Categories: South Africa

Proposal for more affordable land reform financing

Agri SA believes it has a funding mechanism which would fast track government’s slow land redistribution efforts.

According to AgriSA president Johannes Möller, joint ventures have proven to be very successful in not only accelerating the redistribution of land but also transferring skills.

These ventures are however largely funded through private capital, something which not all farmers can afford. The high cost of financing for commercial farmers and beneficiaries plus financial institutions’ aversion to the high risk associated with land reform projects are preventing this form of land redistribution of becoming more widely adopted.

AgriSA proposed that the state deploy credit enhancement techniques to alleviate this challenge. State guarantees for loans would allow for lower interest rates and entice commercial banks to relax traditional underwriting criteria allowing for more empowerment partners to qualify for credit.

In addition, a debt service reserve fund was suggested as an alternative to state guarantees on commercial loans. Möller also asked government to consider interest loan subsidies on a sliding scale with graded repayment.

“ An entity arising from an agricultural joint venture would not be required to repay the full interest immediately and the grading of interest payments over time would be determined by the level of ownership by previously disadvantaged individuals,” he said.

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