Saving grace

New Land Bank scheme to provide emerging farmers with affordable loans

Land Bank secures funding for African Farmers
Farm workers
The Land Bank and the African Development Bank have entered into a R1-billion funding agreement that will enable both emerging and commercial farmers to access finance at affordable rates. The Bank will repay the loan over 15 years.

According to the Land Bank, the challenges facing emerging farmers can be mainly attributed to the gap in agricultural funding caused by rapid regulatory and market changes over the past two decades. The loan includes a two year grace period on repayment which enables the Bank to provide funding to emerging famers that is tailor-made to their specific cash flow requirements.

The facility is the first significant international funding for the state-owned Land Bank since the Treasury intervened in 2009 to save the institution from possible collapse after a period of mismanagement, and is indicative of a growing confidence in the bank's operations.

Land Bank CEO, Phakamani Hadebe said borrowing requires a grace period in both capital and interest components of the loan until the project or farm starts generating cash flow to service the debt and to this end the emerging farmers will benefit from the two year grace period offered by the facility.

“The Bank strives to strike a healthy balance between its development mandate and the business imperative of running a sustainable agricultural finance institution. The facility therefore goes a long way in mitigating risks associated with financing few farmers,” Hadebe said.

The facility dovetails well with the new developmental initiative the Bank and the government have embarked on among which are the establishment of Retail Emerging Markets (REM) as a dedicated banking division for emerging farmers and Government approved resuscitation plan for distressed farmers which includes.

According to Land Bank’s Acting Chief Strategy Officer, Greg van Wyk, the facility is structured in a way that emerging farmers can access the finance from a R 500-million pool tailored-made for start-up, and established development farmers benefiting from the other R 500-million.

“This approach will go a long way in balancing the developmental imperative of the mandate, while at the same time implementing prudent financing principles associated with an economically sustainable financial institution,” Van Wyk said.

Finance Minister, Pravin Gordhan said in his 2012 Budget Speech the recapitalisation of the Land Bank would be completed this year with a final payment of R1-billion. The bank's turnaround strategy has given a boost to its performing loan book, which grew 47,4% from R13,6-billion in 2010/11 to R20,1-billion in 2011/12.
comments powered by Disqus

R1
R1

This edition

Issue 30
Current


Archive


Harvest_SA Transforming agriculture - Facilitating the entry of black participants https://t.co/stdhTw9EZV https://t.co/FamDCQh1sI 14 days - reply - retweet - favorite

Harvest_SA Driving water efficiency in the agro-processing sector https://t.co/nxAUKpC2pa https://t.co/2yj4Gs9lNR 14 days - reply - retweet - favorite

  • Terrence Damster
  • Cedrick Ramaboya
  • Adolf Mutarangani
  • JC Van Der Walt