The Western Cape has some of the most beautiful fruit and wine farms. Some offer a variety of outdoor agri-tourism activities, often against breathtaking backdrops. Constantia, Stellenbosch, Franschhoek, Robertson, Swellendam, Caledon, Tulbagh and Ceres all have rich farming histories that can be explored while enjoying some of the best food and wine in the country (if not the world).
Some of these farming legacies date back a century or two, and five or more family generations, on the same farm. Any visit to these mega farms creates a feeling of timeless order, stability and prosperity. What we often forget amidst this comfortable portrayal of luxury, however, is the multi-generational planning, sweat and tears that underpin these farming successes. By taking a closer look, we can learn some valuable tips that apply to financial planning as well.
Do you plan like a farmer?
- Expand for the right reasons
I am yet to meet a farmer who hasn’t considered a way to buy up more land at one time or another. Everyone knows that ‘economies of scale’ work in most businesses and most certainly apply to farming production. Expanding at the wrong time, however, or at the wrong price or for the wrong reason, often ends in tears. When it comes to investments, you need to be equally discerning when considering new investments, doing the research upfront to ensure your acquisition lives up to expectations.
- Record-keeping is key
Another truth about farming is that successful farmers document everything. They base their decisions on real (often their own) data. Some of these farming families have their own rainfall records, spanning well over a hundred years. This data allows them to see longer-term trends, whether it relates to climate, produce or market conditions.
Understanding trends always results in better decision making. For example, long-term climate records remind farming families that droughts do not last forever and that when times are good, you should think ahead and save up.
These records create an environment to learn from the past, to avoid repeating the same mistakes (often driven by greed or fear). Successful long-term investing relies on this process too: looking at one event in isolation doesn’t provide you with the full picture.
- Focus on time
Any farmer knows that you can’t plant a tree today and benefit from it within the next year, just as you can’t plant today to only return in three years hoping to see growth. They know each plant requires nurturing (especially during the early days), fertilizer, continuous watering, patience and a deep belief that successful ‘growth principles’ from the past, still apply today.
- Diversify and plan as a team
Farmers know that farming is high risk and requires product diversification and protection against seasonal concerns, climate change and natural disasters. A strategy that doesn’t take diversification into account can run dry when disaster strikes.
Successful farmers consult with experts on their practices (they use fertilizers, irrigation, labs, accountants, lawyers and financial advisers). It takes a team of the right ingredients, processes and people to ensure the best outcome.
Wealth to riches
Mega farmers initially started with an idea that worked well on a small scale, similar to any successful business today. The owner and management team spent a lot of time perfecting their approaches. Many of these advances and improvements are multi-generational, and often rest on a strong bond of trust, collective knowledge and mutual interest in succeeding over the long term.
The planning and benefits of such operations widely exceeds the financial needs of any one single individual/generation, aspiring to create something much bigger and meaningful. It is about leaving a collective family legacy.
Embracing more multi-generational farming principles in your own financial planning can go a long way to securing your own financial future, while also helping you plan for generations to come. Many farms in South Africa are a clear example of long-term investment, everyday discipline and multi-generational planning. How serious you (and your adviser) take your own financial planning, will eventually determine how your own “multi-generational” financial legacy will look.