The state-owned company that quadrupled its surplus in five years

South Africa’s Agricultural Research Council (ARC) has grown its surplus from R66.11 million in the 2019/20 financial year to R293.55 million in 2023/24, a 344.02% rise in five years.

The ARC is a public entity overseen by the Department of Agriculture. It aims to be a premier science institution that conducts research with partners, develops human capital, and fosters innovation to support and develop the agricultural sector.

Its main functions include undertaking and promoting research, technology development, and technology transfer, as well as using its technological expertise and making it generally available.

The council is also tasked with establishing facilities for collecting and disseminating information related to research and development, publishing research results, and establishing and controlling facilities in research, technology development, and technology transfer.

The organisation’s long-term planning framework, ARC Vision 2050, outlines its key focus areas as:

• Genetic improvement of crops and livestock to enable increased productivity
• Anticipation and mitigation of agricultural risks to enable resilience to climate change
• Promotion of ecosystem sustainability to enable effective natural resources conservation
• Solutions, processes, and technologies to reduce post-harvest losses and develop new products
• Inclusive market-oriented agricultural development to reduce malnutrition and hunger

In its latest annual report for the 2023/24 financial year, ARC chairperson Joyene Isaacs said the council delivered outstanding research and technology options in that year. 

However, she noted that the challenges for the organisation remain and have proven to be systemic in nature. 

“The council has realised that a concerted effort and commitment from both the management and staff, as well as the shareholders and stakeholders, will be required to address these challenges,” she said. 

“The changes required are not parallel processes but an inter-disciplinary, interconnected and complex web of fundamental shifts.”

Isaacs did not detail these challenges, but the report outlined that, in terms of its human capital operations, the council struggles with increasing labour costs compared to revenue.

In addition, the report also highlighted decreasing staff morale caused by current economic conditions, the resignations and retirement of critical staff, and the demand for scientific skills versus availability in the country as challenges.

The council’s other challenges include building productive workplace relations and managing the “changing world of work”.

Strong financial performance

Despite its challenges, the ARC is one of the few public entities in South Africa to consistently report a surplus.

Unlike private companies, public entities in South Africa are often not required to run at a surplus, as they are not profit-driven. Therefore, reporting a surplus is usually not included in a public entity’s key performance indicators.

However, for at least the past five financial years, the ARC has run at a surplus and maintained a healthy solvency position.

In the 2019/20 fiscal year, the council reported a surplus of R66.11 million and total net assets of R1.87 billion.

The ARC’s surplus has grown nearly every year between 2019/20 and 2023/24, reaching R293.55 million in the 2023/24 fiscal year.

The council’s net assets have also grown year-on-year, from R1.87 billion in 2019/20 to R2.70 billion in 2023/24.

However, it should be noted that the ARC has failed to achieve a clean audit outcome across these five years.

Since the 2019/20 fiscal year, the ARC has received a qualified audit opinion, which means its financial statements likely contain material misstatements in specific amounts.

This outcome could also mean there is insufficient evidence for the Auditor General to conclude that specific amounts included in the financial statements are not materially misstated.

ARC’s financial performance

The graphs below illustrate the ARC’s financial performance between the 2019/20 and 2023/24 fiscal years.