"Share" in our success
Large quantities of quality wool, meat and skins are produced under the Konsortium-Merino brand. However, these volumes are not nearly sufficient to meet the demand for these products. So what do we do to solve this problem?
A farmer always comes up with a plan!
After thorough investigation and discussion, the directors of Konsortium-Merino decided to form a holding company which could issue shares to the public according to the Companies Act of 2008. By way of Konsortium Holdings Ltd, more farmers and other investors can now share in the success of Konsortium-Merino.
According to Braam Coetzee, Konsortium-Merino director, the capital generated by the issuing of shares will be used by Konsortium Holdings to buy and/or hire land and stock to increase the farming capacity of Konsortium. The aim is to acquire 20% market share in the Merino industry in South Africa, eventually enabling Konsortium-Merino to produce enough wool, meat and skins to meet the local and international demand for their Merino products.
The investment offers the investor a 9% return, but the potential is higher. Ockie Olivier, agricultural economist of IIQ Consultants says that, according to case studies based on genuine farming figures of the past five years, agricultural land and livestock have grown by 17% and 10% respectively.
The capital injection into Konsortium-Merino will open the doors to much bigger opportunities. Within the group, there is a wealth of intellectual capital available to be utilized. For young Konsortium-Merino farmers, unable to expand on their own, this new environment will offer immense opportunities. Konsortium-Merino members will benefit from the increased demand for Konsortium products coupled with higher prices. The group will be able to market and purchase goods more cost effectively.
As a result of the agreement which Konsortium-Merino entered into with SMZA in 2009, farmers who marketed their wool through them this past season saved themselves R2,2 million in commissions. SMZA do not charge any bale handling fees. This R43 per bale which they saved with SMZA resulted in a further R785 000 for our farmers. This is a saving of almost R3 million for the marketing of wool. Every rand is precious. SMZA and Konsortium-Merino offer the farmer a choice and this teamwork saves the Konsortium-Merino farmer money.
The Konsortium Holdings model is perfectly structured for providing quality food and food security in an ever increasing world population. Another benefit is the workers trust which will enable the farmers in the group to comply with black empowerment legislation, placing them in a more favourable position in the South African Agricultural arena thus providing opportunities for their farm labourers. Coetzee emphasises the skills development, clinics and farm schools which will also be catered for within Konsortium Holdings.
Approximately 130 farmers, with more than 200 000 producing ewes, are already in the Konsortium-Merino fold. The group sells the most rams annually on official auctions in the country. This year they should pass the 800 mark. Gawie van Heerden, director and breeder of Konsortium-Merino, says that the cornerstone of their success is their top genetics. “Few farmers can compete with us due to our large gene pool which is selected by Mother Nature.”
This year there have been about 16 Konsortium-Merino studs breeding rams for the six auctions. The stud farmers all follow the same breeding policy and only their best ram lambs are selected for performance testing. No more than 20% of each breeder’s ram crop is sold on auction. This insures their quality. The rams have to perform on natural veldt conditions and are rigorously classed by nature and by specialist sheep advisors.
Farmers spend a lot of time and energy to improve the product produced on their farms. “They strive to increase the quantity and improve the quality of the wool and meat they produce, but the moment it leaves their farm, someone else adds value and makes the money. Commercial farmers are on the short end of the stick.” Van Heerden maintains that the only way we can turn this around is by producing larger, good quality volumes on a contract basis.
Konsortium-Merino is the only farmer owned smallstock brand in South Africa. The group have come a long way in creating a demand for their Konsortium-Merino products locally and internationally. Their marketing in France, Italy, China and Japan during the past two years has borne fruit. The demand is there but they cannot produce enough wool. SMZA has had an order from France alone, for 250 tons of exclusively Konsortium-Merino wool.
The group supports free market and do not have control over the products of their members. Coetzee says that the farmers use Konsortium-Merino as a price determining mechanism and then market to whoever offers them the best price. “Konsortium-Merino has to farm on a scale sufficient to produce enough wool, meat and skins to supply the market on a contract basis. We have to grow our Konsortium-Merino sheep numbers” says Van Heerden. He feels that with the capital injection by the investors, Konsortium-Merino is geared to change today’s farmer from a price taker to a price maker. A plan makes a farmer…and together Konsortium-Merino definitely offers so much more.