Speech by the Minister of Agriculture, Forestry and Fisheries Tina Joemat-Pettersson, at the presentation of Land Bank's 2009 annual results, Midrand, August 17 2009

Land Bank's Role in the Transforming & Developing the Agriculture and Rural Sector

My colleagueses Minister of Finance, Mr Pravin Gordhan, Minister of Rural Development and Land Reform, Mr Gugile Nkwinti (in absentia), Minister in the Presidency, Mr Trevor Manuel (in absentia), Chairperson of the Portfolio Committee on Agriculture, Mr Lulu Johnson, Chairperson of the Portfolio Committee on Finance, Mr Thaba Mufamadi, clients, investors and partners of the Land Bank, Chairperson and members of the Board, members of the media, honoured guests, ladies and gentlemen.

It is my pleasure to be part of the proceedings today at the launch of the Land Bank's annual report.

The debate going on in South Africa sees DFIs as effective government agencies to promote economic development. The DFIs are further seen as important players in achieving the government's five development priorities. The five priorities of government which are now gaining momentum and becoming part of our daily lives are:

• Creation of decent work and sustainable livelihoods
• Education
• Health
• Rural development, food security and land reform
• Fight against crime and corruption.

These have now been incorporated into the Medium Term Strategic Framework which sets policy priorities for the next five years and beyond. While these priorities cut across every activities within the agricultural economy, of great interest and relevance to us is the fact that Rural Development, Land Reform and Food Security are now receiving a higher level of priority. It is gratifying that for the first time, issues concerning agriculture and rural development are conspicuously raised to that level.

For us this means that in the next five years, we need to put in place systems and processes that ensure that our rural space becomes vibrant and places worth living in, and that land reform facilitates development of the rural economies through transformation of agriculture, forestry and fisheries to ensure food security, competition and elimination of abject poverty. The details of this vision are entailed in the Comprehensive Rural Development Strategy that is under discussion and the Agrarian Transformation and Development Perspective under construction. It is hoped that through these initiatives we will be able to add to the achievements of the past years and deliver more to our people.

As we enter the next phase of transformation, it is government's keen interest to see the agricultural sector play a more active role in promoting food security and export competitiveness.

It is essential for the previously excluded potential farmers (or emerging farmers) to be part of this major economic transformation drive.

The current global interest in agriculture is the first experienced in the post industrial era. The need to embrace agriculture and rural development provides a good opportunity to involve emerging and previously marginalized farmers in the process. The government is gearing to play a critical role in this respect and assist the sector to transform and develop.

The role of Land Bank and other DFIs and SOEs is critical in this regard.

However, amidst this excitement, we should be vigilant not to be carried away as the challenges are immense. One of the most difficult ones and of great concern is the reality that some development farmers are loosing or stand to loose their farms. While it is understandable that the prevailing tight economic conditions are also affecting farmers' profitability and ability to service their loans - the development imperatives compel us to rethink our strategies.

The implication and impact of farmers loosing their farms is two fold; viz. the productive capacity of the land is eroded and secondly, the gains achieved in land reform (towards 30% target) are lost. It is of great concern to government that at this stage we cannot even begin to talk about achieving a 10% benchmark in land redistribution. It is this benchmark that we are keen to cross and march towards 20% and then the 30% target.

In light of the situation, it is essential to preserve the land reform achievements made thus far. In this regard, an understanding and cooperation among the Ministries of Finance, Rural Development & Land Reform, as well as Agriculture, Forestry and Fisheries has been reached to develop a coordinated strategy. This relationship has made it possible for us to come up with a plan to help the farmers under distress.

Of critical importance are the principles that firstly; government will not just be throwing money into the problem and walking away. Secondly, government will not allow the distortion of normal flow of business processes and principles to rescue individuals who are not willing to put their shoulders behind the wheel. Thirdly, where government invests in farms, these will leased back to the previous owners who will be given proper support to farm in a sustainable manner. Those that are not keen to rise to the occasion will be left by the wayside. Farms will be given to farmers who are willing and able to farm. Finally, it is also important to stress that while we implement these measures, the ownership of farms bought back from the Land Bank will reside with government.

The plan is premised on the understanding that Land Bank borrows its funds and has to repay them to investors at an interest. The inability or perception of the Land Bank not repaying its liabilities will adversely impact on the Bank's ability to raise funding and will concomitantly make its funding more costly. As such, in executing its business which involves raising funds from the markets and financing clients, the Bank has to apply proper credit management principles, including collection and recovery of loans. Certainly, when such debt collections take place, farmers may feel under threat - with some even failing and loosing their assets.

Accordingly, the Department of Rural Development and Land Reform will take over from the Land Bank the mortgage loans of farmers under distress that are in the legal phase, renegotiate and restructure loans for the affected farmers and lease the farms to them for a specific period. Approximately 383 development farmers occupying 88 000ha of land are classified as legal. The amount owed in approximately R232 million. The essence here is to ensure that the right farmers are allocated farms. Should these farmers not display farming and business mettle, even after appropriate support, the farms will be offered to other eager farmers so that the sector can maintain and increase production capacity. It is important to also highlight that the strategy is not limited to farmers in distress, but will be considered as the future strategy in which the Land Bank and the affected departments work as a team.

The Department of Agriculture, Forestry and Fisheries will also take over from Land Bank the production loans of the farmer under distress that are in the legal phase. The production loans make 10% of the total nonperforming loans referred to above.

Further the Department will provide after-care support in the form of extension services and training, marketing, infrastructure, access to information and enterprise planning.

The Land Bank will seek to crowd in the private sector through partnerships with agribusiness with a view for the latter to provide aftercare assistance. Discussions will also be held with the agribusiness for potential off-take agreements to assist the emerging farmers.

Assisting distressed farmers is just one aspect of the potential areas for working together. There are still critical areas that we need to coorperate in, in order to do more for agriculture and rural development. We still need the Land Bank's participation in rural development, land reform, forestry and fishery.

It should be noted that the modalities and legal processes of this plan still need to be finalised. This will be communicated once the whole plan has been completed.

As the Bank gears itself to celebrate its centenary, we anticipate its role as going beyond financial activities but into the realm of strategic advice and policy support in rural development, land reform and agrarian transformation. We expect the Bank to provide innovative solutions that will guide and lead the sector into a greater future.

This year marks the turning point. We commit the government to work in unison with Land Bank to make real impact on the development of our people.

Source: Department of Agriculture, Forestry and Fisheries

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