Agriculture is in need of commodity-driven funding to facilitate and enable transformation in the sector. This was the call made by Hortfin chief executive Michael Brinkhuis following the launch of a new blended finance model for the fruit, table grape and wine industries.
The model – a facility that uses grants to complement loans provided by FNB – was welcomed by new era farmers across the country.
Hortgro executive director Anton Rabe says each commodity should have its own blended finance programme.
“I believe that this commodity-based approach where your Hortgro and Vinpro’s of the world are involved, that is the only way forward. That model is working in the Western Cape, and we need to duplicate it in other parts of the country,” he says.
In reference to the Land Bank’s recent launch of its own blended finance programme, Rabe says he cannot help to be sceptical. “If that is going to be driven without commodity involvement it is not going to work.”
Meanwhile, Brinkhuis says blended finance transactions worth R37.2 million have already been processed by FNB with a further R90 million currently being evaluated by the bank. “There are about 15 more projects that are in the pipeline – all in different stages [of application]. In total, those projects are worth R350 million.
“This is a loan that is payable based on the merit of the project. it could be ten to 15 years. This is done in a way not to put pressure on the farmer and allows them to have flexibility when it comes to repayment,” he explained.
‘Level the playing field’
Najwah Allie-Edries, the deputy director general of employment facilitation for the Jobs Fund pointed out that money alone would not ensure sectoral growth. Farmer development was also key.
She called on financial institution to emulate what FNB did by putting money and resources into agriculture.
However, Najwah Allie-Edries, deputy director-general of employment facilitation for the Jobs Fund, points out that money alone would not ensure sectoral growth. Farmer development was key, she says while calling on other banks to follow FNB by investing money and resources into agriculture.
“We have to level the playing field. It cannot be said that transformation has been slow while the value chain in the sector is well developed. Access to [these] value chains for emerging farmers are being ham-stringed by lack of access to land, inappropriate financing mechanisms, [and a lack of] technical skills and mentorship.”
Since its inception, the Jobs Fund has allocated approximately R360 million towards 42 projects in agriculture.
“These interventions have largely focused on reducing barriers to entry for smallholder and emerging farmers. And it addresses specific challenges that hamper the ability to sustainably grow farming enterprises. [These] collaborations with financial institutions are critical,” says Allie-Edries.
Farmers grateful for Hortfin, FNB partnership
Meanwhile, Jotta Plaatjies, a stone and pome fruit producer from Montagu in the Western Cape, says the partnership between Hortfin and FNB couldn’t have come at a better time in his own farming journey.
He is one of the blended finance beneficiaries. Through a R1.7 million loan, he was able to build a dam on his farm, acquire implements and fund production capital.
“I bought this farm in 2015. As I progressed, I realised that water was scarce. We live in an area that depends on groundwater. With the recent droughts, water is even more scarce,” he explains the reason for building a dam.
“I have two small dams on the farm, but I needed to increase its capacity to store water. It was Hortfin who came with partners and made it possible for me to get a loan to build a dam and a borehole.”
Another beneficiary, A&B Williams Fruit Distributors in Pniel, outside Stellenbosch, received a R23-million loan to build their capacity amid a rise in demand for their services. One of the co-owners, Natalie Williams, says the loan from Hortfin and FNB ensured that they were able to keep their doors open and sustain more than 200 jobs.
“We had many challenges when we started,” she says.
“We could not pack apples throughout the year. Fruit was only available in season. This is where we started building cold rooms. We have a good name in the industry and the more it spreads, the greater demand we have from producers to export their fruit.”
With increasing demand, Williams and her fellow farmers initially had to lease space on other farms to store their fruit upon harvesting. They eventually reached out to Hortfin with the intention to build eight cold rooms.
Meanwhile, Western Cape agriculture minister Dr Ivan Meyer calls on more financial institutions to come on board as the sector was contributing 11% of the provincial gross domestic product, and 55% of exports across the country.
He believes agriculture was worthy of support and referenced how during the Covid-19 pandemic the sector was still thriving despite farmers not receiving any subsidies from government.
