Transforming the agricultural sector isn’t a simple case of handing over a piece of land and telling the beneficiaries to start farming. It involves a complex interconnection of numerous critical success factors, without which enterprises are likely to fail.

This was the message echoed by all parties during a recent media field trip and round table discussion hosted by Nedbank Agriculture and Partners in Agri Land Solutions (PALS) in Ceres.

PALS is a non-profit organisation developed by farmers in Ceres, in cooperation with local communities, to provide emerging black farmers with the support, insights, and expertise they need to thrive as commercial farmers. The organisation and its work represent a fundamental departure from post-land reform models and is based on sound business principles, legal structures, mentorship and training.

Lennox Plaatjies, national liaison manager for PALS, says that the organisation has identified 8 characteristics for an agricultural enterprise to be considered a PALS project. And while security of tenure to land is a vital component, it’s not more important than the other 7, which include a feasible, bankable business plan; knowledge transfer and mentorship; a legal entity with structure and agreements to protect all partners (including dispute resolution mechanisms and exit strategies); socioeconomic upliftment of the people who work the land; capital or financing; access to markets; and ‘skin in the game’. ‘We so firmly believe in all these factors that we’ve created a special PALS framework, which is a registered trademark and has become our holy grail.’

This approach is working, with 47 successful projects implemented over the past 8 years. All these projects are profitable, and many are exporting fruit to international markets, which is testimony to the quality of their produce. ‘It’s important to remember that PALS is not helping people to become subsistence farmers. Our aim is to establish successful commercial farmers who can achieve sustainable growth that will uplift their families and communities, provide profits for all shareholders, and empower future generations to continue with a successful enterprise. That is why having a vested interest and land ownership are essential. Generational wealth isn’t created in 1 generation – it’s a long-term game, and it’s our hope that the PALS approach will improve the lives of many generations to come’, says Plaatjies.

Cobus de Bruyn, Head of Client Value Propositions for Agriculture at Nedbank Commercial Banking, says that, while PALS has been a hugely successful programme, all stakeholders – including banks – are frustrated by the limited access to finance for this sector. ‘Banks are all looking for ways to approach the sector. For example, Nedbank has a special transformation solution that offers both financial and non-financial components. In collaboration with PALS, transformation credit applications are approached differently to traditional lending parameters. Nedbank has also partnered with Hortfin and signed a cooperation agreement to co-fund transformation transactions in the fruit sector. This partnership will also help make access to finance easier. For transformation to be successful, it is essential that the complete agricultural value chain put its weight behind transformation initiatives.

A real game changer, however, will be the Blended Finance Scheme, which will essentially blend grant funding and commercial debt for black farmers or partnerships. The Minister of Agriculture, Land Reform and Rural Development launched a R3,2 bn Blended Finance Scheme with the Land Bank last year, but the scheme also needs to be rolled out to all commercial banks for change to happen at scale. Nedbank Commercial Banking confirmed its participation in the Blended Finance Scheme several years ago, and awaits confirmation to proceed,’ says De Bruyn.

Speaking at the PALS annual general meeting that took place on the same day as the Nedbank round table discussion, Wandile Sihlobo, Chief Economist at Agbiz, said that, although slow, South Africa has made more progress on land reform than is believed. ‘Based on numbers extracted from official sources, it is estimated that 24% of all farmland has been redistributed and that land rights have been restored. This is very close to the target of 30% by 2030. Since 1994 black farmers have also acquired almost 2 million ha of farmland – or 2,3% of total freehold farmland – on their own without any assistance from the state-sponsored land redistribution programme, indicating that they’re willing to put skin in the game to succeed.

Ultimately, it’s not as simple as replacing white farmers with black farmers. We need to grow the agricultural pie in South Africa to support all farmers, and that requires collaboration, commitment and combined effort from all stakeholders, as PALS has so ably demonstrated,’ concludes Sihlobo.

Source: Percheron Strategic Communications