What ever happened to the Micro Agricultural Financial Institutions of South Africa also known as Mafisa? According to Dr Moshe Swartz, CEO of the Black Agricultural Commodities Federation, there is nothing in the South African micro-lending market that comes close to Mafisa. He explains why this potent tool in the fight against financial exclusion, poverty, and unemployment should be revived.
I sometimes wonder if there is anyone in and outside government today, who remembers the noble intentions of both the Sustainable Development Goals (SDGs) of the United Nations and our own National Development Plan (NDP).
The ever-increasing pressure on agriculture, for the provision of “sufficient, affordable and nutritious food” for growing national populations; the need to feed the world sustainably, have been aptly recognised by the Food and Agriculture Organisation (FAO) of the United Nations in collaboration with the International Fund for Agricultural Development (IFAD). Hence their declaration of the years 2019 to 2028, the United Nations Decade of Family Farming.
There is an urgent need to implement a wide variety of innovative, effective and transformative actions to address complex social and economic challenges that beset families in their communities.
Urgent need to address challenges
The World Bank has evidence-based faith in its consideration that the facilitation of access to financial services enables the reduction of extreme poverty in society.
According to the bank’s 2022 figures, there has been a notable increase of 1.2 billion people across the world who are gaining access to financial services. On the other hand, it is quite worrying that 1.7 billion people still are excluded. It is therefore of little wonder that out of the 17 SDGs – that South Africa is a signatory of – seven have identified financial inclusion as an imperative to poverty reduction in society.
NDP – Vision 2023
Let me also throw in this small reminder; as far as the NDP, also known as “Vision 2030”, pertained to the agricultural sector:
The NDP listed the following intentions for the agricultural sector:
- The creation of 600 000 rural jobs and another 300 000 through commercial agriculture.
- The acquisition of 2 million hectares of strategically located land by 2019 (that was four years ago).
- To raise productivity in rural, communal areas and in land reform projects by developing “1 million hectares of under-utilised land”.
- Guiding how land is used, by developing and implementing spatial development plans, prioritising the 27 poor district municipalities.
- The growing of sustainable rural enterprises and industries with “strong rural-urban linkages, increasing investment in agro-processing, trade development and access to markets and financial services – resulting in rural job creation”.
- Providing support to smallholder producers “to ensure production efficiencies – 80 000 new smallholders by 2019” (that year has come and gone!).
- Rendering “every household” food secure, and being able to say “WE HAVE food on the table”.
Operation Phakisa
To facilitate the realisation of this noble vision, the government then embarked on what was supposed to accelerate its achievement by starting what it appropriately called “Operation Phakisa” (Phakisa being a Ngoni word meaning hurry-up). This was a platform for participants in the agricultural sector to come to some consensus regarding the appropriate interventions to achieve Vision 2030, targets set out in the government’s medium-term strategic frameworks.
In 2015, about 132 participants were drawn from government, academia, NGOs and CBOs, organised business, and organised labour; the private and public sectors were head-locked in what was called a “lab”. Here, they searched for evidence-based solutions to problems besetting the agricultural sector over five consecutive weeks that now appear to have evaded them.
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The arrival of the AAMP
They “receive inadequate farmer support services such as veterinary support and services, primary animal health care (PAHC), extension, infrastructure and customised finance and this results in sub-optimal production and reproduction, negatively affecting off-take rates. Skewed ownership through domination of the various value chains by a few large, vertically integrated firms and the alleged increase of input costs for smallholder farmers who are mainly not well organised limit entry into commodity value chains” (Operation Phakisa Report).
Now little is heard about Operation Phakisa, instead, there is a new flavour being pursued. It goes by the name Agriculture and Agro-processing Master Plan: AAMP.
The very interesting thing about the AAMP is that it has put behind its immediate line of sight critical, the remaining micro-lending instrument that promises to work for the black and poor smallholder. This is the Micro Finance Institution of South Africa: Mafisa.
How Mafisa was crafted
Commenting, I dare say, imprudently, about Mafisa the Operation Phakisa report makes this point:
“Mafisa provided an affordable credit scheme for producers and agribusiness who did not qualify for credit from financiers. The programme provided capital (loans) to purchase production inputs (fertilisers, seeds, pesticides, animal feed and remedies etc.) and to purchase small equipment and implements.”
