As efforts are continually being made to increase the share of black ownership in South Africa’s agricultural sector, a major barrier has always been access to finance.
Farming is a capital and resource intensive business, which requires access to sufficient finance.
A recent study titled: Barriers to building productive capabilities: The case of smallholder vegetable farmers in South Africa, by researchers based at the University of Johannesburg, Shinge Christo and Karissa Moothoo Padayache, looked at the funding challenges facing smallholder farmers in the vegetables value chain in the country.
The study concludes that government needs to provide patient finance to allow farmers to build capabilities, accumulate returns and be profitable.
This, the study says, will safeguard the participation of smallholder farmers by allowing them to access more reliable and consistent markets.
The study found this will also benefit consumers through better quality produce and avoid potential food shortages in the wake of high inflation and the energy crisis in South Africa.
It found that having the agriculture and agro-processing master plan in place is helpful but it needs to be put into practice properly.
The study says that if smallholder farmers are its focus, then more emphasis needs to be placed on providing them with access to finance, to equip them with the tools to achieve better production.
While delivering his budget and policy speech to the National Assembly on Tuesday, Minister of Agriculture John Steenhuisen acknowledged that lack access to finance for new entrant and small farmers is a cause for concern.
He stressed the need to empower new entrant farmers to become self-sustainable and productive as quickly as possible whilst also assisting larger commercial operations to expand and flourish.
The minister said access to finance has also proven to have been a significant constraint on the ability of new entrant farmers and small farmers to succeed.
This, he said, is highlighted starkly by Wandile Sihhlobo in his excellent book “a country of two agricultures”
Steenhuisen said that to support farmers to grow and develop and contribute to the household food security, there’s a need for a fully-fledged database of farmers, understanding in each instance the type of support they require.
The minister said he has read the Portfolio Committee’s critical reports on some of the findings during their oversight visits, including the PESI and conditional grants meant for farmers.
“It is of concern that in some instances money meant for farmers was never received,” said Steenhuisen.
He said they’ll relook at the process of allocating grants and measuring their actual impaction the ground as it is crucial that farmers benefitting from these grants appear on a database.
Going forward, he said, funding will only flow to provinces with proper planning and accountability and payments will be made quarterly contingent on proper reporting against targets.
“I also take note of SIU reports on conditional grants which will receive my full and urgent attention.”
On finance, the minister said the Department of Agriculture developed the Blended Finance Scheme (BFS) to increase access to affordable finance for black producers in the agriculture and agro-processing sector, as part of the commitment to the Agriculture and Agro-processing Master Plan (AAMP). Blended finance involves the provision of grants by the state and loans by private finance institutions, including development banks.
He said to date, the department has successfully partnered with the IDC, the Land Bank, and ABSA, and is concluding agreements with FNB, Nedbank, and SEFA.
“Since March 2021, through the BFS, R3,107 billion has been invested in the agricultural sector for the development of 183 commercial black producers, with R1,204 billion of this amount being grants. As of 31 March 2024, the IDC approved 29 transactions worth R1,915 billion, with R587 million in grants, creating 1,445 jobs. The Land Bank approved 154 transactions worth R1,192 billion, with R617 million in grants, creating 1,973 jobs. ABSA signed the agreement with the department on 16 May 2024 and is currently conducting internal roadshows and change management to prepare all its branches for the implementation of the BFS. The department and ABSA will soon announce the date of implementation by ABSA,” explains Steenhuisen.
Another facility the minister encouraged farmers to utilize is the Agro-Energy Fund (AEF), a blended finance instrument developed in partnership with the Land Bank to support all qualifying producers and agro-processors, regardless of race, with alternative energy sources.
Said the minister: “The fund facilitates the purchase of capital equipment and infrastructure (“CAPEX”) for farming or agro-processing. The AEF focuses on energy-intensive agricultural activities such as irrigation, intensive agricultural production systems, and on-farm cold chain-related activities. Since its launch on 29 August 2023, a total of R24,425 million has been approved as of 31 May 2024, with R7,989 million provided as grants and R16,436 million as loans, supporting nine transactions. I encourage farmers to make use of this facility to diversify their energy sources.”
He said the department will continue to roll out the farmer supporter programmes, such as CASP amongst others.
“These producer development support grants are provided to producers who cannot afford loans. These are largely subsistence and smallholder producers on arable agricultural land. The support includes the provision of on-and-off farm infrastructure, production inputs, mechanization, training and mentorship, extension support, and ensuring these smallholder producers receive accreditation and certification to supply safe and high-quality food to the market and the public through the tailor-made SA-GAP certification programme implemented in partnership with the Perishable Products Exports Control Board (PPECB),” states the minister.
He said from 2019/20 to 2023/24, CASP has spent R6,661 billion on 2,125 projects, benefiting 59,482 smallholder producers and creating 21,762 jobs.
“Ilima/Letsema spent R2,611 billion, supporting an average production on 83,061 hectares and benefiting 296,823 subsistence and smallholder producers, while creating 81,299 jobs. In the 2024/25 financial year, R1,741 billion will be made available to support approximately 6,023 smallholder producers across all nine provinces through the provincial departments of agriculture, targeting the creation of about 3,000 jobs. Additionally, R448 million will be made available through Ilima/Letsema to support 67,492 vulnerable households with food production, aiming to create 9,461 jobs.”
