Successful transformation requires more than land ownership

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Estimated reading time: 4 minutes

Transforming the agricultural sector isn’t a simple case of handing over a portion 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.

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To this end, Nedbank Agriculture began collaborating with Partners in Agri Land Solutions (PALS) in September 2022, and the partnership has grown in leaps and bounds ever since.

A new model for land reform

PALS is a non-profit organisation developed by producers and the local community in Ceres to provide emerging black farmers with the support, insights, and expertise they need to thrive as commercial producers.

Lennox Plaatjies, national liaison manager for PALS, says the organisation has a unique approach to land reform. Agricultural enterprises must meet eight requirements to be considered as a PALS project.

The requirements are as follows:

  • Land tenure or ownership.
  • A realistic and profitable business plan.
  • Knowledge transfer and mentorship.
  • A legal entity with the structure and agreements to protect all partners.
  • Socioeconomic upliftment of workers.
  • Access to financing or capital.
  • Access to markets.
  • Vested interest.

PALS has so much confidence in the framework they created that they registered it as a trademark.

A proven track record

The success of this approach is evident in the 47 successful projects implemented over the past nine years. All of the projects are profitable, and many are exporting fruit to international markets, which is testimony to the quality of their produce.

“We aim to establish successful commercial producers 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 a single 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.  

Wandile Sihlobo, chief economist at Agbiz, says that land reform has progressed more than people think. “Based on numbers from official sources, it is estimated that 24% of all farmland has been redistributed and that land rights have been restored. However, it’s not as simple as replacing white producers with black producers. We need to grow the agricultural pie in the country to support allproducers, which requires collaboration and commitment from all stakeholders.”

The role of Nedbank in transformation funding

Cobus de Bruyn, head of client value propositions for agriculture at Nedbank Commercial Banking, says that, while PALS has been highly successful, all stakeholders are frustrated by the limited access to finance.

“Banks are all looking for innovative ways in which to approach transformation funding. 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 to co-fund transformation transactions in the fruit sector, which will help make access to finance easier.

“A real game changer, however, will be the blended finance scheme, which will essentially blend grant funding and commercial debt for black producers or partnerships. The minister of agriculture, land reform and rural development, Thoko Didiza, launched a R3,2 billion blended finance scheme with the Land Bank in 2022, but the scheme needs to be rolled out to all commercial banks for change to happen at scale. Nedbank Commercial Banking confirmed its participation in the scheme several years ago, and awaits confirmation to proceed,” says De Bruyn.

Read more about Nedbank’s outlook for 2024.

Think bigger. Think Nedbank Commercial Banking.

For more information, email us at agriculture@nedbank.co.za.

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