A blended financing programme announced by President Cyril Ramaphosa in his 2018 economic recovery plan speech almost two years ago has left many black farmers exposed, with their businesses at risk.
Farmers are pleading with the Land Bank and the department of agriculture, land reform and rural development (DALRRD) to play open cards about the programme, which has dashed the hopes of many farmers. They are asking the developmental bank and department to be frank about the long delays and empty promises that have characterised the process.
Farmers were hoping to use a combination of grant and loan funding promised by the Black Producer Commercialisation Programme Blended Finance (BPCP-BF) to acquire land to expand their agriculture enterprises.
The programme was launched to facilitate the commercialisation of 450 farmers by providing them with a blended funding solution comprised of a loan and grant component. Its stated aim is to help farmers procure land and to increase participation of black producers owning and controlling the agriculture, forestry and fisheries value chains.
Blended finance scheme crippling farmers
However, farmers have come out saying that the programme intended to develop them has instead crippled them. Some have suffered revenue losses directly due to the loan agreement conditions laid down by the programme.
A sheep farmer in the drought-stricken Northern Cape says the programme has done nothing but turn his business on its head. The farmer asked Food For Mzansi not to use his real name, as he fears victimisation for speaking out, so we are referring to him as Elton Klaasen.
Klaasen applied in February 2019 and was informed (via email) that the Land Bank had approved his application, subject to final approval from the funding forum of the former Department of Agriculture, Forestry and Fisheries (DAFF). (DAFF has since been combined with the former department of land reform and rural development to form DALLRD under minister Thoko Didiza.)
After submitting his application, Klaasen was plagued by severe drought. In normal circumstances he would sell some of his ewes to relieve the pressure, but this time he couldn’t. The conditions of the BPCP-BF programme made it impossible for him to do so.
Among other things, farmers are advised not sell or acquire any inputs after Land Bank’s evaluation of their land as this would negatively affect their application. Farmers are also not allowed to make any production changes during the application process.
Klaasen says he had to hold onto his ewes even though he couldn’t afford to feed them. Some of them eventually died.
‘I was excited when I heard about the programme. I saw this as an opportunity to expand my business. I could buy more land, farm with more sheep and make my business economically sustainable,’ Klaasen says.
With his BPCP-BF pay-out, Klaasen planned to buy a neighboring farm of about 5000 hectares. His current farm of 3800 hectares can only accommodate 600 ewes, but with the new farm he could add 1000 more.
It has been close to two years and Klaasen is no closer to buying that adjacent property. “They just need to be frank and play open cards,” Klaasen says. “Tell us the truth. I’ve lost business and money because of your delays.”
“Rather tell us that the program is no more. That would be better, because then I would know what I have to do tomorrow to save my business,” he says.
How blended finance was supposed to work
Rebecca Phalatse, general manager of marketing and communications at the Land Bank, tells Food For Mzansi that so far, “just over R99 million has been disbursed to beneficiaries through the blended finance scheme.
She says that bank’s development and transformation loan book has grown significantly over the last three years, approximately 20% of the total loan book as at end of March 2020.
The BPCP-BF has both a loan and grant component. The grant complements the loan and fills the equity gap which most growing farmers are faced with. Many up-and-coming farmers have thriving businesses, but because they don’t have ownership of the land they farm on they can’t get credit to scale their businesses.
‘What happened was, those who were in government and who served on the committee were the ones at the front of benefitting.’ – Noko Masipa, member of parliament’s portfolio committee on agriculture, RURAL DEVELOPMENT and LAND REFORM
The BPCP-BF was announced in September 2018 and initiated in November of that year, to be implemented by the Land Bank. The Land Bank was to assesses all applications and provisionally green-light them, whereafter the former DAFF funding forum would give final approval.
By April 2019, successful applicants were notified of that BPCP-BF was being suspended to undergo a review and assessment by the former DAFF for improvement purposes.
In March this year, the suspension was finally lifted, and farmers were asked to re-apply, as their initial approvals had lapsed according to the bank’s standard loan policy, which puts a six month limitation on the validity of approvals.
