Germany’s KfW Development Bank signed an agreement this month for a R900-million loan to the Land and Agricultural Development Bank of South Africa (Land Bank).

The loan, which will assist the Land Bank with refinancing its loan book and extending longer-term financing to both emerging and established commercial farmers, marks the first time that KfW has ventured into this sector in South Africa.

Speaking to Engineering News at the signing in Pretoria, KfW Southern Africa funds director Dr Thomas Duve said Germany recognised the importance of agriculture for South Africa and Africa.

“We are here to help produce more and better food, and to increase jobs in the agriculture sector. “The start of a real cooperation with the Land Bank is a change for us; we see them as being a strong agricultural partner in South Africa, addressing severe development problems with clever approaches,” he said.

He added that the Land Bank played a pivotal role in addressing the lack of financing in the agriculture space for small and medium-sized enterprises (SMEs) in South Africa, which, he said, were the backbone of an economy.

Duve added that, while the financial services needs of large commercial farms and agribusinesses were generally well catered for by the private sector, farmers and enterprises in rural areas experienced many challenges, ranging from difficulties in accessing markets to poor infrastructure and little or no physical assets that could be used as collateral for accessing financing.

He pointed out that the KfW loan would contribute significantly to broadening and deepening the financing offer for SMEs in South Africa’s agriculture sector.

“One of the main challenges for rural and agricultural development in South Africa is affordable access to working capital for emerging farmers and medium- to long-term finance for small and medium-sized agricultural enterprises.

To allow for crucial investments for productivity increases in the form of machinery, seeds, fertiliser and irrigation systems, farmers need a well-functioning credit market that offers them needs-based products on affordable conditions.”

Land Bank CEO TP Nchocho, meanwhile, said the facility would enable the bank to continue supporting greenfield projects.