The fact of the matter is, however, that very few of us can go through life debt-free. I work for a salary and for me it would be next to impossible to purchase a car or home without the necessary financing. Although debt is certainly not our first choice, it is something that we can barely live without.
Agriculture is a capital intensive sector and it is only in very rare cases that you will find producers who do not need some or other type of financing. Debt can, however, be good or bad, and there are various avenues through which to acquire financing.
Good vs bad debt
Basically there is no fixed definition that distinguishes between good and bad debt. Some sources refer to bad debt as debt with high-interest rates, while others regard debt as good, as long as you can afford the down payment, and bad when you cannot. Does this then mean that when you need a R500 000 tractor, but you purchase a R1 million tractor simply because you can afford the down payment, it is still good debt?
In my view the difference between good and bad debt in agriculture is the purpose and outcomes of the loan. When debt is detrimental to your overall wealth, it is bad. When it is beneficial to your wealth, it is good.
The concept of ‘leverage’ in layman’s financial terms, refers to the use of your own money, together with borrowed money, to make more money and therefore create wealth. This equals good debt. However, if you use borrowed money to fund luxury items that lose their value over time without having contributed to the creation of money (wealth), it entails bad debt.
Esta historia es de la edición June 2020 de FarmBiz.
Comience su prueba gratuita de Magzter GOLD de 7 días para acceder a miles de historias premium seleccionadas y a más de 9,000 revistas y periódicos.
Ya eres suscriptor ? Conectar
Esta historia es de la edición June 2020 de FarmBiz.
Comience su prueba gratuita de Magzter GOLD de 7 días para acceder a miles de historias premium seleccionadas y a más de 9,000 revistas y periódicos.
Ya eres suscriptor? Conectar
Hauling In A Full Net: Reaping The Benefits Of Processed Fish
As local and global governments deal with the full impact of the COVID-19 pandemic, producers are now more than ever searching for new options for expanding their businesses. That said, farming and value addition to produce does not have to be limited to landlocked food sources.
Grow Produce Year-round With Tunnels And Greenhouses
Climate change is an inescapable reality and can wreak havoc in open-field production systems that rely on the right weather patterns to produce good yields. For this reason, many producers worldwide have turned to growing crops in tunnels or greenhouses. These production systems offer protection from changing weather patterns, allowing them to grow crops throughout the year.
Saving Soil: Harnessing The Microbiome
We live in unprecedented times.
Summer Grain Production: A Producer's Perspective
The 2020 planting season for producers in the summer rainfall areas is here and most of them are looking forward to the first summer rains so that they can plant their crops. FarmBiz spoke to Jaco Minnaar from the farm Uitsny near Henneman about the new season. Jaco is vice-chairperson of Agri SA and currently serves on the Senwes board.
Electronic Auctions: The New Normal?
The South African livestock industry has suffered a tremendous setback with challenges posed to physical auctions. However, the industry is nothing if not resilient. The first ban on livestock auctions was imposed during the outbreak of foot-and-mouth disease (FMD) in 2019.
Oxygen Types That Damage Crops In Extreme Weather Conditions
Oxygen is best known as a life-giving gas without which life as we know it, would not be possible.
Asia's Maize Imports Likely To Grow
In 2019, the Asian maize market was finally on the rise to reach US$204,4 billion after two years of decline. The total consumption indicated buoyant growth from 2009 to 2019. Its value increased at an average annual rate of 5,1% over the last decade.
Cultivated grazing: Fertiliser is the key to success
Nowadays everything in agriculture has to be done on a larger scale. Cultivated grazing has also become a science, with producers forced to think bigger to get more out of their grazing – all at the most economical cost.
Industry Giants Comment On Special Adjustment Budget
Prof Johan Willemse, an independent agricultural economist, says the supplementary budget delivered by the minister of finance on 24 June was a real shocker. According to him, the government is spending an additional R145 billion on the COVID-19 issue. The real issue, however, is a record budget shortfall due to the economic meltdown, with wrong policy choices and corruption on the cards.
Rethinking The Conversion Process Of Poultry Litter To Biogas
The poultry industry is generally comprised of broiler chicken production, egg production, day-old chick suppliers and other poultry. While micro-enterprise businesses are gaining prominence as a means to address the challenges of job creation, economic growth and equity, the industry has future challenges concerning poultry litter management.