Some farmers that Food For Mzansi spoke to were informed in April that their re-applications were greenlit by the Land Bank and now again await approval by the department. Three months later, they say that they have not heard of any new developments, just that the bank is waiting for the funding forum’s final approval.
In a recent (19 June 2020) call to the developmental bank, Klaasen was informed that all applications had again been frozen due to the bank’s liquidity woes.
‘Government officials helped themselves first’
Former Western Cape provincial manager for the Land Bank, Noko Masipa, explains that the first round of applications was opened to everyone. Government officials could also apply.
Masipa worked on the blended finance programme when it was still in its infant stages. He left the land bank in October 2017 and is currently a DA MP on the portfolio committee of agriculture, rural development and land reform.
According to Masipa, “What happened was, those who were in government and who served on the committee were the ones at the front of benefitting. We were informed that the programme was suspend due to government officials and committee members who were at the front of benefitting.”
Land Bank spokesperson Phalatse says the programme was suspended in April 2019 to revise the beneficiary selection policy.
Phalatse says the reinstatement of the programme, however, unfortunately coincided with the prevalence of the Land Bank’s liquidity challenges. The bank was downgraded by ratings agency Moody’s last year after experiencing a liquidity shortfall and then again twice this year.
Phalatse tells Food for Mzansi, “Whilst we understand that the liquidity challenges negatively impact our farmers and the development agenda overall, we continue to be open to engagements with farmers as we work towards a resolution of our current financial constraints.
“In understanding the precarious situation that our farmers are faced with as a result of the Land Bank’s liquidity challenges,” Phalatse says, “the bank continues to engage with farmers based on their specific needs and our regional offices provide guidance to farmers on how to structure their transactions.”
‘Virtually my whole life is on hold’
Livestock farmer Jody Kloosman (again not his real name), also from the Northern Cape, submitted his loan application to the Land Bank in February 2019. He was informed on 26 July 2019 that his application was successful with the bank, however, was subject to approval from the former DAFF’s funding forum.
Nearly five months later in a letter dated 12 December 2019, Jansen received the same damning news as Klaasen, confirming the BPCP-BF suspension. This, after the programme had officially been suspended in April 2019 already, according to Phalatse.
Kloosman says: “I was told that following the bank’s approval, DAFF had suspended the BPCP-BF before my application could be considered by the funding forum, and that the transaction could not be finalised.”
‘I’ve been putting everything on hold. Virtually my whole life is on hold. I’ve been waiting and waiting. it’s not fair, it really isn’t!’ – Jody Kloosman
Early in March this year, Kloosman along with other applicants started receiving calls from the developmental bank saying that the suspension of BPCP-BF was finally lifted and that they had to hastily re-apply.
For a second time, Kloosman’s application was approved and declared successful in April. Almost three months later he still hasn’t heard about any new developments except that the Land Bank is waiting for the department’s funding forum for final approval.
But Masipa reckons farmers who are currently waiting on the blended scheme are in for a long wait.
He argues that because Land Bank is unable to pay out any loans now, intended beneficiaries will not be receiving anything soon. Even with the scheme having a loan and grant component, he believes government won’t pay out the grant to farmers.
Masipa adds, “While the department is ready to offer the blended finance with their grant portion, the Land Bank is not ready. The bank is in a dire position.”
A week ago Food For Mzansi reached out the department of agriculture for comment, but have had no response yet.
Kloosman’s business, however, can’t afford another delay. “I cannot plan anything for my business at this stage. I can’t get a loan from another bank to extend my business. I’m basically stuck,” Kloosman exclaims.
He tells Food For Mzansi that he has had to decline an opportunity to partner with a commercial farmer. Also, due to the BPCP-BF conditions, he has not bought any implements or breeding stock.
“I’ve been putting everything on hold. Virtually my whole life is on hold. I’ve been waiting and waiting. it’s not fair, it really isn’t!
“They promised that this thing was going to run. They let us apply, say it’s approved and then nothing happens. How long must we still wait? Some of us can’t afford to wait any longer. Already covid-19 has affected us tremendously,” Kloosman says.