Government needs to provide more support to farmers and the Loan Bank Photo Pexels
South Africa – Over 10 million South Africans experience food insecurity. As loadshedding continues to hamstring food production, the failures of the Land Bank and other factors could see more people suffering from food insecurity.
We must understand how food production works. In order to be food secure, a country has to have enough farmers producing enough food at a stable price to ensure everyone has access to food. When the input costs to produce food skyrockets, it puts food production under immense pressure, explained Christo van der Rheede, AgriSA CEO and Agriculturist.
The Land Bank and its purpose
The Land Bank’s sole objective is to provide commercial and emerging farmers with financial services. The Land Bank uses intermediaries to onlend money to farmers, said van der Rheede. Due to the 2015/16 drought and other factors, it became harder for farmers to pay back their loans. This put tremendous pressure on Land Bank’s liquidity and availability to help farmers financially.
“Many farmers moved from the Land Bank to your normal bank. We currently owe the financial institutions approximately R200 billion. We produce food on the back of debt. If farmers are no longer in a position to pay back the money that they owe to the banks, you can just imagine the ripple effect that will have on the entire financial system.”
Currently farmers are nearing such a situation. With input costs soaring, repo rates increasing every three to four months, whatever little profits they make is being eaten up, said van der Rheede. This in turn means less money to pay back their loans.
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Farmers get little help from government
Farmers in America, China and Brazil get a lot of producer support. While the government does support farmers, it is far too little help and can spell disaster in the long run, explained van der Rheede.
“We welcome the bit of support like the diesel rebate as well as the tax incentives for solar panels but it is too little to ensure our farmers remain on the land and produce food. People will find their circumstances are not conducive. They will pack their bags and go to another country … Then South Africans will find we have a lot of land but lack the expertise to unlock the potential of the land. That is the big risk we face as a country.
Getting Land Bank back on their feet
In October Deputy Finance Minister David Masondo said the Land Bank had managed to repay 43% of the debt that was outstanding. Only R1.5 billion of the guaranteed debt remained with a further reduction of the debt expected in the financial year. For van der Rheede, the Land Bank can recover but the government needs to help.
“I think the Land Back still has a long way to go but it needs greater support from the government. I know that is a controversial topic because we spend a lot on SOE (State Owned Enterprises). The fact of the matter is the government needs to either support it or sell off to private parties.”
Simply put, South Africa would be in a better state if government provides more support to the Land Bank as well as farmers. Offering subsidies and more rebates will help to reduce the input costs. If these costs come down, the price of goods will decrease and food insecurity will reduce. This will also help farmers to have a bigger profit allowing them to pay back their loans more quickly.
To hear more from Christo van der Rheede about what else South Africa can do to remain food secure, listen to the podcast here:
