Financial implications of converting from livestock to game farming in the Karoo region, South Africa

Chiyangwa, Tafadswa (2018-03)

Thesis (MCom)--Stellenbosch University, 2018.

Thesis

ENGLISH SUMMARY : South Africa’s game farming industry is becoming more common and more popular in the country’s agricultural sector. It is one of the geographically growing agriculture subsectors, with an approximate growth rate of between 2 and 2.5% per year on average. Currently, game farming is widely adapted within traditionally extensive cattle and sheep producing areas, where current sheep producers are moving towards game farming practises. This type of farming, is regarded as a lifestyle investment and, because of this; it is largely investors with a large capital who can afford this. Due to the complexity of this type of farming, influenced by the huge initial capital required, interrelationships of biological, physical and economic aspects, and exposure to high risk and uncertainties, game farming is not easy to tap into without a considerable degree of capital. There is a general lack of finance, knowledge and access to markets by South African farmers, hence switching from sheep to game farming can become even more costly. To mitigate this deficiency, use of efficient and effective decision making processes is useful in order to make informed decisions. The researcher employed whole farm budget modelling as a technique, which is useful for the decision making process, by adapting the use of a multi-period budget model. The proficiency of the systems thinking approach was used in order to deal with complexity in the whole farm system where physical and financial components of the farm were incorporated together as a single item. The main aim of this study is to analyse the financial and managerial implications of converting from sheep farming to game farming in Beaufort West, a town in the Karoo in the Western Cape of South Africa, with the objective of finding out if it is financially profitable for a current sheep farmer to move to a game farming system. To achieve this, a collaborative research method is used following a review of literature and then empirical investigation is used to analyse the results. The intention is to generate comprehensive and feasible insight for farmers to tap into, thus assisting them in making informed choices with improved knowledge in their daily operations. The findings of this work reveals that current sheep farming system over a period of 20 years is profitable, but converting to game farming is more profitable. This was revealed by an IRR of 4.02% in a sheep farming system compared to IRR of 5.85% in a game farming system. The IRR was described and analysed to show how it is used to measure profitability in a whole farm system situation. It was noted that there are external factors that also influence whole farm profitability. Scenarios were simulated to analyse the impact of specified factors on whole farm profitability. The factors were high game prices, drought and decrease in carrying capacity. The results are significant in all scenarios. The scenario with high game prices show increase in IRR from 5.85% to 7.45% and the scenario with a decrease in carrying capacity show decrease in IRR from 5.85% to 2.41%. Lastly, the scenario with drought shows decrease in IRR from 5.85% to 5.53%. This explains that the occurrence of drought and decrease in carrying capacity decreases whole farm profitability, whilst high game price increases whole farm profitability.

AFRIKAANSE OPSOMMING : In Suid-Afrika is wildboerdery besig om meer algemeen en populêr te word binne die landbousektor as geheel. Hierdie subsektor is geografies besig om uit te brei en groei teen ‘n gemiddelde koers van tussen twee- en 2.5% per jaar. Wildboerdery ontwikkel veral in areas wat voorheen vir ekstensiewe bees- en skaapboerdery gebruik is en waar landbouers hul fokus toenemend na die wildsektor verskuif. Hierdie tipe boerdery word egter dikwels as ‘n leefstylboerdery beskou wat beteken dat dit grotendeels beleggers van buite die landbousektor, met genoeg kapitaalbronne, is wat in die bedryf investeer. Wildboerdery is ‘n komplekse bedryf wat aanvanklik ‘n groot kapitaalbelegging verg om te implementeer. Dit, tesame met die wisselwerking tussen biologiese, fisiese en ekonomiese faktore, maak dit ‘n onsekere en hoë risiko bedryf, wat moeilik is om te betree sonder noemenswaardige kapitaalbesteding. Suid-Afrikaanse landbouers het dikwels nie genoeg kennis van die wildbedryf of toegang tot die nodige kapitaal of markte om die skuif van skape en beeste na ‘n wildboerdery suksesvol uit te voer nie. Om hierdie probleme aan te spreek is die gebruik van doeltreffende en effektiewe besluitnemingsprosesse noodsaaklik om ingeligte besluite te neem. In hierdie studie is ʼn geheel-plaas begrotingsmodel gebruik. Die bedrewenheid van hierdie werkswyse is aangewend om die kompleksiteit van die geheel-plaas begrotingsmodel aan te spreek en die fisiese- en finansiële komponente van die boerdery as ‘n enkele meetbare item te inkorporeer. Die fokus van hierdie studie is om die finansiële en bestuursimplikasies van die skuif van skaapboerdery na wildboerdery in die Beaufort-Wes area van die Karoo, Wes-Kaap, te analiseer, met die doel om vas te stel of dit finansiëel winsgewend is vir ‘n huidige skaapboer om na wildboerdery oor te skakel. Dit is gedoen deur ‘n literatuurstudie, gevolg deur deelnemende navorsing. ‘n Empiriese ondersoek is gedoen om die navorsingsresultate te genereer. Die voorneme is om omvattende en uitvoerbare insig en kennis daar te stel wat boere kan gebruik om hulle te help om ingeligte besluite binne hul daaglikse werksaamhede te neem. Die studie het bevind dat ‘n huidige skaapboerdery oor ‘n periode van 20 jaar winsgewend is, maar deur oor te skakel na ‘n wildboerdery die winsgewendheid toeneem. Dié resultate is onthul deur ʼn interne opbrengskoers van kapitaal investering IOK van 4.02% met betrekking tot die skaapboerdery sisteem teenoor ‘n interne opbrengskoers van 5.85% vir ‘n wildboerdery sisteem. Die interne opbrengskoers word beskryf en geanaliseer om aan te toon hoe dit gebruik is om winsgewendheid binne ‘n geheel-plaassisteem te bepaal. Eksterne faktore is ook geïdentifiseer wat geheel-plaas winsgewendheid beïnvloed. Verskillende scenarios is gesimuleer en ontleed om die impak van spesifieke faktore op geheel-plaas winsgewendheid te bepaal. Hierdie faktore sluit hoër wildspryse, droogtes en ‘n afname in drakapasiteit van die plaas in. Noemenswaardige resultate is vir al die scenarios verkry. Hoër wildspryse het ‘n toename in die interne opbrengskoers van 5.85% tot 7.45% tot gevolg gehad. ‘n Afname in drakapasiteit het die interne opbrengskoers verlaag van 5.85% tot 2.41%, terwyl ‘n droogte die interne opbrengskoers verlaag het van 5.85% na 5.53%.

Please refer to this item in SUNScholar by using the following persistent URL: http://hdl.handle.net/10019.1/103526
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