An evaluation of global management accounting principles in the sustainability of a mechanised piggery

Abstract

Commercial farming forms the backbone of food security in most countries and specifically in South Africa. Moreover, it is evident that agriculture is still an important source of employment in the South African economy. The agricultural industry globally, but specifically in South Africa, is facing many influential factors over which little or no control can be exerted. These influential factors or complexities have an impact on sustainability of commercial farming operations. The sustainability of commercial farming in South Africa requires a fresh look at available tools to steer through uncertainty and instability. The internal management and business decisionmaking processes of commercial farming operations should firstly be considered. The importance of sound business decision-making was recently highlighted by the joint venture between the Chartered Institute of Management Accountants (CIMA) and the American Institute of CPAs (AICPA) in that quality decision-making has never been more important – or more difficult. It is argued that management accounting has a role to play in improving business conduct. This is equally relevant for commercial farming operations. In 2014, CIMA and AICPA published the first set of Global Management Accounting Principles (GMAPs) to provide guidance on best practice for management accounting functions. GMAPs take the combination of appropriately skilled people and four core principles, within a functioning performance system, and apply it over fourteen (14) practice areas to describe what a management accounting function should provide for sustainable success. The main objective of this study was to evaluate the relevance of GMAPs in the sustainability of a mechanised piggery in a South African context. The research design, therefore, took the form of case study research with a combination of exploratory and contextual applied research with an inductivist approach to qualitative research. The object of the study is a commercial farming operation in South Africa that has a focus on pork production, Piggery A. Piggery A is a sole proprietor type business entity, managed and owned by Owner-A. The study made use of the concept of business sustainability as a lens through which GMAPs were evaluated in the case of Piggery A. CIMA and AICPA published a diagnostic checklist to assist organisations in assessing the contribution that their management accounting functions are making towards sustainable success. This checklist formed the foundation of the evaluation of GMAPs in the sustainability of Piggery A. Data collection techniques included the observation of the farming operation during a field visit, as well as a predetermined set of questions that were used within a semistructured approach to face-to-face interviews. The study found that, without pre-knowledge of GMAPs, Piggery A employed a large number of the concepts and principles described by GMAPs as best practice. Combined with the assessment that the farming operation itself was physically sustainable, it could be concluded that GMAPs assisted with the sustainability of Piggery A and the decision-making processes of Owner-A. However, despite the strong presence of principles of GMAPs within Piggery A, it was still decided to discontinue the pork production part of the commercial farming operation, due to external factors beyond the control of Piggery A’s management. This discovery brought about two questions that remain unanswered: firstly, whether or not GMAPs could have assisted Owner-A with steering clear of this definitive decision by providing the information more timely, with strategic options to turn the profitability of Piggery A around; and secondly, whether or not GMAPs could have informed the decision earlier on, with strategic alternative options to consider for cash generating activities which could harness the infrastructure, already in place, to avoid the prolonged period of internal losses. Notwithstanding this, namely that GMAPs were found in practice in Piggery A, a sole proprietor, supporting its sustainability, it could be generalised that GMAPs would be applicable to more complex business forms such as companies, trusts or closed corporations. It is therefore recommended, based on the finding of this study, that all commercial farming operations consider GMAPs as a tool to establish best practice in the support of decision-making, which would promote sustainability of farming operations