From Concept to Reality: The Blended Finance Scheme’s Role in Shaping South Africa’s Agricultural Future

South Africa’s agricultural landscape is experiencing a pivotal moment as key institutions collaborate to address historical disparities and foster growth among emerging black farmers. Recently, the Department of Agriculture, Land Reform and Rural Development (DALRRD), the Industrial Development Corporation (IDC), and the Land Bank presented their progress on the Blended Finance Scheme (BFS) before the Portfolio Committee on Agriculture, Land Reform, and Rural Development. This initiative is designed to accelerate transformation within the sector, aiming to shift the balance in an industry currently dominated by white commercial farmers.

The Evolution of the Blended Finance Scheme

The BFS was first introduced in 2018 with the objective of providing emerging and small-scale black farmers with access to blended finance— a mix of loans and grants designed to overcome barriers to market participation. Initial efforts, however, did not achieve the desired results in transferring ownership of productive assets to black producers. Recognizing the need for a more robust approach, DALRRD repurposed the BFS to better align with the National Development Plan – Vision 2030.

Ms. Elder Mtshiza, Chief Director of Comprehensive Agricultural Support Programme at DALRRD, highlighted that the scheme was re-launched in March 2021, in partnership with the IDC. This revised BFS aims to eliminate previous financial and technical deficiencies and is fortified by a new memorandum of agreement with financial institutions. This agreement stipulates that the department’s grants act as equity contributions, while loans or credit components are provided by financial institutions.

Achievements and Challenges

As of now, the BFS has supported 225 black producers, generating 3,936 jobs. The department’s request for a R1.3 billion financial injections during the 2025–28 Medium-Term Expenditure Framework underscores its commitment to scaling this impact further.

However, there are some contradictions and challenges that have surfaced. The Land Bank, for instance, has expressed a need for a repurposed mandate and additional funding to maximize its effectiveness. CEO Mr. Themba Rikhotso emphasized that the bank’s historical funding inadequacies hinder its potential to fully support the transformation agenda. In contrast, the IDC has already approved R21.45 billion in support, with R667 million allocated to the Africa Investment Forum, showing a strong commitment to infrastructure development and market expansion for black farmers.

Addressing Risk and Support Mechanisms

A critical question raised during the committee meeting concerned balancing the risks associated with funding emerging black farmers. Ms. Mtshiza explained that the department has established a financial safety net, supplemented by insurance to mitigate risks. This approach aims to cushion the BFS from potential financial strains.

Another pressing issue is the technical support provided post-funding. The IDC has adopted a comprehensive approach, supporting farmers throughout the entire lifecycle of their business ventures. This includes technical assistance and external support to navigate challenges.

Land Ownership and Policy Amendments

The question of land ownership on communal and tribal authority lands also emerged. Mr. Rikhotso pointed out that the Land Bank is actively lobbying for policy amendments to convert government farm leases into title deeds for black farmers. This move aims to enhance land security and ownership, which are critical for long-term agricultural success.

The Path Forward

Committee Chairperson Ms. Dina Pule emphasized the importance of monitoring and evaluating the BFS’s effectiveness. She stressed the need for continuous assessment to ensure that the scheme remains productive and meets its developmental goals. Furthermore, Ms. Pule urged the involved entities to regularly review their funding criteria, taking into account the historical and material conditions of emerging black farmers.

In conclusion, while significant progress has been made in supporting black farmers through the BFS, ongoing challenges and the need for refined strategies remain. The collaboration between DALRRD, IDC, and the Land Bank represents a concerted effort to transform South Africa’s agricultural sector. However, the success of this initiative will ultimately depend on effective monitoring, adequate funding, and a commitment to addressing the evolving needs of emerging farmers.

 

Sources: 

Parliament of the Republic of South Africa