South Africa has launched a R1 billion Agri-Industrial Fund aimed at addressing funding constraints facing black farmers and breaking the entry barriers in commercial farming.
The Industrial Development Corporation (IDC), in partnership with the Department of Agriculture, Land Reform and Rural Development (DALRRD) launched the fund.
Minister of agriculture, Thoko Didiza, said: “We aim to create jobs and also transform our sector, increasing exports as well as effecting land reform and rural development in underutilised land.”
The DALRRD will finance the project, while the state-owned IDC will run the project, which will have an initial duration of ten years. The fund will be used alongside the IDC’s other internal funding products to support businesses through a blended approach.
Grants will be based on pre-set qualifying criteria and will allow for acceptance of a long-term lease agreement and permission to occupy as adequate security to enable access to funding, unlike previously.
Didiza said: “It is a financing model in which the state will leverage private sector investments. The department uses its grants to leverage private sector investment towards increasing and expanding production on land reform fronts, communal lands and privately owned farms. This will also help accelerate land redistribution by supporting the acquisition of agricultural land and assets along the value chain.”
Master plan to be finalised
The department said this fund came at the right time as it would soon finalise the Agriculture Agro-Processing Master plan (AAPM) in addition to the poultry and sugar master plans, which have been identified as critical elements to support such growth and development in the sector.
The fund also comes at a key time for local agriculture, knocked by Covid-19, as the Land and Agricultural Development Bank of SA faces myriad challenges, including a credit rating downgrade, deteriorating book quality, low liquidity, a weak economy, several livestock diseases, drought in several areas and many resignations of key bank staff.
IDC chief executive, TP Nchocho, said: “For us, as the IDC, this development demonstrates government’s trust in the IDC’s ability to play an impactful role in South Africa’s economic recovery. The broader agricultural sector is central to the recovery of the local economy, but most importantly, this fund’s objectives are consistent with the IDC’s role in increasing the number of black commercial farmers.”
Talking about the impact of Covid-19 on the IDC, Nchocho said: “We have gone through the worst. Our balance sheet has recovered. We continue to have access to international and local funding processes and, therefore, capital availability was positive,” said Nchocho.
He said the IDC had a portfolio of just more than R4 billion already invested in the sector and intended to double it in three years.
Minister of trade, industry and competition, Ebrahim Patel, said agriculture was significant to the country’s gross domestic product and trade. He said the fund suited the broader efforts seeking to build strong foundations for agriculture and agro-processing, as well as the economy. “We have vast agricultural land – more than any other country on the African continent. In fact, the World Bank ranks South Africa as number twelve on the list of countries with the most agricultural land.
“We also have diverse climates across the country that allow for the growth of different fruit and livestock. This strengthens the opportunity that comes from these capabilities and the land has to create new, bustling value chains of agro-processed goods downstream,” Patel said. – IOL