Levubu Root Business Plan — Executive Summary

Levubu ginger with a clean seed block: R36.0m equity, 88 commercial hectares and R83.7m FY2031 revenue at a 30.3% margin.

Executive Summary

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1.1 Three facts shape this crop, and everything else follows from them
1.2 What the model shows that a reader should not skip
1.3 Financial summary
1.4 The ask

Levubu Root Company grows irrigated ginger on leased subtropical land in the Levubu and Tzaneen districts of Limpopo, washes, grades, cures and cold-stores it on site, and sells it into South African retail and wholesale channels. Alongside the commercial crop it operates a dedicated clean seed multiplication block, retaining what it needs to plant the following season and selling the surplus as certified, disease-indexed seed rhizome to other growers.

The company builds from 20 commercial hectares and 8 seed hectares in FY2027 to 88 and 24 by FY2031, producing 2,422 tonnes of marketable fresh ginger and 271 tonnes of surplus certified seed, on revenue of R83.70m and EBITDA of R25.34m. It requires R36.0m of equity in two tranches and R20.0m of term debt, alongside a seasonal production credit facility that peaks at R26.1m in the base case.

1.1 Three facts shape this crop, and everything else follows from them

Half the cost of establishing a hectare of ginger is the ginger you plant in it

Ginger is propagated vegetatively from rhizome at 3 tonnes a hectare. At certified seed values that planting material is worth R228,000 a hectare, against R245,000 for every other field cost combined, land preparation, fertiliser, irrigation, mulching, weeding, plant protection and harvest. Planting material is 48% of the cost of establishing a hectare. No other common field crop in South Africa has that cost shape, and it is the reason a ginger venture cannot simply plant more when it wants to grow.

Figure 1. Establishment cost per hectare at FY2031, split between planting rhizome and all other field costs.

The land the company cannot plant costs almost as much as the land it can

Bacterial wilt (Ralstonia solanacearum), Fusarium and root-knot nematodes are soil-borne and persistent. Ginger cannot return to the same land for approximately 4.5 years. To plant 112 hectares in FY2031 the company must therefore control 504 hectares, of which 392 sit under maize, soya or cover crops in any given season. Gross lease on the full footprint is R7.56m a year. Expressed against the area actually in ginger, land costs R50,000 per planted hectare rather than the R15,000 headline rate.

Figure 2. Land controlled against land planted, showing the rotation requirement that drives the lease footprint.

Rotation crops on the resting ground contribute approximately R5,000 a hectare net, recovering about a quarter of the lease on that land. It is a modest but real offset, and it is the reason the company leases whole farms rather than isolated ginger blocks.

The seed business is not a sideline; it is a quarter of revenue and the durable competitive position

Certified clean seed rhizome sells at roughly R76 a kilogram against R25 for the same rhizome sold as food. The binding constraint on ginger expansion across South Africa is clean planting material, and a producer with an indexed, disease-tested seed block sells into a genuine shortage rather than into a commodity market. By FY2031 certified seed contributes 25% of revenue from 21% of the planted area. Selling that surplus as seed rather than as table ginger is worth R9.87m of FY2031 EBITDA, or 39% of the total.

Figure 3. FY2031 value of the surplus rhizome sold as certified seed against the same tonnage sold as table ginger, net of the seed block cost premium and conditioning cost.

1.2 What the model shows that a reader should not skip

Disease is an operating cost, not a tail risk

The plan provisions an annual crop loss of 12% of planted area in FY2027, falling to 8% by FY2031 as soil selection and seed hygiene improve. That provision is not conservatism; it is the normal experience of commercial ginger growers. At a sustained 15% loss, FY2031 EBITDA falls to R14.71m. At 30%, the business generates no EBITDA at all. The loss also compounds: a shortfall in the seed block reduces not this season’s sales but next season’s planted area.

Figure 4. FY2031 EBITDA against the share of planted area lost to soil-borne disease, applied uniformly across all five seasons.

The defences are all preventative and all cost money before any revenue arrives: virgin or long-rested land, indexed planting material from the clean block rather than saved rhizome from the commercial crop, raised beds and drainage, strict machinery and footwear sanitation between blocks, and the discipline to abandon an infected block rather than attempt to save it. The plant health, indexing and laboratory budget is R0.60m in the first season, before the company has sold anything.

Yield matters more than price, because the cost of a hectare is sunk at planting

A ten per cent fall in the fresh ginger price costs R6.06m of FY2031 EBITDA. A ten per cent fall in yield costs R10.50m. The asymmetry comes directly from the cost structure: once a hectare is planted, its cost is fixed, so a shortfall in tonnes falls straight through to the bottom line while the cost stays where it was. The contribution margin on the marginal kilogram is 87%.

