Agricultural finance is key to South Africa's inclusive agricultural growth agenda

Agricultural finance is key to South Africa's inclusive agricultural growth agenda

We have spent the past couple of months in South Africa's agriculture drafting the growth strategy that would take the sector to greater heights than the gains we have seen since 1994. The sector has more than doubled in value terms since 1994. The lagging part of this growth has been 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 to support the 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.
  • Developing localized food, import replacement and expanded agro-processing.

These are broad points, but the document takes a commodity-based approach and identifies key hindrances of 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 government and all social partners. Such an approach ensures that each key stakeholder takes responsibility in the implementation process.

The burning question will be financed as we proceed towards the implementation phase or phase two of the process. Some of the instruments the government has are Blended Finance and its budget, and it will also rely on the support of social partners on some occasions.

This is also an area where the Land Bank will play a crucial role in the coming years. Admittedly, the organisation 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 stabilizing the organisation and ensure that it remains the prime player in South Africa's agricultural economy. The efforts to stabilize the Land Bank should be supported.

The organisation has a long history of supporting the agricultural sector, although in the past, over 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 holds growth potential, and over 2 million hectares of land could come under commercial production in the coming years.

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.

- Wandile Sihlobo is the author of Finding Common Ground: Land, Equity and Agriculture.