The Industrial Development Corporation (IDC) and the government have announced the launch of a R1bn agri-industrial fund to help black commercial farmers expand production and export their produce as the Land Bank, tasked with doing so, founders under poor financial management.
The department of agriculture, land reform & rural development announced last week it will provide R1bn to be used as grants as part of a blended finance offering the IDC will provide to black-owned farmers and companies in the agricultural food chain.
“We are looking to assist businesses to increase output and expand production as part of ongoing efforts to sustain the economic recovery. But the gap has partly arisen from problems with Land Bank,” said IDC CEO Tshokolo (TP) Nchocho, a former CEO of the Land Bank.
There are specific operations the money can be allocated to. It must be applied to black-owned producers that align with the IDC’s objectives of expanding long-term, high-value horticultural crops and other agricultural commodities.
The Land Bank became financially distressed in 2020 as growing bad debts in part caused by adverse weather conditions impeded its ability to service interest on its commercial paper.
Rand Merchant Bank was appointed adviser to the distressed state-owned entity that provides loans to emerging and commercial farmers.
Finance minister Tito Mboweni announced in the budget speech in February that the Land Bank would receive a R7bn recapitalisation over the next few years. Commercial banks such as FNB and Absa that are involved in agricultural finance have used the opportunity to increase market share.
Nchocho said the IDC intends to use the money allocated as grants alongside other lending products to optimise the balance sheets of eligible producers in the agricultural supply chain.
“Combining different types of money is at the core of the IDC’s approach. But the money can only be allocated to farmers and producers that are expanding their operations,” said Nchocho.
He said the agricultural sector had been one of the most resilient in the economy, with the lowest non-performing loans in the IDC’s portfolio.
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