Agribusinesses Constrained In Helping Emerging Farmers

Agribusinesses provide South African agriculture with a large commercial network of agricultural infrastructure, depots, trading stores, input supplies and financial advisory services. Despite the dualistic dimension of the sector this infrastructure and facilities are available to all farmers. Many black farmers already buy their inputs at the trading stores of these agribusiness firms and deliver their commodities to the depots and silos operated by these businesses.

In this case, it can be seen that there is no need for government to set up parallel institutions and schemes to fund agriculture that will bypass the existing system of commercial agriculture. However the State, including for that matter the Land Bank, could certainly speed the processes of delivery to targeted farmers. Utilising the services, financial systems and monitoring procedures of agribusiness would be an efficient means of ensuring the appropriate and timely utilisation of state funds.

Black farmers who are starting out are initially propped up by government grants. However, for those emerging farmers who do succeed in entering into mainstream commercial agriculture frequently find themselves isolated in a vacuum. An acceptable living standard is not maintainable with the size of the land holdings and scale of operations. Commercial farming requires full time involvement but farmers are giving all of their time for little access into the ‘big time’. The need is being recognised to provide for expanded land units or the provision of bigger farms.

Agribusinesses limit production loans to farmers in groups and to those who farm on land under traditional tenure. They want to minimise the risk and their accountability to financiers and shareholders prevents them from lending without proper state guarantees set up. What this means is that many black farmers cannot access production loans and credit facilities. They are unable to use this land (eg, PLAS land) as security to access enough capital to grow their farms and become sustainable and commercially viable. This puts constraints on the farm development and production programmes under the land reform act.

Insurance schemes, combined with business driven coaching, mentoring and business counseling are implemented by a number of agribusinesses. This, however, remains an additional overhead to the company plus the risk of loan defaults by these farmers. Without more assistance from the state and its agencies in terms of state guarantees on production finance provided to these farmers, as well as support for mentorship programs, it is unlikely that any agribusiness can scale-up their farmer empowerment initiatives to such a level that it will make a meaningful difference to the big challenge to unite and integrate South African agriculture. The current support programs such as CASP and MAFISA should ideally be channeled via the systems of agribusinesses, since this will ensure better monitoring as well as prevent ‘double dipping’ by beneficiaries.

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