Government moves are giving impetus to changes in rural financing, reports Madeleine Wackernagel
THE transformation of the Land and Agricultural Bank gained momentum this week with the announcement by the Ministry of Agriculture and Land Affairs, Derek Hanekom, that it would in future fall under its jurisdiction, rather than that of the Ministry of Finance.
The move is in line with recommendations made by the Strauss Commission, tabled in September, which also envisaged a new board in place by the beginning of this month.
But, says Dr Helena Dolny, adviser to Hanekom, transformation of the Land Bank was not, understandably, a priority for the finance ministry. Now that the anomaly has been sorted out, the will is there to enforce significant changes at the bank.
Hanekom has accordingly extended the deadline for appointing a new board until the end of March next year.
Dolny points to the experience of the Development Bank of Southern Africa as a good example of how to enforce transformation. ”Until the new chief executive, Dr Ian Goldin, took charge, little real change took place at the bank. It may not be as important to replace the entire management, but change has to come from the top.”
The Land Bank has already shifted its emphasis to include emerging farmers while maintaining its existing operations to fund commercial farmers. But there is no question of subsidies, says the bank’s Karl Ehrenberg.
”Unless the government steps in to provide a grant to get a certain sector off the ground, we will carry on lending money in the usual way, providing wholesale financing through intermediaries.
”We do, however, recognise the need to reach people on the ground, so we have some challenges ahead to come up with innovative solutions.
”One of the Strauss Commission’s recommendations was risk-sharing. We have already relaxed certain loan criteria but we need to do more to help the emerging farmers.”
Dolny believes a risk guarantee scheme, whereby the government would stand surety for a certain amount of debt if a borrower defaulted, would help to speed up the process of reaching deep into the rural areas. Overseas experience indicates this is the most efficient route.
In addition, the bank should encourage stronger ties with non-governmental organisations, traditionally well- represented in the poorest sectors of the community.
But there is no question that the bank has an important role to play, says Dolny. It has an extensive network of branches, albeit concentrated in the traditionally white farming areas, and makes a profit on its lending. ”Agricultural co-operatives would no doubt jump at the opportunity to buy the bank if it were put up for sale, but it’s doing its job properly, so why give it away to the private sector?”
It has until April Fool’s Day to prove her right.