Tarlton Beetroot Business Plan — Water, Energy and Land: The Three Binding Constraints

Water entitlement, electricity supply and land access — the three limits that cap the operation regardless of demand.

Section 15 of 37

Water, Energy and Land: The Three Binding Constraints

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Any one of these three failing terminates the plan. None of them is fully within management’s control.

Water

Irrigated beetroot at Tarlton requires approximately 5,500 to 6,500 cubic metres per hectare per cycle. At 41 beetroot hectare-cycles plus 52 rotation hectare-cycles in Year 5, the operation needs roughly 520,000 to 580,000 cubic metres annually. Phase 1 is served from an equipped borehole under Schedule 1 and General Authorisation provisions, which is adequate for one hectare and entirely inadequate for anything larger.

Phase 2 therefore depends on acquiring a property with an existing, lawful and verified water use entitlement of not less than 55 hectares under irrigation. Under the National Water Act 36 of 1998 existing lawful use must survive validation and verification by the Department of Water and Sanitation, a process that has been applied unevenly and has in places reduced recorded entitlements. New licences in the Crocodile West system are difficult to obtain and slow. Water is consequently the first screening criterion in the land search, ahead of soil, price and location, and independent verification of the entitlement is a condition precedent to both the Series A drawdown and the mortgage bond.

Falsification

If a property with a verified entitlement of 55 irrigated hectares cannot be secured within the R9.9 million land budget, the Phase 2 business case does not exist in the form modelled. The correct response is to return Series A capital, not to proceed on a smaller or unverified entitlement.

Energy

Irrigation energy is budgeted at R9,870 per hectare-cycle in FY2028 terms, approximately 11 per cent of the field cost stack. Eskom tariffs have escalated well above headline inflation for more than a decade and the model carries energy within the 5.8 per cent general cost escalation, which is arguably generous to the plan. The 100 kWp solar installation budgeted at R1.15 million in month 31 is included principally to displace daytime pumping load and to provide packhouse resilience during load curtailment, not as an environmental gesture. On the modelled tariff path it recovers its cost over approximately seven to eight years, which is acceptable but not compelling; its stronger justification is that a cold chain interruption destroys product value directly.

Land

The Company will hold freehold title to the Phase 2 property, financed 62 per cent by equity and 38 per cent by a mortgage bond. Land at R9.9 million for 85 hectares, or approximately R116,500 per hectare, reflects water-entitled, arable Highveld property within reasonable distance of the Johannesburg market. It is at the upper end of what the returns can support: the sensitivity analysis shows that land acquired at R85,000 per hectare or below is one of the few changes that moves the investment into venture-grade return territory.

The Expropriation Act, addressed directly

The Expropriation Act 13 of 2024, signed into law in January 2025, repealed the 1975 Act and permits expropriation for a public purpose or in the public interest, with compensation that is just and equitable, and in defined and narrow circumstances nil compensation — for example abandoned land, land held purely speculatively, or land where the state is already the owner. The Act requires an attempt to reach agreement before expropriation and preserves access to the courts.

The honest assessment is this. The Act materially increases legal and political uncertainty around agricultural land tenure in South Africa, and no business plan should pretend otherwise. At the same time, the categories in which nil compensation is contemplated are directed at unused or speculatively held land, and the Company’s asset would be water-entitled, actively farmed, employing approximately 34 permanent and up to 55 seasonal workers, and generating measurable output. That is close to the opposite of the profile the Act targets.

Title insurance against expropriation is not available in the South African market. There is therefore no instrument that transfers this risk. The mitigations available are ordinary and limited: clean title, demonstrable productive use, formal employment with compliant conditions, an active community relationship, and — for lenders — first-ranking security over a productive asset. Investors who regard this risk as unacceptable should not invest in South African farmland at all, and this plan does not attempt to persuade them otherwise.