Western Australia’s Department of Agriculture and Food is forging an alliance with banks and other lenders to help the state’s farmers get through the hard times and stay internationally competitive.
The alliance should be in effect within about three months, according to DAFWA director-general Rob Delane, and will formalise a productive working relationship that has been developing since 2010, when an apocalyptic drought hit the state and threatened to send hundreds of businesses to the wall. He says the crisis turned “sporadic and usually individual meetings” between the department and major financiers into quarterly meetings will all the majors.
“It’s natural for us to engage with [the lenders]; they’re not the enemy,” he told The Mandarin. “They’ve got a very important role to play and, sometimes, a very difficult role to play.”
That relationship has proven very useful, by giving the recently downsized and restructured department a better handle on how the sector is travelling financially and a chance to hear suggestions for what it could do to help. It has also allowed the minister and the department to “influence the banks”, according to Delane.
The WA government gives a small amount of financial assistance to farming businesses in the form of various grants, and DAFWA operates the Rural Business Development Corporation, which provides some assistance in the case of financial hardship, but it has less capacity to help out with concessional loans than similar bodies in other states.
“In several other jurisdictions there is legislation for debt mediation and compulsory debt mediation involving banks and farmers,” Delane added. “We don’t have that [legislation] but we’ve been able to work through and, I’m sure, improve the consistency with which banks deal with things. And they’ve been very helpful to us in defining what will work and what won’t work.”
The weather out west is much kinder now than it was four years ago and WA’s farmers are, on the whole, not doing too badly. The other side of the banking coin is growth; DAFWA wants to see the sector double in value by 2025.
“We want to be talking to the banks also about foreign investment and business models and things which will actually help the sector grow,” said Delane, adding that his department recently commissioned accounting firm KPMG to investigate “farm business financing and ownership models which will enable the sector to grow instead of businesses being capital-constrained and scale-constrained”. KPMG’s report — The Road to Riches: Driving Investment in Western Australia — comes out publicly in February.
[pullquote] “… we’re simply signing up to say we’re going to meet together and we’re going to tackle issues.” [/pullquote]
The new bond follows two others established and facilitated by DAFWA: the InvestWest Agribusiness Alliance, aimed at attracting outside investment, and the WA AgriFood Alliance. “Basically,” said Delane, “people are signing up to play nicely together.”
The alliance won’t require anything much more than the quarterly meetings that already happen and the banks are not opposed to the idea. “But where there are major challenges or there are opportunities for us to do something smarter or government policy to be smarter, or for the banks to learn from us or each other, then I expect they’ll be grabbed,” Delane said.
“We’re not asking the banks to sign up to anything, we’re not expecting they’re going to have to go to their corporate legal departments, we’re simply signing up to say we’re going to meet together and we’re going to tackle issues to the extent it’s practical for us to do so.”
The department also hopes to get buy-in from the banks on a major initiative to help famers improve their business skills, which is clearly to everyone’s long-term benefit.
“We haven’t got the government’s support for it yet but we’re hoping there’ll be a major investment in boosting farm business skills,” Delane explained. “Well, the banks know more about farm business skills than probably everyone except [each] businesses’ accountant, so we’ve been working very closely with them and accounting firms to make sure we get the settings for that right.
“You can’t do that if you’ve just got ephemeral relationships.”