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- The Land Bank launched a three-year R1.95 billion blended finance scheme on Monday.
- The scheme aims to marry state-provided grants with Land Bank loans to help reduce the financial risk of emerging farmers to the bank.
- This marks the Land Bank's resumption of lending to new clients, having held on to its funds after entering debt default in April 2020.
- For more stories, go to the News24 Business front page.
Just over two years after defaulting on its debt obligations the Land Bank is once again lending, with the state-owned bank relaunching a blended finance scheme on Monday which is putting R1.95 billion towards turning emerging farmers into commercial ones over the next three years.
The bank launched the blended finance scheme in 2018 but later went into financial distress, going into debt default in April 2020 and closing the taps on lending for some time.
The launch of the scheme was therefore a significant milestone for the Land Bank, board chair Thabi Nkosi said on Monday. While the focus remained on supporting historically disadvantaged farmers, the scheme is also serving as a "flagship" project that will also reduce the risk of default by targeting farmers already receiving grants.
"The scheme, which serves as a credit enhancement tool, also provides the bank with an improved lending profile on these transactions by reducing the risk of repayment failures," said Nkosi.
READ | Land Bank's 2-year lending drought to farmers to end by September, parliament hears
The scheme, run in partnership with the Department of Agriculture, Land Reform and Rural Development, will start with an initial minimum annual grant allocation of R325 million from the department. The Land Bank will match these grants with loans on a rand-for-rand basis for three financial years.
The funds from the scheme can be used for the development of existing farms, acquisitions and production expansion for farmers who qualify.
Nkosi said that as the Land Bank starts rebuilding, it has a clear mission: facilitating the development and transformation of the agricultural sector. So, there will be a bigger focus on supporting historically disadvantaged farmers, thus the resuscitation of the scheme, which supplements Land Bank loans to these farmers with government grants to make the financing of agricultural transactions more commercially viable and bankable.
She said the scheme will also provide pre- and post-finance support to qualifying farmers. The state-provided grants can be used to fulfil pre-funding requirements like environmental impact assessments for these farmers, where needed. This was not the case when the bank ran the 2018 pilot.
Agriculture, Land Reform and Rural Development Minister Thoko Didiza said that while many financiers have come on board to support emerging farmers, the cost of funding available in the market is still too high because of the risk that they pose.
So, her department consulted with the farmers, financial institutions and other stakeholders, where the blended finance scheme was identified as the solution in 2018. But things didn't work as smoothly as envisaged. The turnaround time for farmers to get the funding was long, partly because many didn't understand the level of administration requirements they'll have to meet.
She said another thing the department learned from the pilot was that those funding emerging farmers need to be "patient," and cannot give a farmer a loan with an expectation that they would start repayments by the end of the following month.
"I'm not sure how you'll work it. But you need to work it because it just doesn't make sense," she said, adding that she does not advocate for farmers not to repay their loans, but they must be given time first to put the money to work.
