Finding alternative sources for agricultural financing

Agricultural financing remains one of the toughest challenges for farmers in South Africa after the collapse of Landbank. 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 in which Landbank collapsed, leaving them in a financing vacuum.

Out of need, many different institutions from the private sector stepped in to try and fill the void that Landbank left. 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. They are 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 opportunities like these.

Some cooperatives and agricultural input providers managed to source foreign financing to replace Landbank as original lender. This process has its own risks, such as volatile exchange rates, and 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.

Another option that is 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.

Rabo Bank, the Netherland-based cooperative bank that is also present in a number of our neighbouring countries and elsewhere in Africa, has expressed their appetite and conditions for expansion into the South-African agricultural market. Over the longer term the dream of setting up a cooperative bank in South-Africa, that will belong to the farmers themselves, will probably gain traction.

As planting time approaches, farmers are getting more desperate to obtain access to financing. Without financing there is no production.

For more information or contact details on any of the above options please email [email protected].