A new scheme byt the land bank offers funds at as low as prime minus 5% for co-operative businesses.
The Land Bank has earmarked R1-billion to be spent over a period of five years on emerging black farmers who already own land. So far, it has advanced R360-million in loans of up to R1-million to 2200 farmers with a 0% payment default rate, according to Mohammed Kabir Sizwe, head of emerging retail markets at the bank. However, with an estimated 200000 emerging black farmers in need of monetary support, training and access to markets, there is still a long way to go.
The Land Bank's retail emerging markets scheme involves making direct loans to emerging black farmers that the normal lending market deems high risk. The scheme will allow farmers to access loans at preferential interest rates of up to prime minus 5% without collateral, based instead on closely monitored business plans and operations.
The scheme addresses the widely accepted dismal legacy of land reform. In August, Rural Development and Land Reform Minister Gugile Nkwinti was reported to have told a gathering of the South African Sugar Association that land redistribution had been carried out at the expense of food security and too much of the redistributed land was lying fallow.
According to Livhuwani Ngwekhulu, transformation manager at Agri SA, this was because of meagre support for emerging farmers. "People were given land," he said. "Farming it is something else."
Mandla Buthelezi, spokesperson for the National African Farmers' Union of South Africa, said that in many cases land recipients found it more beneficial to sell off their land and become employees on other farms at a below-minimum wage.
There is a concern about the exodus of farmers of all races from the land. Farming is no longer seen as an attractive option by the younger generation. Agri SA has training schemes in place, which include sending young people to agricultural colleges. "But we are not so sure these are yielding fruit," said Ngwekhulu, "because in the end it boils down to where they can get jobs."
Another key factor in successful farming is achieving sufficient operations of scale. In 1994 there were about 105 000 commercial farmers on the land, but this is now down to an estimated 35 000 to 40 000 famers, according to Sizwe. But the area under cultivation has not decreased. Instead, consolidated farms have allowed for large-scale operations.
Agri SA economist Dawie Maree, however, said that although economies of scale were important, "with the correct training, access to markets and the will to succeed, small-scale farmers can succeed".
There does not seem to be much concern that the scheme excludes white farmers. "It is not a complaint we have really heard, even though that is what you would think," said Ngwekhulu. He said many white farmers inherited farms with already established business operations.
Part of the scheme involves channelling cheap money through agribusinesses, which have replaced the co-operatives that existed before 1994. These function as purchasing, processing and distributing bodies, sometimes with their own farming operations in place. But agribusinesses have to demonstrate their commitment to mentoring and assisting black farmers. The sugar cane industry in KwaZulu-Natal is one sector in which the scheme is operational through the agribusiness of Tsb Sugar. Buthelezi was sceptical that such businesses would help black farmers. "Farmers in the sugar cane industry are struggling. After years of living together, why now?" he said.
But Sizwe said the agribusinesses would benefit from increased supply.
Maree agreed that increased local sourcing would be welcomed by agribusinesses. "Given the issues of food security and affordability, increased local supply will be much more advantageous than imported products," he said.
In areas without umbrella bodies such as agribusinesses, the Land Bank will channel loans directly to farmers.
Fikiwo Makimama, a sheep and vegetable farmer on a 380-hectare plot of land in the farming region around Mthatha in the Eastern Cape, is sceptical of state assistance. Despite numerous initiatives since 1994, access to finance and insurance is still hard to come by. "There is no programme for upcoming farmers, only for fully fledged commercial farmers," he said.
Makimama operates through an "expensive" loan from Standard Bank and delivers his produce to the fresh produce market himself. The extension officers employed by the department of rural development and land reform to train and support farmers are considered office-bound and not of any real assistance. "For example, if I were to ask them how to calibrate a mixture for fertiliser, most of them wouldn't know," he said.
Although the Land Bank uses the business solutions company Crebus to provide farmers with business management, it does not have a permanent presence in rural communities.
Renewing co-operative structures for emerging farmers remains an option. However, Sizwe said that where the state had tried to encourage co-operatives, the structures that arose were "contrived" and ineffectual.
"Co-operative structures need to be established by farmers and not by governments," he said. In cases where farmers had successfully banded together, they were usually "enlightened farmers with knowledge, resources and capacity".
Sizwe said farmers would gravitate to these kinds of arrangements because they increased their resources and capacity and the retail emerging markets scheme was partly an attempt to "short-circuit the process" and allow farmers to reach a point that would make mutual co-operation more likely.
Support structures crucial to scheme's success
To qualify, candidates must:
- Be an individual, black South African citizen;
- Have access to land;
- Have a limited asset base; and
- Be unable to provide traditional forms of security.
Repayment is structured in line with the production-cash flow cycle. Interest rates vary between 4% and 8%. Advisory support, funds-disbursement administration and aftercare services by agricultural agents will be mandatory.
Low-risk, high-profile commodities will be given preference.
The bank's partners are the departments of agriculture, land reform and rural development. Investors include the treasury.
A key objective is to assist "black, emerging, resource-poor farmers to [make the transition to] commercial farmers that can sustain their enterprises". To succeed, the scheme depends on:
- Technical, financial and marketing support for farmers;
- Secure funding at competitive rates in order to lend at concessionary interest rates;
- Support from the government; and
- Thorough due diligence on all clients and intermediaries. - Source: Land Bank