Levubu Root Business Plan — Risk Analysis

Disease, rotation failure, price and seed-cost risk, with the controls and trigger points governing each.

Risk Analysis

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16.1 Risk heat map
16.2 Risk register
16.3 The four risks that actually matter
16.4 What would cause the investment thesis to fail

Risk in this venture is not evenly distributed. Three of the four highest-rated risks are agronomic, and all three resolve within the first two seasons. That concentration is the most important structural fact about the risk profile: an investor is not taking a five-year risk spread evenly across the period, but a heavily front-loaded technical risk followed by a comparatively ordinary commercial one.

16.1 Risk heat map

Figure 19. Residual risk rating after the mitigations set out in the register below. Codes correspond to the register.

16.2 Risk register

	Risk	Prob.	Impact	Rating	Mitigation and residual position	Owner
R1	Soil-borne disease outbreak — Ralstonia, Fusarium or nematode	4	5	Severe	Land screened before commitment; planting material sourced only from the indexed seed block; block-level sanitation; immediate roguing and block abandonment. A loss of 12% falling to 8% of planted area is provisioned as an operating cost, not treated as a tail event. Residual: at a sustained 15% loss FY2031 EBITDA falls to R17.4m; the business breaks even on EBITDA at roughly 30% loss.	Head of Plant Health
R2	Yield below assumption	4	4	High	Yield assumptions start at 26 tonnes a hectare, below what experienced growers achieve, and rise to 34 — a learning curve, not a best case. Block-level agronomic records; soil-specific fertigation. Residual: a 10% shortfall costs R10.5m of FY2031 EBITDA and reduces MOIC to 0.95x. This is the single most damaging measurable sensitivity.	Managing Director
R3	Seasonal facility unavailable, undersized or withdrawn	2	5	High	Committed multi-season facility negotiated at close rather than annually; limits sized to R40.0m against a base-case peak of R26.1m; 45% of field cost on supplier terms reduces the peak. Residual: in the stress case the requirement reaches R71.4m and exceeds the facility. The business fails on liquidity before it fails on solvency, and this is the risk that would end it.	Finance Director
R4	Fresh price falls to or below import parity	4	3	Elevated	Planning prices of R22.00 to R25.00 are mid-range, not shortage-period levels. Cold storage spreads sales beyond the harvest window. Seed revenue at 25% of the total is priced against a different anchor. Residual: a 10% fall costs R6.1m of FY2031 EBITDA — painful but survivable.	Commercial Manager
R5	Seed market does not clear at the assumed price	3	4	Elevated	Farm-to-farm sales with indexing records supplied; conversion built slowly at roughly four growers a season; surplus rhizome can always be sold as table ginger. Residual: a 20% seed price fall costs R4.1m. The floor is the table price, which is why the downside is bounded.	Head of Plant Health
R6	Water allocation reduced or curtailed	2	4	Moderate	Entitlements verified before lease execution; leases selected on secure allocation rather than on price; drip irrigation and mulching hold application rates well below flood-irrigated equivalents. Residual: a curtailment caps planted area regardless of land or capital availability.	Farm Manager
R7	Lease not renewed on the rotation footprint	2	4	Moderate	Minimum seven-year terms with renewal options, negotiated before capital is committed to a block; irrigation infrastructure ownership and removal rights specified in the lease. Residual: loss of a block mid-rotation strands screened land and forces re-screening elsewhere.	Managing Director
R8	Key technical appointments not made	3	4	Elevated	Both the Managing Director and the Head of Plant Health and Seed are conditions precedent to first drawdown. Consultant pathology support contracted for the first two seasons as a bridge. Residual: the plan should not proceed without the plant health capability, and the plan says so.	Board
R9	Labour availability and cost at harvest	3	2	Low	Standing seasonal arrangements in the surrounding districts rather than seasonal recruitment; harvest window spread by staggered planting; mechanisation of lifting where soil type allows. Residual: cost inflation above the sectoral determination is absorbed in field cost.	Farm Manager
R10	Frost or extreme heat event	2	4	Moderate	Districts selected for frost-free status; mulching and irrigation scheduling moderate soil temperature; from FY2030 production is split across two districts. Residual: an unhedged single-district event in FY2027 to FY2029 would take a full season.	Farm Manager
R11	Input cost inflation and rand weakness	4	2	Moderate	Field cost escalated at approximately 3.9% a year in the plan; forward purchase of fertiliser at planting; the same rand weakness raises import parity and therefore the selling price. Residual: a 10% field cost increase costs R2.9m — the smallest of the measured sensitivities, and partly self-hedging.	Finance Director
R12	Retail programme lost or not secured	3	3	Elevated	Three channels maintained deliberately, at a cost in realised price; board reserved matter caps single-buyer concentration at 60% of fresh volume. Residual: loss of a programme moves volume to wholesale at R1.00 to R2.00 per kilogram less, not to no sale at all.	Commercial Manager
R13	Interest rate increase	3	2	Low	Term debt at a fixed 11.5%; only the seasonal facility is prime-linked. Residual: a 300 basis point rise costs R1.3m of FY2031 profit after tax and reduces DSCR to 3.21x, which remains comfortably above covenant.	Finance Director
R14	Load shedding disrupts the cold chain	3	2	Low	Standby generation for the cold store and packhouse included in the capital plan; cold store designed for thermal inertia; dispatch scheduling avoids peak curtailment windows. Residual: an incremental diesel cost rather than a product loss.	Packhouse Manager

Table 37. Risk register. Probability and impact are scored one to five; the rating is the residual position after the stated mitigation.

16.3 The four risks that actually matter

A register of fourteen risks is only useful if it is prioritised. On the residual ratings above, four risks account for most of the variance in outcome, and an investor’s diligence effort should be allocated accordingly.

Where diligence should be spent

R1 and R2 together — disease and yield — account for roughly two thirds of the downside variance in the model. Both are agronomic, both resolve within two seasons, and both are diligenceable in advance through soil test results, the credentials of the plant health appointment and reference yields from comparable operations in the same districts.

R3 — the seasonal facility — is the only risk that can end the business abruptly. Solvency in this plan is never the binding constraint; liquidity in June is. A lender’s commitment to a multi-season facility, rather than an annually reviewed one, is worth more to this business than a lower margin on the term debt.

R8 — the plant health appointment — is a gating risk rather than a probabilistic one. It either is or is not resolved before drawdown. It has been placed in the conditions precedent for that reason.

16.4 What would cause the investment thesis to fail

Stated plainly, and in the order of likelihood the model implies:

The seed block does not perform to the multiplication and indexing standard assumed. This is the durable asset. If it fails, the company is an ordinary sub-scale ginger grower with an expensive packhouse, and the exit multiple compresses towards asset value.
Disease loss settles materially above the provisioned range. At a sustained 15% the returns fall to 1.38x MOIC; the plan does not survive a persistent 20%.
Yield plateaus below 30 tonnes a hectare. The cost-per-kilogram crossing in Section 10 never occurs, and the company remains permanently dependent on the freshness premium.
The seasonal facility is not available at the required size in FY2030 and FY2031. The business is forced to plant less than the seed block supports, which wastes the one asset it cannot buy.
A sustained import price collapse. This is the risk most outside management control and the one the plan can do least about beyond the seed revenue diversification already built in.

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