The Lady R and Agoa — take a lesson from Warren Buffet and make a case for the intrinsic value of SA Inc

The comments by US Ambassador Reuben Brigety regarding the Lady R shipments sent the rand plummeting and inflamed fears about South Africa’s future trade relations with the US. This is a high-stakes issue for South African business, and the agricultural sector in particular.

In 2021, South Africa’s total agricultural products exported to the US amounted to $839-million. These products were exported duty-free under the African Growth and Opportunity Act (Agoa). Agoa is not a free trade agreement; it is a unilateral concession made by the US Congress to promote African development under the philosophy of “trade, not aid”.

Because Agoa is not a trade agreement, the US dictates the eligibility criteria and can boot out anyone who fails to meet these criteria. We certainly have our work cut out for us, there is no doubt. However, as South Africa prepares to host the US-Africa Agoa Forum later this year, we should apply some of the lessons learned from America’s own investment gurus, Warren Buffet and Charlie Munger.

Earlier this month, I had the great privilege of joining a group of leading South African farmers, investors and agribusiness managers on an educational expedition to America’s agricultural heartland.

In Omaha, Nebraska, we attended Berkshire Hathaway’s annual general meeting, where investors can gain insights into the formula that has made them successful. At its core, Warren Buffet and Charlie Munger’s success is built on adherence to a few fundamental principles which can equally be applied to South Africa’s current dilemma.      

When investing in a company, they look for the intrinsic value of the company, not its stock price or market forecasts. “Mr Market”, as they term the average investor, is easily swept up by sentiment and emotion. Still, the shrewd investor should look for intrinsic value as this will yield sustainable earnings.

In the same sense, we must guard against a preoccupation with the emotional whims of politics and focus on making a case for the intrinsic value of our sector.

This trip once again confirmed that South Africa has some of the best farmers and agribusinesses in the world. Our sector competes with the best in the world despite being handicapped by a volatile climate, logistic challenges and absent state support.

The competitiveness of our sector is not artificially propped up by subsidies but rather built on the resilience, agility and innovation of our farmers and agribusinesses. This intrinsic value has also attracted leading international agribusinesses, including US ones, to invest in South Africa.

The point is that our sector’s relationship with the US is a two-way stream that is evidently mutually beneficial based on intrinsic value. When preparing for the Agoa summit, this is the narrative that we should be pushing. 

The final principle applied by Warren Buffet and Charlie Munger is an interesting one; never bet against America.

This is interesting because the principle did not stop them from severely criticising the US government’s monetary policy nor their diplomatic relations with China at the AGM.

The lesson I took away from that session was that Warren Buffet and Charlie Munger do not conflate their own country’s intrinsic value with the actions of their government.

Like the US, South Africa’s intrinsic value lies in the resilience and agility of our entrepreneurs, a robust financial system, an independent judiciary, and a free and uncensored media.

Where countries share these values, they should promote the instruments that allow them to do business. This is the message that we should be driving, as the intrinsic value of an entire country does not rest on the shoulders of something devious that a politician may or may not have done. DM