Question NW545 to the Minister of Agriculture, Land Reform and Rural Development
22 April 2024 - NW545
Masipa, Mr NP to ask the Minister of Agriculture, Land Reform and Rural Development
With regard to the Land Bank clients who frequently voice concerns about the impact of higher interest rates on their loans with the bank, how is she and/or her department supporting the farmers in mitigating the effects of higher interest rates, which often constrain their profits, ability to pay workers and their livelihoods?
Reply:
The Department of Agriculture, Land Reform and Rural Development (DALRRD) has established the Blended Finance Scheme to broaden access to affordable finance through the provision of grants which are intended to complement loans granted by Participating Finance Institutions (PFI) towards the commercialisation of Black producers, with the goal being to increase the number of Black producers in the agriculture and agro-processing sector.
Land Bank was the first PFI to be signed up by DALRRD through an agreement, covering a period of 10 years, effective from 2023 to 2032. The agreement caters for an allocation, to Land Bank, of a minimum R325m of annual grant funding by DALRRD for the first three years (2023 –2025) of the agreement.
The Blended Finance Scheme provides for a grant allocation of between 40% and 60% of the total approved facilities by the PFI:
- A maximum of 60% of the total funding required by a smallholder producer (not exceeding R5m for production support and R10m for land acquisition);
- A maximum of 50% of the total funding required by a medium scale producer (not exceeding R10m for production support and R20m for land acquisition); and
- A maximum of 40% of the total funding required by a large scale producer (not exceeding R40m for production support and R50m for land acquisition).
Whereas the loan portion of the transaction is priced at market related interest rates, the grant portion of the total funding comes at no cost to the beneficiary, and is not repayable. This means that the client only pays for between 40% to 60% of the total funding received. This funding structure is therefore, in itself, an affordable financing solution which mitigates against the effects of higher interest rates.