Blended finance fund to assist farmers abate energy challenges

The ongoing load shedding in South Africa has become a serious constraint on growth and profitability for various sectors, including agriculture. 

In addressing the negative impact on the productivity and profitability of farm operations brought about by the load shedding crisis, the Land Bank and Department of Agriculture, Land Reform and Rural Development (DALRRD), have launched a blended finance fund, which is geared towards financing alternative energy solutions with a focus on energy intensive agricultural activities which include irrigation, intensive agricultural production systems and on-farm cold chain related activities.

The Agro Energy Fund aims to support all South African citizens, producers in the agricultural sector, including smallholder, medium scale, large scale and mega commercial producers.

The launch of the Agro Energy Fund follows the successful launch of the Blended Finance Scheme (BFS) in October 2022 through the partnership between Land Bank and DALRRD, where the bank, in collaboration with the department launched the R2 billion BFS.

Speaking at the launch held in Pretoria on Tuesday, DALRRD Minister Thoko Didiza emphasised that the purpose of the Agro Energy Fund is to incentivise farmers to invest in alternative energy sources, and will run parallel to other existing financial instruments that are designed to support farmers with production, farmer infrastructure and market, amongst others. 

Didiza explained that the applications for the fund will be directed to the Land Bank and will be subjected to approval guidelines of the bank.

“The funding will be deployed through a blended finance structure which is a combination of a loan and grant. DALRRD will contribute a grant portion to a total value of R500 million which will be matched with a loan portion to a total value of R710 million from Land Bank. 

“This will effectively create a R1.21 billion fund size. The fund will be available in the market until the allocated funds are completely drawn down,” Didiza explained. 

The Minister added that the priority will be on supporting dairy farming, piggeries, poultry, all irrigated commodities and on-farm processing. 

“In deploying funding to producers, the Bank will also rollout its Green Finance product offering with a focus on financing solar panels, biogas and biomass plants which will result in the installation and commissioning of energy efficiency projects across the country which will partially offset electricity usage from the grid. 

“The fund will enable the bank to contribute to building resilience against energy shocks in the sector which have negatively impacted productivity and profitability in farm operations. The food security and rural development remain key priorities in the agricultural sector,” the Minister said. 

Land Bank Board Chairperson, Thabi Nkosi, expressed the bank’s appreciation to be in partnership with the department for the implementation of the Agro Energy Fund, and also commended the department’s allocation of the R500 million grant.

“The fund aims to support all South African producers – from smallholder farmers to large commercial producers – in a manner that ensures a balanced allocation of funds across various farming cohorts, according to need,” Nkosi said.

Nkosi explained that the smallholder producers will be eligible for up to 70% total finance amount, with the grant portion capped at R500 000 per applicant, while medium scale producers will be eligible for up to 50% of the total financed amount, with the grant portion capped at R1 million per applicant.

“Large producers will be eligible for a grant of up to 30% of the total financed amount, with the grant portion capped at R1.5 million per applicant. On this basis, the fund is expected to support over 500 farmers across the country,” Nkosi said.

While acknowledging that the fund may not reach all of South Africa’s farmers, Nkosi said, this initiative, with specific focus on renewable energy solutions, will catalyse the agricultural sector’s adoption of more sustainable farming practice.

The applications to the Agro-Energy Fund are now open, and the details about the fund, product offering, and how clients can contact and apply for funding support from the Land Bank can be found on www.landbank.co.za or www.dalrrd.gov.za – SAnews.gov.za