While the agribusiness sector hailed the government’s actions to avail its land as a positive step that would contribute to the growth of the country’s agricultural fortunes and job creation, the sector said financing the new farms could prove a challenge. Picture: Motshwari Mofokeng/African News Agency(ANA)
While the agribusiness sector hailed the government’s actions to avail its land as a positive step that would contribute to the growth of the country’s agricultural fortunes and job creation, the sector said financing the new farms could prove a challenge. Picture: Motshwari Mofokeng/African News Agency(ANA)

Agribusiness hails land unlocked by government but concerned about financing

By Given Majola Time of article published Oct 6, 2020

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DURBAN - While the agribusiness sector hailed the government’s actions to avail its land as a positive step that would contribute to the growth of the country’s agricultural fortunes and job creation, the sector said financing the new farms could prove a challenge.

The Agricultural Business Chamber(Agbiz) chief economist Wandile Sihlobo said this was also seen in the past land redistribution programmes where beneficiaries who had no tradable leases on the land and the efficacy of the blended finance proposals was yet to be tested. “We have in the past argued that the growth of South Africa’s agricultural fortunes and job creation will, in part, depend on the expansion of agricultural activities in the underutilised former homelands regions and farms that government acquired through the land reform process. Hence, we viewed this past week’s announcement by the Minister of Agriculture, Land Reform and Rural Development, Ms Thoko Didiza, that government would be availing 700 000 hectares of agricultural land as broadly positive,” said Sihlobo.

Agbiz said the The provinces with a specified large supply of land equating to 529 014 hectares were North West with 300 000 hectares, Limpopo with 121 567 hectares, the Eastern Cape with 43 000 hectares, Mpumalanga with 40 206 hectares, the Northern Cape with 12 224 hectares, Free State with 8 333 hectares and KwaZulu-Natal at 3 684 hectares.

Sihlobo said that other important aspects for the success of this programme would be the readiness of the beneficiaries to farm (their know-how of farming) as well as the availability of resources such as finance and infrastructure of the farms.

The government stated that beneficiaries would be subjected to a compulsory training programme before gaining full access to the farm. Agbiz said this was an important step as there might be young people aspiring to join the sector but had minimal experience. He said that there should be training programmes which broadly related to financial and business management and yet also cater to specialized training for commodities that a beneficiary wishes to focus on. “Also, there will need to be active extension officers or mentors to assist the new farmers,” said Agbiz.

The chamber said that the state of the infrastructure on these farms was unclear at this point. Each farm might be in a different condition from the next as some might have been bought by the State a couple of years ago and the infrastructure might not be in a suitable condition. “A clear assessment of this, and an upgrade where necessary, will be key before the new beneficiaries take over the farms. In some cases, beneficiaries with large capital resources might be better placed to refurbish the farm infrastructure. This will be from irrigation, fencing, housing, amongst other aspects, all depending on the type of farming enterprise. To gain capital, it will be vital that the blended finance products being developed jointly between the government and the private sector are operationalized as soon as possible,” Sihlobo said.

According to Agbiz these farms would be issued a non-tradable, 30-year lease, which means the potential beneficiaries might not be able to use the land as collateral to access production finance unless a stepping-in right is registered over the lease. “We foresee this as a potential major challenge in ensuring that these farms are productive and contribute towards growing the South African agricultural fortunes and job creation.”

In his weekly letter sent out on Monday, President Cyril Ramaphosa said that agricultural land was the mainstay of the country’s natural resource base. “The availability and sustainable use of farmland to grow crops and for animal husbandry is key to our very survival.South Africa has vast tracts of land suitable for agricultural production, with 37,9 percent of our total land area currently being used for commercial agriculture.,” wrote Ramaphosa.

He also wrote that the continued monopolization of a key means of production like land was not just an obstacle to advancing a more egalitarian society but also a recipe for social unrest. “The hunger for land to farm is growing, especially amongst the rural poor. And for a number of reasons, the pace of land reform in this particular sector has been slow and unsatisfactory.

The president said that transforming the patterns of agricultural land ownership was vital not just to address the historical injustices of the past, but to safeguard our nation’s food security. “As noted in the 2019 report of the Presidential Advisory Panel on Land Reform and Agriculture, “whilst we export food, back home 41 percent of people in rural areas and 59,4 percent in urban areas have severely inadequate access to food.”

Ramaphosa also wrote that broadening access to land and opportunities for farming would support job creation and enterprise development, and improve the market for food, agricultural goods and services. He said that the ultimate goal of releasing these land parcels was to transform the agricultural landscape by growing a new generation of farmers. Leasing land under such favourable conditions must spur them to think big; to not just grow their own businesses but to advance shared wealth and prosperity in the communities in which they farm,” said the president.

Meanwhile, Agbiz said that South Africa’s food price inflation slowed to 4.3 percent year-on-year in August 2020 from 4.6 percent in July. Sihlobo said this was primarily on the back of a deceleration in meat and fish products price inflation, which overshadowed the uptick in other products prices such as oils, fats and fruit.

“While we expect South Africa’s food price inflation to remain subdued for the rest of the year, the rising grains prices have introduced additional upside risks. Hence, we now think South Africa’s food price inflation could average around 4.5 percent in 2020. Already, in the first eight months of the year, food price inflation has averaged around 4.4 percent. This is slightly higher than our initial expectations of about 4 percent at the start of the year.”

Sihlobo said going forward, South Africa’s food price inflation would remain contained into 2021 as South Africa expected a good agricultural season on the back of a La Nina weather event which should help contain grain prices while supporting all forms of agriculture output.

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