Land Bank offers drought-affected farmers soft loans

15th April 2016

By: Mia Breytenbach

Creamer Media Deputy Editor: Features

  

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State-owned specialist land and agricultural financial services provider Land Bank has called on farmers in drought-declared provinces to apply for concessional loans, raised by the bank from the Industrial Development Corporation (IDC), to help ease the effects of the drought and return farming to viability in the long term.

The IDC advanced a concessional loan of R400-million to the Land Bank for on-lending to farmers, which can apply for these loans immediately.

Government declared KwaZulu-Natal, Mpumalanga, North West, Limpopo and the Free State disaster areas last year, following poor rainfall, which led to critical losses in production, especially of maize.

Maize production, particularly white maize, is set to decline considerably this season, owing to a marked reduction of some 27.1% in the area planted.

Further, agriculture growth fell by 8.4%, the largest yearly decline since 1995, accord- ing to Statistics South Africa, while weather phenomenon El Niño’s effects have resulted in the sector contracting by 14% and losses of more than $1-billion.

“The conditions in the affected provinces are unforgiving to the crops and livestock. In keeping with our mandate, this collaboration effort with the IDC is an offer of practical support to help farmers cope . . . and recover when conditions improve,” Land Bank CEO TP Nchocho said in a statement late last month.

He explained that the lending conditions for the concessionary loans were “fairly relaxed” and available in three forms – the rate of interest at prime less 3%, repayments that can be made over an extended period and the bank’s offering of an extended capital moratorium of up to two years.

“These loans represent the cheapest finance available to farmers in drought-declared areas in the country today,” Nchocho averred.

The loans can further be used as a source of emergency working capital to reduce further losses to current farming operations and carry over debt, as well as repair and replace weather-damaged property and equipment. The Land Bank will also use the funds to provide companies involved in primary agriculture with start-up capital.

Financing Advance
The bank was also looking to advance a further R15-billion in the next three years towards financing growth and the transformation in the agriculture sector. This funding could be accessed for land acquisition, farm-level infrastructure development and the commercialisation of underused land, particularly in rural areas, as well as expanding agroprocessing opportunities.

The Land Bank has also intervened using various measures to reduce risk, either through rescheduling debt or new facili- ties. These include a carry-over debt facility for production credit, restructuring and capitalising arrears or instalments due, granting repayment holidays depending on cash-flow projections, adjusting loan to value from 60% to 75% (fully collateralised) and extending the repayment period for the remaining term of the loan.

The bank further offers a facility for tax relief to livestock farmers in disaster-declared areas, whereby farmers are granted exemption from income tax on livestock sold because of the drought. However, the onus of determining whether a farmer qualifies for the tax incentive rests with the South African Revenue Service.

While these initiatives were established amid growing concerns about drought conditions in the country and El Niño’s stranglehold over weather patterns, Nchocho stressed that more collaborative interventions would be required to help the sector recover from “the worst time in decades”.

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Edited by Martin Zhuwakinyu
Creamer Media Senior Deputy Editor

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