Financial Data
Updated 25 Mar 2017


Why agribusiness owners should implement the King IV principles

How do you ensure that your board of directors make the best business decisions? Through corporate governance. Agri, finance, and legal experts share why you need to embrace King IV. 


Pritesh Ruthun , 06 February 2017  Share  0 comments  Print


All the answers to your unique business lifestage questions

Corporate governance might seem like a concept that’s reserved for Fortune 500 and Forbes-touted technology and financial services businesses, but according to Agbiz’s CEO, John Purchase, it remains one of the chief challenges facing local farmers, agri-processors and (all) its incumbent stakeholders.

“We need to focus on it [corporate governance] to continue to set the bar higher and ensure that the South African agricultural sector remains at the top of its game,” he says.

Purchase, together with Michael Judin (one of the authors of King IV), Milton Kotze (Standard Bank) and Jacko Maree (former Standard Bank CEO) spoke at Standard Bank’s King IV knowledge-sharing event held at the Royal Elephant Conference Centre in Centurion in February. They all agree: South Africa’s agribusinesses need corporate governance structures in place. 


TAKE NOTE

The King IV Report, developed by the King Commission, is considered to be the authoritative guide to implementing sound corporate governance structures in an organisation. It’s previous iteration, King III comprised of 75 principles to consider, but the latest version, King IV, has been slashed down to 17 principles to make it easier for local companies to embrace and implement regardless of size or business sector.


Related: Starting an agribusiness: Vital factors that can make or break your venture

Why there’s a need for SA agri players to embrace governance

Corporate -governance

South Africa’s agricultural sector is a leading contributor to national GDP, however, if you consider the climatic, political, and financial pressures on the industry, it’s getting tougher out there for food producers and processors.

“SA’s farmers are finding it challenging. Not only are the labour matters tough to deal with, but financial pressure, the ability to attract investors, and the need to please existing stakeholders place heavy burdens on farmers, no matter what their scale is and regardless of whether they are cultivating maize or rearing cattle,” Purchase says.

So then, how does corporate governance help? Well, according to Purchase and his counterparts, you need to think of the concept of corporate governance as the framework that will lead to your success. And, it becomes particularly more critical that governance structures are in place when you have a board in control of business-critical decision making.

“Corporate governance isn’t new, and there are many ways in which an organisation can implement it, but we believe that King IV is the ideal solution to assist farmers in creating transparent, authentic businesses with trustworthy directors leading the charge,” adds Purchase.

How governance can help your agribusiness

Because South Africa’s agri sector is so close-knit, and many farms are still run and directed by families, friends and acquaintances, the need for governance structures cannot be stressed enough. 

Building trust through corporate governance

“Financial services providers like Standard Bank, and many of those companies you know and trust with your personal investments, for instance, have corporate governance structures in place to ensure that sound business decisions are made. Corporate governance enables the building of trust with all stakeholders, internally and externally, and provides assurance that a company is responsible,” explains Standard Bank’s Milton Kotze – Chief Compliance Officer for Standard Bank’s Personal and Business Banking and Wealth Business Units.

He says that businesses need money to grow and that you can only gain access to this money if you can display to investors that you make sound decisions, factoring in the risks with the rewards. Corporate governance then serves as the roadmap that investors use as part of their decision-making process.

Related: 6 Signs of being a stressed farmer

Guiding your decision-making

Michael Judin, one of the King IV authors, adds that corporate governance should be seen as an essential part of any business, regardless of scale, sector or current standing. “Governance in its essence is there to provide security and peace of mind. If you have a board of directors in place, and those directors don’t have principles in place to guide their decision-making in the interest of the company, the chances of bad decisions being made increases. You want to ensure that every member of your board is striving to make informed, honest, open decisions about how they are spending investors’ funds,” he explains.

Naturally, implementing corporate governance in your agribusiness won’t be a simple case of ticking checklists that confirm that your business processes are sound. It goes deeper, requiring buy-in from all your company’s stakeholders.

As a parting shot at the event, Agbiz CEO John Purchase said that agri business owners must reflect upon who’s on their board of directors; are they genuine appointees that are acting in the best interest of the company, and are they in the position because of merit?

If you’d like to start implementing systems and processes to better manage the company, give Standard Bank’s agri specialists a call for more information on King IV and it’s benefits for business – big or small.


KEY TAKEAWAYS

  • Agbiz CEO John Purchase says that South Africa’s agriculture sector needs to focus on corporate governance as a priority if it is to remain competitive.
  • Michael Judin, one of the authors of King IV, says that with sound corporate governance in place, agribusinesses can attract more investors.
  • Milton Kotze, Chief Compliance Officer for Standard Bank’s Personal and Business Banking and Wealth Business Units, says that the financial services provider is willing and able to assist you in determining where you stand when it comes to corporate governance.
Rate It12345rating

About the author


Pritesh Ruthun


Introducing the bank’s advice for new entrants to farming

Considering going into farming? Head of Agribusiness, Nico Groenewald gives top advice on common mistakes to avoid and how to overcome the barriers to entry in agribusiness.

Login to comment