The World Bank said it provided a long-term financing solution for Land Bank’s Financial Intermediation Project which will be repaid in local currency.
The deal, which has a 25-year maturity period, will enable the Land Bank to give financial aid to participating financial intermediaries (PFIs) and direct beneficiaries.
The World Bank said the resultant disbursement would enable the Land Bank to sustainably scale up its sources of funding to benefit emerging farmers.
The project is supported by a R1.3 billion line of credit with a government guarantee.
The Land Bank said the loan would assist it in driving a new approach of integrating emerging farmers into established value chains.
It said that it would provide both wholesale finance to PFIs for on-lending to both commercial and emerging farmers as well as direct financing, in partnership with large agricultural corporates, to emerging farmers to support their integration in established value chains.
Land Bank chief executive Petrus Nchocho said the agreement represents a vote of confidence in the development work being undertaken at Land Bank.
“We are excited that Land Bank is at the forefront of furthering national imperatives around transformation and inclusivity in the sector and this disbursement will go a long way in ensuring the availability of sustainable finance solutions to deepen our development impact,” said Nchocho.
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The agreement comes with a number of requirements to ensure effective governance around on-lending and reporting, including the alignment and integration to the institution's environmentally and socially sound and sustainable development principles that the PFIs would have to comply with.
World Bank country director Paul Noumba said the measures were meant to ensure appropriate risk management processes for loan applications.
Noumba said: “Through this loan, emerging farmers in particular will have increased access to affordable finance, which is critical to South Africa’s aim to create jobs, reduce poverty and lessen inequality by promoting agriculture and rural development.”
Noumba added that South Africa shared the same principles with the World Bank, that of reducing poverty:
“It is an aim that is contained in the country’s national development plan and aligns with our own objectives to reduce poverty and improve shared prosperity,” said Noumba.
He said the Land Bank would be responsible for implementation and monitoring of the World Bank financed Financial Intermediation Project through a team being led by its chief financial officer, Bennie van Rooy, with the support of the chief operating officer/s and the respective operational teams.