Finance is key to South Africa’s inclusive agricultural growth agenda

We have spent the past couple of months drafting the growth strategy that will take South Africa’s agriculture sector to greater heights than the gains we have seen since 1994. The sector has more than doubled in value terms since then. This growth has lagged in including black farmers at the commercial level – they still form roughly 10% of the commercial output. 

The growth strategy, such as the Agriculture and Agro-Processing Master Plan, not only aims to boost the share of black farmers’ participation in the sector, but also to support established commercial farming for a robust, inclusive sector. This growth will be delivered through various interventions, including:

• Resolving policy ambiguities;


• Ensuring food security, expanded production and employment creation; and


• Developing localised food, import replacement and expanded agro-processing.

These are broad points, but the document takes a commodity-based approach and identifies key hindrances to inclusive growth and potential expansion areas. This makes the plan generally distinct from some files we have seen in the past. 

Notably, the master plan is a co-creation process of the government and all social partners. Such an approach ensures that each key stakeholder takes responsibility in the implementation process.

https://www.dailymaverick.co.za/article/2022-05-11-we-need-a-revolution-in-african-farming-regenerative-agriculture-could-be-the-catalyst/

The burning question will be finance as we approach the implementation phase, or phase two, of the process. The instruments the government has include blended finance and its budget, and it will occasionally also rely on the support of social partners. 

The Land Bank too will play a crucial role in this area over the coming years. Admittedly, it has had some challenges since the start of 2020, but the finance minister appointed a new board at the end of 2021, which seeks to work towards stabilising the organisation and ensure it remains the prime player in South Africa’s agricultural economy. The efforts to stabilise the Land Bank should be supported. 

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The organisation has a long history of supporting the agricultural sector, although in the past, more than two-thirds of its business has been with commercial, mainly white farmers. From now on, it could play a crucial role in development while maintaining its commercial presence. 

Other financial organisations also have a role to play, but the Land Bank’s role is quite distinct because of its developmental mandate. There is also a business case for the Land Bank. Agriculture has potential for growth, and more than two million hectares could come under commercial production in the next few years. 

https://www.dailymaverick.co.za/article/2021-01-19-treasury-gets-tough-on-land-bank-intensifying-the-soes-risk-of-financial-collapse/

With global demand for food and agricultural products set to remain solid for the coming years, investing in the agricultural sector is a positive step. Importantly, focusing on high-value crops would be even more rewarding while also creating employment – a positive for social good.

Ultimately, we have plans to grow South Africa’s agriculture. But for this agenda to succeed, agricultural finance is crucial. At the heart of it is also the revival of the Land Bank and not undermining this important organisation that could be instrumental for inclusive growth. DM