The truth of the matter is that Mafisa was never designed to be such a nakedly financialised intervention. It was crafted as an agrarian micro-lending instrument that resides within a deliberately developmental eco-system of support for the black producer, making it difficult for the producer to fail.
The “champion-less” Mafisa
Indeed, there is good reason to believe that there is no appetite right there at the political leadership level to have anything to do with Mafisa, despite a 2013 Research Report at the Presidency that called for its continuation and deepened support.
In case you wonder where this statement above comes from, I urge you to go and look for the word Mafisa in both the latest political Budget Policy Speech generated by public officials in the department of agriculture land reform and rural development and the AAMP itself. Let me know if you can find it.
My curiosity in this Mafisa matter, and my considered conclusion, is that there is both a concerted administrative and political collusion to suffocate it. This stems from the reality that despite its studied and acknowledged performance in the 2013 supportive report and the fact that it has contributed to over 26 000 jobs through black smallholder farmers, Mafisa has gone unnoticed in the department’s performance reports.
Why continued support matters
Let me illustrate why these Mafisa jobs are of significance, and why the continued support of Mafisa through a new capital injection by the National Treasury is imperative.
Historically, Black enterprising was a no-no in South Africa. So the experience of Black entrepreneurs in enterprise management was an unknown wilderness.
Apartheid policy stances cannot be under-estimated and simply forgotten about, in as far as the huge effect they have left behind on rural economic growth and the equitable distribution of wealth.
Anyone that does not see the reduced profitability levels so evident among smallholder farmers and the deep levels of economic enslavement through the over-indebtedness of black households at the mercy of commercial banks, is simply self-indulging in willing blindness.
Those who championed deregulation in agriculture, while the rest of the world guarded and protected the farmer through strict policies, duped us into thinking that they were establishing a just economic environment that promoted fairness and enhanced productivity.
That deregulation of South African markets, we now can see, effectively made it extremely difficult for the black, entrepreneurially ill-experienced smallholder farmer and household to have access to adequate farmer support, such as land, water, research and development, extension services, access to markets, essentially, because the money market was deeply averse to a risk infested sector of society such as the black household and smallholder farmer.
Mafisa was a deliberate move by the government back in 2007 to offset the effects of this deregulation of agricultural markets. It was intended, in view of the real damaging effects of past policies on the growth of entrepreneurship among black people, in particular the black agro-entrepreneur, to be a “developmental” instrument, by building a developmental eco-system around the black producer that is not simply defined by a mere access to some cheap funding. No!
The degeneration of Mafisa
Articulating the origins and the evolution of Mafisa, one of its architects Masiphula Mbongwa shared with farmers’ organisations the rare insight that Mafisa was designed with the following support mechanisms: the creation of a culture of savings integrated with lending and loan repayments among black producers; the encouragement of the black ethic of broadened community involvement through their own producer organisations (whether through trusts or cooperatives or the like).
There is no wisdom in going to a community of livestock-loving households to give financial assistance to one enterprise and leave the rest to languish in need. Mafisa was designed to effectively impact, broad, community-wide economic empowerment, something that broad-based black economic empowerment (B-BBEE) is struggling to achieve.
Mafisa, according to the performance assessment report in the presidency was designed to work within the eco-system of the Comprehensive Agricultural Support Programme (Casp). This programme, relatively speaking, is heavily supported by the department of agriculture land reform and rural development but has been de-coupled from Mafisa.
Casp, and its twin, “Ilima / Letsema” have become dependency entrenching instruments that further cripple black farmers. These are, purely, grant disbursing programmes, expecting no return on the public investments.
‘Grants cannot build any economy’
Year after year, provincial departments of agriculture are flooded with requests from black rural and township households and farmers for this easy resource that can hardly satisfy the three million black producers’ needs in the country. Government support through Casp is unsustainable, both from the social, institutional and, especially the economic perspective, because grants cannot build any economy, let alone entrepreneurship.
But the worse thing about Casp is that, being structurally de-coupled from Mafisa, right there, from inside the department of agriculture land reform and rural development, – against its original design – black producer households and smallholder farmers are left economically naked.
