A profound sense of disempowerment among emerging farmers has come to light following FNB’s announcement of a R300million deal with United States development agency USAid. The deal will see the agency guaranteeing half the loans the bank extends to black farmers.
The deal will alleviate, to some extent, the problem where black farmers cannot use their land as collateral for bank loans because of communal ownership or restitution history. The department of agriculture wants to vet the sale (and presumably forfeiture) of land given to emerging farmers under its land restitution programme. For the next seven years 50% of loans given by FNB under the new scheme will be guaranteed by USAid and FNB will carry the risk for the other 50%, says Ernst Janovsky, FNB’s head of agri-finance.
But, when approached for comment on the deal, emerging farmers voiced what appears to be deep-seated resentment against the style of agricultural lending that has developed in South Africa. Bank loans come with advisers who are appointed to help the farmer and protect the bank’s investment. But from the farmers’ perspective, these advisers take over the running of the farm.
“It’s just a glorified farm workers’ arrangement,” says Gideon Morule, a maize and livestock farmer from North West; the bank’s adviser has the power to decide where to buy equipment and raw material.
This is to ensure the loan is not spent on wasteful lifestyle items, such as luxury vehicles, but — coupled with suspicions that the adviser bases his buying decisions on supplier kickbacks and not on the best interest of the farmer — is seen as a humiliating loss of control.
When an emerging farmer gets a bank loan, says Morule, “you have to sign surety [with] your tractors [and] everything that you have. [You] sign a long, complicated contract and then an agent of the bank will decide when to plant, what to plant and they will buy for you and debit your account. You have no control whatsoever.”
Motsepe Motlala, president of the National African Farmers’ Union (Nafu), says that while he respects FNB’s transformation attempts, any effort to help emerging farmers without consulting them is sure to fail.
When previously disadvantaged farmers were Afrikaners, the banks had no problem talking to them, even though in those days “white farmers were not necessarily managing their own finances correctly. They were buying Mercedes Benzes and so on.
“Today every bank is taking a different line, saying ‘there is no need to talk to the emerging farmers because we know what they want’, which is not true,” says Motlala.
He contrasts the success of the relationship between banks and Afrikaner farmers with the failed attempts of bantustan development agencies. “They would buy implements and plant on behalf of the farmer. They would then market the produce on behalf of the farmer and, when they make a loss, it is the loss of the farmer. This agenda has failed dismally and this is what we see certain banks trying to do.
“The union is saying that if the banking groups in South Africa think they can do things for us without us, then they can keep their money.”
Motlala called for a R3billion equity fund set up in the Land Bank — similar to the Umsobomvu Youth Fund — in which commercial banks, the government and emerging farmers can cooperate to solve the “continued misunderstanding between the emerging farmers and the banking groups in South Africa”.
The emphasis of such a fund must be training and the correct analysis of the needs of the farmer. “They will not belittle the farmer, they will not make him think that he is nothing, that he is being done a favour.”
Janovsky says it is understandable that some farmers might feel a loss of control over their farming operations, but the bank cannot leave a loan unmanaged if the farmer’s management skills are not up to scratch.
The amount of outside management imposed on a farmer by the bank depends on the management skills of the farmer and is decided on a case-by-case basis, says Janovsky, who describes the financing of emerging farmers as “a training task”. This is starting to bear fruit as a class of black farmers is emerging that “can give any established farmer a run for his money”.
Janovsky says there are no formal feedback mechanisms between emerging farmers and the banks, apart from the interaction between the bank’s contracted agricultural managers and the farmers and occasional meetings between the bank and organised agriculture.
Loans extended to farmers under the USAid guarantee scheme will range from R40Â 000 to R15million a project.
With the R1,5billion that banks have promised to extend to emerging farmers under the Financial Sector Charter, Nafu’s strong stance could be construed as an attempt at gatekeeping what should be case-by-case interaction between a commercial bank and individual clients. But Nafu seems to have strong grassroots support and, given the sensitive racial politics of South African agriculture, communication probably needs to flow more smoothly — along with the money.