He also provides more information about the latest developments in the agricultural sector. 

Here is Sihlobo....

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He says South Africa’s large agricultural output for 2020, coupled with higher commodity prices that were precipitated by the weaker domestic currency, together with growing global demand improved farmers’ finances somewhat. The benefits of this improvement were also observed through robust agricultural machinery sales, with tractor sales for the first nine months of this year up slightly from the corresponding period in 2019. Yet, the challenge of growing farm debt in the sector persists as it will not be solved by one good harvest like the one we recently recorded, which was preceded by years of poor output in various provinces of the country.

According to him, South Africa’s agricultural debt in 2019 was at a record R187 billion, which was a nearly three-fold increase since 2010, according to data from the Department of Agriculture, Land Reform and Rural Development. About 29% of this farm debt was held by the Land Bank, 61% by the commercial banks, and the balance spread between agricultural cooperatives, private persons and other institutions. The escalation of debt, particularly in more recent years, was because of both the expansion in area farmed, specifically in horticulture and to some extent, the financial pressure brought by frequent droughts, which have limited agricultural output on various farms.    

There are now growing concerns amongst various farmers that access to credit in the 2020/21 production season is proving to be a challenge. This is the case, despite the large harvest of the 2019/20 season that we have previously mentioned. It appears that the liquidity constraints that are currently facing the Land Bank, coupled with general uncertainty brought by the pandemic have made various financial institutions more risk-averse. There is anecdotal evidence from various farmer organisations and agribusinesses that previously worked closely with the Land Bank on providing finance to the sector, who are now worried about the 2020/21 season. 

He says the Land Bank’s involvement in South Africa’s agricultural sector is through various direct and indirect financial services dedicated to supporting both on and off-farm agricultural activities and businesses including input provision, land purchase, production, distribution, wholesale, processing and marketing. 

That was Wandile Sihlobo, Chief Economist at the Agricultural Business Chamber of South Africa, Agbiz. To listen to these inserts again, go to http://www.ofm.co.za, click on News, Agriculture, and the Agri Hour. Tune in to OFM weekdays at 11:00 and 13:30 for your latest agricultural news bulletins. 

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