At around “R200000 per kg (R200/g)” saffron is the most expensive spice in the world. Saffron farming is the cultivation of saffron. Saffron is mainly used as a spice but also used in cosmetics and medicine and as a leather dye.
At the saffron cultivation, saffron is collected from the blossoms of Crocus sativus (Iridaceae), commonly known as saffron crocus or saffron bulbs. It is propagated by bulbs called corms. Each corm forms new bulbs, and this is how the plant multiplies. Saffron flowers come out in autumn and are harvested for the red stigmas that we all know as saffron threads, from which the spice is derived. Each blossom yields three stigmas and are carefully picked by hand. – Sativus
In very recent years saffron farming has been punted locally as a viable business opportunity but let’s take a critical look at it because the way it’s being promoted and the way they are going about it is giving me flashbacks of rabbit farming and Coniglio, which was being vaunted the same way but it showed the dangers of tethering yourself to a single partner and not developing your own business model and sales channels. When Coniglio evaporated overnight farmers were left with nothing but lots of cute bunnies to cuddle with.
In my opinion, the saffron equivalent of Coniglio in SA – which like Coniglio with rabbit meat is trying to corner the local market in saffron production – has an even worse business model and you might be better of just doing it sideline, going solo, or skipping this business altogether.
As its price alludes to this is not an easy business, it is not difficult per se but it is labor-intensive, onerous, and monotonous, and requires a significant capital outlay (depending on how you go about it). We don’t have the cheapest or most motivated labour workforce and this industry is still very, very young locally, but the product is a premium product and sought after in many high-end restaurants. Which has motivated people to find a way or make a way.
Now there are two ways to go about starting a saffron growing business, go it alone, or partner with a company whose business model I mention below (at a price of R1.8m/hectre and under contract). Now within the South African context, the industry is so nascent it is almost nonexistent. The question is why? We have vastly experienced farmers, good farming conditions (mainly), and multi-billion rand farming co-operatives. Surely if this extremely expensive plant was suited to the local environment (encompassing all factors from the soil to the harvest to the labour) then it would have been done already. Well, many have tried and given up, some have done it on a small scale. But it is unclear why more experienced farmers who have access to many delicate hands to pick the stigmas although I suspect the significant capital outlay spread in such a small area could be one of the reasons.
Now recently there has been a company that has arrived with a lot of fanfare, even Carte Blanche did a fawning insert on them. They claim to have done many years of R&D, but here is the kicker, they don’t want to farm it. They want to sell starter packs and rent out the corms, buy the saffron from the grower and then buy the corms back (which has now multiplied). Their business model appears to be to whip up a media frenzy and then sell the shovels during the ensuing gold rush.
Watching and reading this model has raised various red flags in my mind: all these articles and videos are positive, with extremely optimistic projections and best case scenarious – an impossibility in the ANC’s South Africa. If it was so lucrative why aren’t they farming it themselves? This is not like any other business, the people that can execute here can become a local monopoly and very wealthy.
Contract growing is challenging and can end up more being a shitty job than being a farm owner and can even leave the farmer in debt or worse off than before. In fact, the people who offer growing contracts know this and that is why they aren’t growing it themselves. I know this because contract growing is an outsourcing model that I favour from a business perspective and that is why I would not buy into any concept where I find myself on the other end. You should read up on Sonny Nguyen on the pitfalls of being a contract grower for a third party or if you have Netflix watch Rotten “Big Bird” (Season 1, Episode 4). It deals with a different industry with a different model but that is what happens when you are not in control of your destiny in business. I can foresee problems when you don’t even own the bulbs in your soil – especially when you have outlaid R450 000 for a quarter of a hectare.
The company owns the tools.
The company owns the plans.
The company owns the product.
The company owns the profits.
The local landscape
Saffron has been grown on a small scale in SA, in the past, people have dabbled in it, there has not been much success in growing the local industry or ecosystem (which is the same as what Coniglio was trying to do with rabbit meat). A lot of recent media hype in SA has been driven by the entry of a single player who has scaled production by using an “out-grower” business model which rents out the corms to farmers, buys back the saffron, and then buys back the corms (which has now multiplied) after three years. However, it must be noted this project is only a year in.
Not the same but similar to a chicken growing business model we looked at a while back where in this case the “planting material” remains the property of the company which is the same model used in the chicken growers business and what we see happening there is that farmers end up with a high stress “job” that pays little once all his expenses are deducted. Remember labour intensive means labourers need to be paid and in South Africa, they are not very productive, they will try to stretch out a job for a long as possible.
