As planting time approaches, farmers are getting more desperate to access financing.
Without financing, there is no production, and without production, there’s no food.
Agricultural financing remains one of the toughest challenges for farmers in South Africa after the collapse of the Land Bank.
While most people will remember 2020 as the year of disasters such as the Covid-19 pandemic, fires and drought, farmers will remember it as the year the Land Bank collapsed, leaving them in a financing vacuum.
In April last year, the Land Bank informed creditors that it would default on payments of R50 billion.
Land Banks finance mainly small to emerging farmers.
Family farming network, the Southern African Agri Initiative (Saai), said that several institutions from the private sector stepped in to fill the void left by the Land Bank.
“As a network for family farmers of all sizes and capacities, Saai organised a webinar to introduce a number of these initiatives to farmers and agri-businesses. The commercial banks have already picked up some of the slack by financing hundreds of former Landbank clients,” said Saai board chairperson Dr Theo de Jager
De Jager said they were still exploring ways to attract more of them, but it costs the farmer a little more.
“The commercial banks, therefore, focused on the larger farmers and managed to do some cherry-picking amongst the strongest and the best-established farmers.”
This makes it even harder for smaller and medium-scale farmers to access financing.
Some foreign financing has also been in the fold to replace the Land Bank as the original lender.
But this process has its risks, such as volatile exchange rates.
“It took these cooperatives the better part of five years to set up the channels and put the processes in place before these facilities became available,” said de Jager.
Another option available over the shorter term is the forward buying of products, especially from importers in the United Arabian Emirates and elsewhere in the Middle East.
“There is an abundance of opportunities available here, but it will do little to ensure national food security here in South Africa,” stressed de Jager.
Rabo Bank, based in the Netherlands- which has a presence in several neighbouring countries, has reportedly shown interest in expansion into the South-African agricultural market.
But Saai’s long-term goal is to set up a cooperative bank in South Africa that will belong to the farmers.