Access to finance remains a critical issue for South Africa’s agricultural and food sectors, but speakers at the South African Future of Food Conference in Centurion argued that the challenge is not simply a shortage of capital.
The conference, hosted by Food For Mzansi in partnership with Land Bank and South Africa Wine, brought together stakeholders to examine how finance can better support farmers and businesses across the food system.
Robert Matsila, head of agricultural banking and monitoring support at Land Bank, explained that demand for the bank’s land and finance product had been high enough to exhaust its grant component.
“The bank has exhausted the grant component of the land and finance purely because of the high demand that we have experienced,” Matsila said.
He added that Land Bank was engaging government on a possible top-up while also considering how its own resources could be used to support farmers during the critical summer grain planting season.
“The bank will provide concessionary loans, blended with the commercial loans, so that the farmers can continue planting,” he said.
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Risk remains central to financing
Deon Scheepers, a lecturer in agricultural economics, extension and rural development at the University of Pretoria, argued that the central issue is not whether money exists, but whether the risks associated with agricultural investment are being adequately addressed.
“There’s no question, there’s enough money in the system,” Scheepers said. “Why is it not going where you want it to go? That answer is risk.”
Scheepers, who is also involved in crop insurance and farming, said reducing risk could encourage capital to move towards parts of the agricultural sector where it is currently difficult to secure finance.
“Money goes where it feels safe. And money goes where it has a return,” he said.
He also pointed to challenges around land rights and collateral, particularly where farmers do not have title deeds that can be used as security.
Financial inclusion requires readiness
Quinton Naidoo, head of socio-economic development at Kagiso Trust, said the organisation had hundreds of agricultural funding applications but returned some funding last year because it could not be deployed.
“The money’s there. It’s that the systems are not able to absorb their capital for reasons of risk, for reasons of what we call readiness,” Naidoo said.
Kagiso Trust assesses applicants through what Naidoo described as the “three E’s”: the entrepreneur, the enterprise and the ecosystem.
He said some applicants had strong ideas and technical expertise, but their businesses were not yet commercially viable.
The organisation has therefore developed a readiness framework and a “capital ladder” that includes readiness funding, concessionary loans and other financial products, with the aim of helping businesses eventually access mainstream commercial finance.
Designing finance for the right businesses
Cuthbert Kambanje, an agrifood systems, investment and policy specialist at the Food and Agriculture Organisation (FAO) regional office for Southern Africa, said financial instruments need to be designed around the realities of smaller and fragmented agricultural businesses.
He said finance tends to follow functioning systems, institutions and information, while many of the risks facing agriculture are regional rather than confined to individual countries.
Kambanje also questioned whether grants alone provide sufficient de-risking to attract commercial capital. “The money is there all over. But it’s not moving to where it’s supposed to go because we are not removing the risk,” he said.
He called for a combination of financial and regulatory instruments and greater regional cooperation, including investment along economic corridors.
Alternative approaches to agricultural funding
Diale Tilo, executive director of the Kgodiso Development Fund, said the fund considers businesses across the food system, from pre-production and farming through to processing, manufacturing, packaging, transport and storage.
Unlike traditional lending models, Kgodiso does not require tangible collateral or equity contributions for the businesses it funds and can finance 100% of the required amount, according to Tilo. However, businesses must demonstrate that they can generate sufficient cash to repay the capital and interest.
“Every business has a cycle,” Tilo said, explaining that this could range from daily or weekly cycles to an annual cycle for grain producers. “We need to understand what it is that you do in that cycle to turn the product or service into cash.”
He said the key question is whether a business has sufficient free cash after covering its operating costs to meet its repayment obligations. “For us, if you’re ready, operational, and you want to grow, you are the right business to talk to.”
Tilo also highlighted the scale of opportunity across the broader food system, arguing that investment should not be limited to farming or food retail. Opportunities extend into processing, manufacturing, packaging, transport and storage.
He said the sector represents a significant opportunity for entrepreneurship and job creation, but that stronger business education is needed.
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