They are also selling “starter backs” so people can test the waters. There is also a plant nutrition chemical company (that supplies this firm) in the mix that is spinning this model as good (because of their client’s involvement). But all it looks to me like is selling shovels during a gold rush business model and pushing most of the cost and risk to the farmer. SA media which parrots any feel-good farming story that can help small-scale farmers without critically analysing the underlying model has lapped the story up without questioning the rationale of paying R1 800 000 – enough to buy a whole farm – to become a contract farmer and rent bulbs that will cover 10 000m2 and then still having to get your own piece of land. With record unemployment and a shrinking middle class, this could end up ensnaring desperate people in a business that they do not understand. In a traditional growing business, the growers are usually experienced because they operate on thin margins (and any fuckups with erode those margins further) but how many people in SA have saffron growing experience at scale? You could probably count on one hand. But the media is hyping this as a way out of poverty for small-scale farmers. These initiatives rarely live up to the hype.
If you are doing it on your own, from corms that you own and bought outright then fine, you can look at the maths for a small operation right at the bottom. Saffron cultivating does not require a lot of land, which means it can be run as a side business if you have a large plot or small holding, and worst-case scenario is your wife gets lovely spices or maybe you can sell it to your local restaurant. And you don’t owe anybody anything (and you did not lay out R450k per 2500m2 for bulbs you didn’t even own) .
Solo or via partner
If we believe the hype that has been propagated by the local proponents offering starter packs and corms to rent: highly lucrative, demand exceeds supply etc. etc. then that has to apply to you whether you partner with a company or not. Saffron farming in SA is nothing new, here is an article from 2013, in which a small-scale farmer is buying corms from New Zealand so even if there is only one supplier in SA and they don’t want to sell it to you but tie you to a three years rental contract with a R450 000 / 150 000 corm buy in. Then the corms can simply be imported from another country a few thousand at a time from a B2B supplier, do not buy from places that sell low quantity to consumers (they sell at a significant premium).
To work with this partner will cost R450000 for 150000 corms, which should cover a quarter hectare, as part of growing contracts. This should be enough to produce 1kg per harvest (see basic math right at the bottom). The problem here is, no one and I mean no one of all the reputable media houses that covered this has bothered to ask any type of hard questions (they didn’t even bother to ask if the R200k/kg is wholesale or retail especially considering that there is a third party that the farmer is contracted to sell to and that company will most likely sell to wholesale who will, in turn, sell to retail so if that number is retail, then how much is the farmer making with all these middlemen?). We know the capital outlay is R450 000 for 0.25 hectares or R1.8m (one point eight million rand) per hectare and all over are just positives, best-case scenarios “up to 10 flowers per bulb” etc.
In theory, it makes a lot of sense to partner with a company that will offer advice especially if you are new and will buy the product from you, etc. They are also invested in your success because they make profits from you – multiple streams in this case. But in South Africa, we have seen human nature defy common sense too many times. I have become highly cynical of these models in SA. Let me be clear here this is not a cooperative where all share in the profits or an offtake agreement that you can shop around, this is contract growing it is a one-sided affair (with a significant capital outlay). It might even be worse than chicken growing because there the chicks are dropped by you and the adults are collected never to be heard from again. The processing is done by multinational factories, here you have to extract the stigmas (the red strands) at a rate of 3 per flower in the hot sun or pouring rain.
If you want to do this you can do it on your own to test the waters. If we have to believe the initial Moneyweb article, paywall but I will post it here. According to the company mentioned above the maths for a small niche setup looks like this:
250m2 can accommodate 15 000 corms.
According to a cursory Google search depending on the size of the bulb, you will get 1-2 flowers, to 2-3 flowers to 3+ per bulb. But let’s look at the worst-case scenario 1 flower per bulb. This means you will have 15000 flowers. It takes around 150 000 flowers for 1kg of pure dried saffron which means 250m2 will yield 100g of saffron. At R200/g it’s R20k.
If you look at what corms cost overseas in bulk, then it is possible to do this at R45k/250m2 (1/10 of the abovementioned figures) and own your own corms.
You have to ask yourself is it prudent to be paying R1.8m per hectare to become a contract farmer at the mercy of a third party for both your supply of raw materials and the marketing of the processed product.
R1.8m/hectare under contract in a business that is unproven in SA with a company with no track record is far too risky in my opinion (unless you have the money laying around). For that money, you can buy a small farm down the road from a tree grower, build a sawmill on it, turn the trees into timber and sell it to the building or furniture industries with a clear path to profitability and you own all your assets.