Farming: the field of broken dreams

A really nice day …

I don’t know whether I mentioned it earlier, but I’ve been training two consultants in Lichinga in problem solving and logical reasoning. Today we decided to make it practical. We visited a potential client two hours out of town to give the consultants an opportunity to put their newly learned business skills to work while I watched (I like to watch) and, later, give feedback.

The man we visited, Keith, had invited us to hear his business proposal. He had built a beautiful house using local materials and had a gorgeous garden overlooking the river. After spending three hours with him and his family, we followed his son back to his farm. After a tour, we were treated to a truly awesome electrical storm as we sat on the verandah, followed by a lovely dinner of macaroni and cheese, fresh corn, and lemon meringues. These farmers (and their self-constructed kitchens!) do a really good job.

To top it all off, the ride home was filled with fauna – including having to dodge endless processions of large owls (what a hoot! Sorry.) and narrowly avoiding running over a cheetah (those beautiful spotted creatures). It was a long, but satisfying, day.


… Tinged with, for me, sadness …

Keith is a good man but he is a desperate man. In debt to tobacco companies (as are most farmers I’ve met here, due to these companies lending money on credit on the condition the farmer must sell to them, then keeping sales price low - $1.50 per kilo of tobacco!?!) and short of cash, he needs something to keep him going: give him a small cash flow to keep living a simple life on the farm but, equally, a purpose, a dream, a reason to live. A man of sixty who has spent his entire life working hard on a farm, Keith is used to hardship and being knocked back; particularly in the past few years when his money-making ideas have been many but “no one has given him the time of day”. I sense the desperation in his voice and see his eyes water as he pleads with us that his latest idea is a good one; his stoic belief in this future venture tempered by his admission that, as of April, he will have no money on which to live.

The tragedy of course is that now, no bank is going to lend Keith money. After a few calculations in my head I can see he hasn’t even thought through whether he will even make a profit per litre of sales – in one of his revenue streams he would actually make a large loss for every litre produced. All he has is a series of magazine articles and emails on why his idea is the next big thing. Furthermore, even if someone lent him the money, he wouldn’t see a cent by April due to African bureaucracy – it will take months for any cash at all to come in.

The bigger tragedy is that Keith is not alone. There are plenty of hardworking, honest farmers like him all across the world – people who have worked hard and dreamed dreams: hard work that has come to nothing but bankruptcy, dreams that will die with them, or perhaps, long before. These are not lazy people looking to make a quick buck. These are families that have sacrificed much for the land: living in isolation (Keith’s grandchildren only leave the farm three times a year due to the high cost of petrol), tolerating early mornings and hard physical labour for decades. These are generous people who would open up their home and their food to a stranger, like me, without thinking twice.


A brief lesson in agricultural economics …

From many farmers here sharing with me, I have come to some generalizations about why farmers have it tough:

1. They are in an extraordinarily capital-intensive industry (ie you need to buy heaps of tools, vehicles, etc), meaning that they need to borrow lots of money (therefore incurring a large interest expense) and will lose a lot of its value of these purchases each year through depreciation,
2. They have to wait at least half a year to see any returns from your investment (seed, fertilizer, labour, fuel, etc), meaning they need to borrow more money at the start of each season, and
3. They carry a large risk: if the rainfall is too much or too little – something they cannot control! – they will lose money, probably big money. This means that, over the middle to long term, they will probably only barely break even, the occasional bad year canceling out many years of profit.

The fundamental problem many of them have, however, is that they focus on cash flow and not profit. That is, a farmer will care much more for whether he is able to buy food for his family tomorrow, not whether he will be making actual profits over the middle to long-term.

For this reason, many farmers unwittingly enter into debt contracts with quick-thinking banks or buyers (like, in Mozambique, tobacco companies) that give them immediate cash in hand, but place them into debt at high interest rates and reduced bargaining power. Fair enough, you might say, and often there is no choice. But there is a problem: decisions like this affect long-term profitability. By increasing your debt and reducing the price you can sell at, your revenues go down and interest expenses go up, the debt growing all the time. You become increasingly dependent on financing just to provide you with money to live on and stop even calculating whether you are actually making a profit, simply whether you have cash to buy food and pay workers. In essence, you are not even receiving a salary for working; you are literally paying for the right to work 12 hours a day on the farm, 300 days a year. Until of course, one day, you become too big a risk, and the lenders desert you.

Put simply, that is why businessmen and bankers are generally much richer than farmers. Farmers are probably much more hard working and generous, and typically start with much more assets. But businessmen calculate profitability, and make business decisions accordingly. Farmers focus on cash flow, and often do not consider true profitability. Unfortunately for many, the biggest driver of future cash flows is current and planned profitability; even if you have cash now, if you are not actually making a profit, the cash will one day run out. (Sorry to bore you non-financial types with accounting jargon, but remember, I once helped write a business studies textbook!)


(one of Keith’s rapidly depreciating assets – a large unused tractor – sitting on the world’s biggest anthill)

… And my emotional response

One thing I have noticed about myself on this trip is how logically I see the world. Typically when others meet new people they ask them how they’re feeling; I naturally tend to ask questions of fact (“What do you do?”, “How long have you been in Africa?”, “Really! How much did that cost in US dollars?” etc). In seeing this, I have realized two things about me: firstly, I’m a bit weird. Secondly, however, this can be a great asset when trying to help people make business plans: it forces them to ground their ideas in reality, into hard accounting facts, figures and forecasts. Opinions and emotions are not helpful for making good business decisions, objective facts are.

What has struck me is the occasional disconnect between my logical mind and my emotions, and how that feels. Logically, I knew Keith was wasting our time. He had nothing to offer us but promises and statements based on opinion and endless assumptions, not fact. But my heart mourned for Keith and for those like him: it didn’t at all seem fair. Why should I be much richer and (in business anyway) more successful just because I had business training and he had agricultural? I wanted to put my arm around Keith and tell him everything would be okay. That he would get his funding and live a happy life as a successful entrepreneur and retire happy, content. But I knew this would not be, and even as we ate dinner later, thinking about tragedies like Keith made me feel physically sick.

In Chimoio a few weeks ago, I was putting together my first financial model whilst watching TV. An old movie, “Shirley Valentine”, was playing, a story of an ageing woman in her 40s who starts to question the purpose of her existence. Eventually she flees to Greece, but even fulfilling her lifelong dream of enjoying a Greek sunset by the water with fine wine does not satisfy her, causing her to cry bitterly. She reflects on her wide-eyed youth, a time when she believed she could do and be anything, in contrast to what she has become: a middle aged woman living a tired old life.

“Why do we spent all our lives dreaming of hopes and dreams,” she mourns in the light of the sunset, tears strolling down her face, “if they are just meant to die with us, never to be fulfilled?”

God knows.