Lending to the South African farming sector is not being hurt by uncertainty over possible reforms which could see foreign ownership banned and limits on the size of farms, a senior banker said on Friday.
Land is an emotive issue in South Africa, where most of it remains in white hands despite efforts by the ruling African National Congress (ANC) at redistribution.
Frustrated by the slow transfer of land to black hands, the party says it is aiming to accelerate land redistribution by capping ownership at a maximum of 12,000 hectares and barring foreigners from owning farmland.
“Any uncertainty around policy could equate to risk. But one needs to step back from what is being said and look at what is actual policy at the moment,” said Nico Groenewald, head of Agribusiness at South Africa’s Standard Bank.
“And the policy framework is quite clear,” he said, noting that it remained based on a respect for property rights with a “willing seller, willing buyer” principle, where the government buys land from farmers who want to sell at market prices.
He said that because this is the official policy, farmers can still use land for collateral.
“And the government is open for discussion on these matters and that gives us comfort,” he said.
Groenewald said the entire agricultural loan book in Africa’s most advanced economy in 2013 was 115 billion rand ($9.25 billion). For the 2014 financial year, Standard Bank forecast it could rise to 126 billion rand.
Without disclosing Standard Bank’s figures, he said, “our loan book is growing and, based on research, our competitors’ books are also growing”.
In part, this was because farmers were “expanding vertically into the value chain to process their products” by adding value through processing instead of just producing crops or livestock.
He said Standard Bank saw this as a growth area because while South Africa is a net exporter of agricultural products “when it gets to processed products we are a net importer”.
According to Edward Lahiff, an expert on South African land issues at University College Cork in Ireland, 8.2 million hectares have been transferred to black owners since apartheid was abolished, equal to 8-10 per cent of the land in white hands in 1994. That is only a third of the 30 per cent target.