In many family agribusinesses, succession is a period not only of highly charged emotions, but of danger, for it is at this stage that the capital integrity of the operation may be put at risk. Most family businesses that progress through the classic phases of business growth (survival, stable, professional and institutional) have figured out how to transfer ownership down the generations without threatening the capital base.
A major deterrent to building and preserving an adequate capital base for a family agribusiness is the senior generation’s perception that it must somehow harvest its equity during the succession process. That perception is neither right nor wrong.
Family businesses are sold every day to facilitate such harvesting, and, for the senior generation that built the business, selling may well be a natural and highly appropriate culmination of a lifetime’s work. But while the sell option may work for the senior generation, it is not a particularly effective transfer tax strategy and may mark the end of the business as an economic resource for the family.
Access to a stable capital base is essential for the long-term success of most enterprises. And no business can sustain its market position, let alone grow, when its capital base is dramatically diluted each time the mantle of ownership shifts from one generation to the next.
Fair market value, as traditionally defined, is a poor measure of the worth of the family agribusiness for the purpose of the intra-family succession of ownership. A more realistic and accurate transition yardstick is need, together with ability to pay.
This story is from the November 19, 2021 edition of Farmer's Weekly.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 9,000+ magazines and newspapers.
Already a subscriber ? Sign In
This story is from the November 19, 2021 edition of Farmer's Weekly.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 9,000+ magazines and newspapers.
Already a subscriber? Sign In
Understanding eye conditions in horses: causes and first aid
A horse can get a swollen eye from bumping it against a tree, shaking its head to keep flies away, or even snake venom
IPM requires a completely different mindset
You need to investigate any beneficial insects that may appear on your plants, or you can purchase them
Does parrot farming protect wild species?
Those in favour of commercial captive breeding argue that breeding parrots to sell can relieve pressure on wild populations. Researchers Neil D'Cruze and Rowan Martin review the evidence.
Bacterial and fungal diseases of garlic
Garlic can be prone to bacterial and fungal diseases, and it's important that farmers are proactive in preventing infection and practise appropriate management. Magda du Toit reports.
Responsible wastewater management: a crucial part of farming
The inadequate management of waste water is a challenge that the agriculture sector needs to deal with. Magda du Toit spoke to experts in waste and water management about a cost-effective treatment system.
Technology that can help protect South Africa's farms
Farm attacks, murders, livestock and crop theft, and other rural crimes are a growing concern in South Africa. As a result, more and more farmers are turning to advanced security technology to protect their lives, properties, and livelihoods. Sinenhlanhla Mncwango spoke to experts about the security strategies that producers can adopt to combat these threats.
The impact of theft on farms in South Africa
A high number of livestock are being stolen every year in South Africa. Insurance is expensive and farmers are battling to find solutions to the problem, says Dr Lindie von Maltitz, agricultural economics lecturer in the Faculty of Natural and Agricultural Sciences at the University of the Free State.
Staying afloat amid the cost-price squeeze
John Hudson, head of agriculture at Nedbank Commercial Banking, spoke to Glenneis Kriel about the importance of environmental and social sustainability for a prosperous agriculture sector.
Free State has no reason to mark Transport Month
Free State Agriculture (FSA) is very concerned about the extremely poor state of rural paved and gravel roads in the province and has very little, if anything, to celebrate during Transport Month, which takes place every October.
SA's food system ‘vulnerable to climate change'
The Just Transition Agenda for Food System Policymaking in SA webinar, hosted by the Institute for Economic Justice (IEJ) in October, highlighted the role that South Africa’s food system plays in contributing to climate change and how vulnerable it is to the impact thereof.