They are vulnerable as they are without pre-lending and definitely robbed of the post-lending support they need. Casp and Mafisa are headed, internally, from two water-tight silos. Each one of these has a separate deputy director general minding their own individual programmes.
There is no agreement among any of these siloed programmes that any of those fortunate black farmers that access Mafisa shall be provided all the supportive Casp benefits, as originally intended. That is how abominable the situation and anti-black producer it has been allowed to degenerate!
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Mafisa, in a league of its own
The saddest thing about this situation is that there seems to be no political will in sight as the administrators continue to annihilate this beautiful remnant of black producer survival. There is nothing in the South African micro-lending market that even comes close to Mafisa in the beauty of its architecture!
Let me be clear on these two protective pillars that Mafisa has been denuded of: Pre-lending support entails provisions such as feasibility studies, business planning, production climate research and farmer skilling for enhanced productivity, right before any loan is disbursed.
Post-lending support involves critical measures such as the provision of accessible storage infrastructure: (that is why a black grain producer at the Eastern Cape must, as soon as harvesting has been completed, rush to find a buyer in the nearest city, because the longer the produce stays with the producer the more likely it shall be lost to either theft or rot).
Market access
Post-lending support also includes access to just markets for the farmer, without having to start looking for off-takes when the produce is already in the ground.
The South African deregulated market is brutal against the black producer, even at the state-owned municipal fresh produce markets.
The black producer who rocks up there in his/her small “botsotso” (small) bakkie load of spinach has no way of competing for the attention of those white market agents, against a 14-ton truck-load of spinach from a white commercial farmer. He or she must wait until the white load has been sold before the botsotso produce is given any attention.
By the time it does, it is normally too late to sell because it has waned in quality and the black producer has to take any price or drive back home to feed it to animals.
Black producers likely to fail
The separation of Mafisa from Casp has, as should be appreciated, left the black borrowing producer with a higher likelihood to fail than that succeeding.
The Black Agricultural Commodities Federation (BACF) has no less than two financial Intermediaries among the total of five (my arithmetic gives me 40% of the total of these Mafisa service providers). Unlike two out of the very same five that are state-owned, which means that the loan administrating officials have their month-to-month salaries assured, whether they perform or not, our non-government financial intermediaries, have nevertheless out-performed the government-owned entities.
We shall produce the facts if anybody dares to challenge the federation on this fact. In fact, our BACF financial intermediaries have been so successful in the management of Mafisa, the commercial sector now wants to know our secrets.
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The excruciating pain that the BACF is now dealing with is the clear and present danger that Mafisa faces. The public hears little about it, and the parliamentary portfolio committee in agriculture seems oblivious about it. Budget speeches are quiet about it!
The Black Agricultural Commodities Federation is calling for:
- National Treasury to recapitalise this last bastion of black agricultural microlending;
- The department to seek and provide developmental support to more black financial intermediaries with cultural affinity to black households and smallholders;
- The minister in the department of agriculture land reform and rural development to not leave the future of Mafisa at the mercy of careless administrators;
- The minister in the DALRRD insists that the Farmer Production Support Units that provide access to rural households to affordable mechanisation and input services, be incorporated into the Mafisa programme; that way farmers will enjoy improved repayment rates;
- The parliamentary portfolio committee on agriculture to pay attention and insist that the DALRRD should set aside resources towards the fostering of family farming as per the United Nations Decade of Family Farming (2019 – 2028); conduct its mandatory over-sight on Mafisa projects; and insist that the participation in family farming by over 3 million black families involved in agriculture be supported, for sustainability, through access in the Mafisa;
- The President to recognise Mafisa as a potent tool in the fight against financial exclusion, poverty and unemployment, especially for the unbanked millions of rural and township producer households and black smallholder farmers, and in the attainment of the Global Sustainable Development Goals (SDGs); and a contributor to his Reconstruction and Recovery Plan (ERRP).
- Finally, the President must, also, insist on his Presidential Employment Stimulus Initiative (Pesi) be coupled with the Mafisa for enhancing its sustainability.
- Dr Moshe Swartz is the CEO of the Black Agricultural Commodities Federation. The views and opinions expressed in this article are those of the author and do not necessarily reflect the views or positions of Food For Mzansi.
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