Ongoing agricultural disaster: Privately driven land fund to take over Land Bank’s role?

25 August 2022

The vulnerability of agriculture in the volatile South African climate has been a known fact for as long as the region has been inhabited. Therefore, establishing a state bank to help negotiate this volatility was one of the first things that the new Union of South Africa did in 1912.

Nowadays, it seems like the Land Bank is no longer fulfilling its initial role and civil society may have to consider embarking on a similar undertaking. 

The Land Bank's business model entails offering loans at competitive interest rates to agricultural enterprises.

During the heyday of the cooperative, these grassroots enterprises often managed the Land Bank's loans on an agency basis. It meant that potential loans were assessed by experts who were able to judge the local agricultural environment and the merit of loan applicants for themselves.

Over the years, the Land Bank did its part to keep farmers on their land and to stabilise the rural economy. Although profit was not its main objective, the Land Bank had to be commercially successful to survive. 

After land reform was added to the Land Bank's mandate, less emphasis was placed on the possibility of successfully recovering loan amounts.

But over the past few months, the Land Bank has become more and more controversial due to the drastic methods employed to recall loans.

This is the first good agricultural season after a number of years of unfavourable farming conditions across the country. As a result, many farmers have fallen behind on their Land Bank loan repayments even though the value of their farms far exceeds the loan amounts. 

The controversy does not lie in the fact that loans are being recalled, but rather in the aggressive way in which it is being done.

In the first place, the capacity of enterprises with local knowledge to function as agencies was revoked so that all debt collection was centralised under the Land Bank itself. Reports on social – as well as mainstream – media increasingly relate incidents of intimidating and reckless conduct by Land Bank and its debt collectors.  

More than one complaint about the Land Bank's actions have been lodged, but the legal process is still ongoing. While its conduct may be found to be justifiable and lawful, it appears as if the Land Bank is increasingly falling short of achieving its main goal of saving farms.

It may compel civil society to start fulfilling this state function as well.

Capital funds raised for this purpose can be used to pay off Land Bank loans. If the value of the land exceeds the loan amount, it could be seen as the farmer's capital contribution. Farms can then be leased to the same, or other, farmers with the option to buy.  

In a country like Israel, approximately 13% of the land belongs to the Jewish National Fund. This Fund was established with the aim of buying land and making it available for Jewish settlement.

It is an important mechanism to enable immigrants, who possess the necessary knowledge and experience, but lack capital, to establish agricultural enterprises. 

An undertaking of this nature can help prevent the economic exclusion of a large part of the population.

It will, of course, need to be properly planned and funded to be viable. It could be the topic of an economic summit conference for civil institutions. 

Issued by Wynand Boshoff, FF Plus MP and provincial leader: Northern Cape, 25 August 2022