Achieving full potential

Collaboration crucial in unlocking South Africa’s agriculture sector

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The National Development Plan (NDP) sets out a clear vision for creating an integrated and inclusive rural economy, with the agricultural sector at the centre of this development. It goes further to state that the agricultural sector has the potential to create an additional one million jobs, an ambitious target for all sector players to work towards achieving.

There can be no doubt about the strategic nature of the agricultural sector in as far as its potential to contribute to economic growth and job creation. However, for the sector to grow and safeguard the country’s food security, it must seize the opportunity to open up and become much more accessible to emerging farmers. Inclusive participation will certainly lead to sustainable growth, ensuring that as many people as possible contribute and benefit from the economic benefits driven by the sector

The Land and Agricultural Development Bank (“Land Bank”) is one such organisation whose mandate is to facilitate economic transformation and social inclusivity in the agricultural. While creating access to financing to grow the agricultural sector is a core part of what the Bank does, it believes that funding alone is not the sole catalyst for growth. The transfer of skills from large commercial farmers to emerging farmers, including vulnerable groups such as women and the youth is a key component for driving growth of the South African agricultural sector. For this to happen, there must be greater collaboration between established players and new entrants so they become integrated into existing value chains.

Land Bank is already working with a range of stakeholders to achieve transformation and social inclusivity in the agricultural sector. In addition to the direct debt and equity funding provided to both commercial and emerging farmers, this collaboration is seeing an increase in development financing through established commercial business in the sector who act as intermediaries, on-lending to emerging farmers around them. This move towards a more blended finance approach is ensuring that funding gets to those who really needs it, enabling organisations such as Land Bank to better manage the risks associated with this type of lending.

Zolarity (PTY) Ltd
Where: Limpopo

Zolarity, in Limpopo, is a joint venture between Limpopo Dairies and their Workers’ Trust, a majority black grouping who own 51% of the business with Limpopo Dairies owning a 49% share.

Financed by Land Bank, Zolarity acquired unutilised land adjacent to the dairy upon which to expand and diversify its operations.

With an off-take agreement in place through Limpopo Dairies, the initiative received the boost that it needed. In addition to a guaranteed off-take agreement, Limpopo Dairies provides technical assistance to the farmers to ensure that they meet the stringent commercial standards required by the Dairy.

The project also has a comprehensive crop diversification plan in place, which is to be rolled out in three phases over five years that will see maize production, blueberries and alternative energy generation becoming the focus of the venture.

Land Bank’s involvement from a development impact perspective is focussed on sustainably increasing the commercialisation of underutilised to deepen economic transformation and social inclusivity in the sector.

Some of the benefits already realised include the employment of eight permanent employees who are all registered for UIF, receive a Provident Fund and have access to bursary schemes. Moving forward, Zolarity is looking to create 150 jobs by the end of 2018 and a number of new businesses while continuing to provide skills training in operations management to grow this emerging farmer base.

The Ndwandwa Community Trust
Where: Mpumalanga

Land Bank is one of the financiers of the Ndwandwa Community Trust in Badplaas who acquired 29 farms on 9800 hectares through successful land claims in 2003. By facilitating a partnership with a commercial farmer who provides the necessary technical support to the community trust, a total of 555 hectares has been brought under production with a mix of maize, soya beans and dry beans already planted. The Banks support has served as a catalyst for further development, with more land being earmarked for production in a phased approach.

Akwandze Financial Services
Where: Mpumalanga

Akwandze Agricultural Financial Service was established in 2006 after land was transferred from the previous owners to a newly established Community Property Associations (CPA). The project was set up to provide financial services to these property associations, strategic partners and small-scale farmers in the sugarcane production industry.

Akwandze is backed by a unique partnership between TSB sugar and the Liguguletfu Co-operative. The organisational shareholding structure consists of a 50 - 50 partnership between TSB Sugar RSA and Liguguletfu Co-operative Limited, the latter representing the sugar cane growers in the region (currently 889 members). Both shareholders have invested a total of R25 million in Akwandze and have extensive knowledge and experience in sugar cane milling and production.

Land Bank has partnered with Akwandze Financial Services in Mpumalanga to bring this communal land in the area under production. Working through Community Property Associations and Strategic Partners as well as Small Scale Growers in the sugarcane production industry, the partnership has already seen the creation of nearly 4000 jobs, the establishment of 17 new businesses along the agri-value chain and an off-take agreement with RCL Foods for the emerging farmers.

The Sernick Group
Where: Free State

The Sernick Group, a specialist business involved in end-to-end beef production, approached the Land Bank for assistance in supporting 59 emerging black livestock farmers who are currently supplying into the business.

Managing Director Nick Serfontein noticed that some of the livestock being supplied by these farmers did not meet Sernick’s quality standards and as such, he sought to put in place a solution to address the issue head on.

Land Bank extended a R25-million credit facility to The Sernick Group in order to support these 59 emerging black farmers to manage 3,500 wieners during 2016. The Sernick Group acts as a financial intermediary, borrowing on behalf of these farmers who would ordinarily be viewed as too high of a risk to qualify for traditional financing from the commercial banks. The Group then on-lends to these farmers, who enter into a three-year repayment agreement replete with a comprehensive technical support programme to ensure that quality standards improve. Farmers are able to access quality animals, The Sernick Group’s feedlot as well as the educational and technical support offered through the programme. All profits earned are shared between the farmers.

The sole objective of the facility is to commercialise these farmers and give them access to established value chains while they benefit from the intellectual property and technical support of an established commercial player. Land Bank recently (May 2017) extended an additional R25-million-credit facility to expand the programme due to its successful implementation during the initial phase.

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