The Agro-Energy Fund offers farmers a solution to rising energy costs. Craig Harrison, the provincial head of Land Bank in the Western Cape, walks farmers through the steps to assess energy needs, prepare key documents, and build a strong application, helping them reduce energy expenses and enhance farm efficiency.
As energy costs continue to rise, many farmers are searching for sustainable solutions to reduce expenses and maintain profitability.
The Agro-Energy Fund, established by the department of agriculture, land reform and rural development (DALRRD) in partnership with Land Bank, offers a blended finance option to help farmers access alternative energy sources.
Craig Harrison, the provincial head of Land Bank in the Western Cape, explains, “The department has committed R500 million to this fund, with match funding from the Land Bank. This finance instrument combines a grant, which does not need to be repaid, and a loan from the Land Bank.”
Here’s what farmers need to know about the Agro-Energy Fund and how to apply.
Step 1: Assess your energy needs
Before starting your application, Harrison advises farmers to first assess their energy consumption and associated costs.
“You need to determine if your farm requires an energy solution,” he says. “Ask an accredited energy expert to conduct due diligence on your current energy usage and recommend a solution.”
Once you have identified the need for an energy solution, reach out to a Land Bank relationship manager, whose contact details are available on their website.
Step 2: Prepare your application
The application process can be complex but having the right documents ready will make it easier. According to Harrison, key documents include:
- A feasibility study that outlines your farm’s energy requirements.
- An infrastructure design should be included in the energy expert’s report.
- Quotations for capital expenditures should detail energy consumption, cost savings, equipment costs, and the installation schedule.
- Supporting documents that the bank will require to determine affordability.
Harrison emphasises that “quotations must be accompanied by the feasibility report and should indicate whether the service provider is accredited”.
Step 3: Create realistic financial projections
One of the most important parts of the application is presenting a five-year cash flow projection.
Harrison advises farmers to keep their projections “simple and honest”, using monthly breakdowns for the first two years and annual totals for the last three. He also suggests using your historical financial information to estimate future earnings and expenses accurately.
“Make sure to include all your payments, instalments, income, and expenses. It’s important not to overstate income or understate expenses. If your energy solution reduces electricity costs, show that in your projections and include the loan instalments,” he shares.
Step 4: Stay on top of regulatory requirements
Certain projects may require a National Energy Regulator of South Africa (Nersa) license, which adds another layer of complexity.
Harrison recommends getting advice from your energy expert, contacting the provincial department of agriculture, or consulting your Land Bank relationship manager to ensure compliance with all regulatory requirements.
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Step 5: Build a strong relationship with your bank manager
A critical factor in the success of your application is building a solid relationship with your Land Bank relationship manager.
“Going forward, all farmers will have a dedicated relationship manager who will assist them. They are highly skilled and seasoned bankers who can guide you through the process,” he says.
Final tips for success
Harrison’s key advice for farmers is to ensure that all supporting documents are submitted on time. “Failing to provide the necessary paperwork can delay the application process.”
By following these steps and maintaining open communication with your Land Bank relationship manager, farmers can increase their chances of securing funding through the Agro-Energy Fund and invest in sustainable energy solutions for their operations.
For more information, visit Land Bank’s website or contact your nearest Land Bank relationship manager.
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