Figure 5. Change in FY2031 EBITDA against the base case of R25.34m, ranked by magnitude.

The company is a price taker on imported ginger and should not pretend otherwise

South Africa imports the majority of the ginger it consumes, principally from China, and the local price sits close to import parity. That has two consequences. The company does not set its price and this plan does not assume it can. And the local price inherits the volatility of a global market that has recently seen severe shortage followed by sharp correction, which is why the plan uses mid-range pricing of R22.00 rising to R25.00 a kilogram rather than the elevated levels of the shortage years.

The seasonal financing requirement is larger than the equity cheque and is the most easily missed feature of the plan

The crop is planted in November and generates no revenue until July. In FY2031 the company spends R47m before a single rand arrives, against a facility peak of R26.1m in June, a third of annual revenue, and more than double the year-end net working capital balance. A reader who assesses this business on its year-end balance sheet will materially understate the capital it uses. The seasonal production credit facility is not a contingency; it is a structural component of the funding package.

Figure 6. FY2031 monthly cash costs, collections and cash position before the seasonal facility is drawn.

1.3 Financial summary

R million unless stated	FY2027	FY2028	FY2029	FY2030	FY2031
Commercial ginger (hectares)	20	34	50	68	88
Clean seed block (hectares)	8	12	16	20	24
Land controlled (hectares)	126	207	297	396	504
Yield (tonnes per hectare)	26	28	30	32	34
Marketable fresh ginger (tonnes)	403	746	1,188	1,743	2,422
Certified seed sold (tonnes)	30	77	133	200	271
Revenue	11.31	23.09	38.72	58.85	83.70
Cost of production	(14.10)	(15.80)	(23.90)	(33.56)	(44.94)
Gross profit	(2.79)	7.29	14.83	25.29	38.76
Gross margin	-24.7%	31.6%	38.3%	43.0%	46.3%
Overheads	(4.42)	(6.62)	(9.21)	(11.48)	(13.42)
EBITDA	(7.21)	0.67	5.62	13.81	25.34
EBITDA margin	-63.7%	2.9%	14.5%	23.5%	30.3%
Profit after tax	(9.58)	(2.47)	0.68	7.49	18.28
Capital expenditure	17.40	7.50	8.20	5.60	3.85
Peak seasonal facility	0.00	0.00	10.44	21.40	26.11
Closing cash	10.80	12.92	11.44	12.47	25.98
Net debt	4.20	2.08	8.56	5.38	(10.27)
DSCR	-5.37x	-0.73x	1.39x	2.07x	3.89x

Table 1. Five-season financial summary, base case. Full statements appear in Section 19.

Figure 7. EBITDA, EBITDA margin and gross margin across the five seasons.

1.4 The ask

The company seeks R36.0m of equity in two tranches, R24.0m at close and R12.0m at the start of FY2028, conditional on stated operating milestones, for 61.7% of the fully diluted share capital after a 12% management option pool. Alongside the equity it seeks a R20.0m agricultural term facility at 11.5% over ten years with three years of principal grace, and a seasonal production credit facility rising to R40.0m secured by cession of the growing crop, crop insurance and the packhouse.

Equity and debt together fund R42.55m of irrigation, packhouse, cold chain and clean seed infrastructure, R4.98m of first-season purchased planting material, R6.54m of operating losses in the first two seasons, and the working capital carried in a crop that is planted eight months before it is sold.

Figure 8. Sources and uses of funds across the five-season plan.

The investment in one paragraph

An investor is being asked to fund an irrigated ginger operation that reaches 112 planted hectares within five seasons, in a crop where South Africa is a net importer, and to accept two things that no amount of capital removes: that roughly half the establishment cost of every hectare is the rhizome going into the ground, and that soil-borne disease is a recurring operating cost rather than an insurable event.

At the base case the equity returns 2.45 times money over five years, an internal rate of return of 27.5%. At the downside case, a 6% shortfall in both price and yield, disease running at 12% rather than 8%, and input costs 4% higher, the equity returns 0.21 times and is substantially impaired. The gap between those two outcomes is the investment question, and it is narrower than the headline return suggests.

Section 24 sets out the scenario definitions in full. The plan does not present the downside as unlikely: it presents it as the reason the seasonal facility is sized at R40.0m rather than R26.1m, why the equity is tranched, and why the conditions precedent in Appendix B are weighted towards soil history and technical leadership rather than towards market access.

Next section2. Investment Thesis