During a discussion held at Nampo Cape in Bredasdorp this week, Willie Aucamp, minister for the Department of Agriculture, said government had failed many small-scale farmers in their transition to commercial agriculture. He added that lessons from unsuccessful interventions needed to shape a different approach going forward.
“Let’s be honest and admit that the agri-hubs have been a failure. Anyone who says otherwise is lying. I have been to hubs where tractors stand idle in storerooms, having never worked a day. It is nothing more than window dressing,” said Aucamp.
He said that going forward, cadre deployment needed to end, the right people with the right skills needed to be employed in the department, and title deeds needed to be transferred to farmers to increase their financial security.
Land ownership
A farmer attending the discussion agreed with Aucamp’s sentiments, saying that he had farmed government-leased land for 14 years without a title deed. Unable to use the property as security for finance, he had sold his bakkie and used savings intended for his children’s education to keep farming.
To begin rectifying the issue of land ownership and title deeds, Aucamp said government planned to identify 100 farmers in each province, conduct due diligence and transfer government-owned land to them.
“If you own the farm, you will put your heart and capital into developing it. It also opens up financing models, because you cannot approach a commercial bank with the same security when you are farming on leased land.”
Finance and lending
Responsible lending was equally important, particularly given the Land Bank’s history. The state-owned agricultural lender defaulted in April 2020 after liquidity constraints prevented it from meeting a scheduled debt payment, triggering a cross-default across its R40 billion debt portfolio.
Aucamp said loans had previously been granted without sufficient due diligence, although he acknowledged that the Land Bank had since improved its processes.
“There has definitely been a change at the Land Bank, and that needs to be acknowledged. Whatever we do now must take us further away from another default.”
He said blended finance could play an important role in expanding farmers’ access to capital, but funding had to be directed towards viable businesses.
“Blended finance is a very good system, but it can only work if proper due diligence is done and the farmer is capable of farming successfully. We cannot simply give out money without ensuring that it can be used productively.”
Jabu Mphambo, acting CEO of the Land Bank, said demand for agricultural finance remained significant, particularly among emerging farmers, but the bank also had obligations to its own funders.
“Every deal that is approved goes through a due diligence review. We borrow money and those lenders expect us to repay it, so although farmers may be disappointed when an application is declined, we have to be strict.”
For Aucamp, the ultimate measure of agricultural support was whether it enabled farmers to build profitable businesses. “Farmers cannot provide food security if they cannot make a profit. Profit is not a sin. It means more investment and growth in the rural economy.”
