corn), avocados, and poultry.
Donnae du Preez, Ruan Walters and Zahn Venter of evdw
Financial sustainability of fruit farms under threat
“Our purpose is to help with the books on farm level, also during the difficult times so that producers are still on their feet when better years come,” he says.
Earle has been keeping an eye on the returns realized on fruit farms for a long time (he was financial director of Capespan Farms for six years), and he notes that many South African farmers are experiencing cash flow problems at the moment.
“The current returns for table grapes are prices that I saw ten years ago. Input costs have gone up from R150,000 [8,900 euros] per hectare to R300,000 [17,950 euros] per hectare. There will have to be a price adjustment by retail,” he observes. “Hex River growers are now getting paid, and the current prices are completely unsustainable. It’s been two exceptionally difficult years, with logistics and Covid having the largest impact. Price levels are very weak, and that’s coupled with high inputs: the price of chemicals and fertilizers compounded by the Russian war and also fuel price increases.”
This year and next year will be some of the most difficult years in the South African fruit industry, but, he posits, it will definitely normalize in the future. However, there will have to be movement on overseas price points on the imported product to ensure the sustainability of the local fruit industry.
Table grape growers in the Orange River increasingly turn to raisins and pecan nuts to supplement their enterprise with lower-risk crops
In the Orange River region, where evdw has a strong footprint among table grape growers, there has been, he says, a very strong movement to raisins and to pecan nuts to offset the risks on table grapes, whose input costs are very high. Raisins don’t have the same returns, but it’s a more stable return than table grapes.
Regenerative agriculture investment vehicle
Earle says that the challenge in South Africa is around financing, which is limited to 50% of a farm’s valuation.
“There’s a lot of value in agriculture – the value of the soil, biological value, a farm’s water rights, but there’s a gap that we’re trying to fill through overseas investment. Many farmers have the opportunity for expansion, but they won’t necessarily get helped by a conventional bank. That is why we’re setting up an agricultural investment vehicle for international investors who have the long-term time horizons needed by agriculture, and there are international investors who understand this.”
The Orange River and Augrabies Falls in the Northern Cape, where evdw has a strong footprint
For more information:
Earle van der Watt
Tel: +27 83 258 1591