Conceptualising Finance to Support Labour-intensive Land Redistribution

This paper seeks to provide an overview and understanding of how South Africa’s smallholder farmers and small-scale black commercial farmers (‘SFs & SSBCFs’) presently finance their agricultural operations (excluding land acquisition), with a view to identifying where the current system could be improved so as to support an employment-intensive land reform premised on these types of farmers. As such, the paper seeks to identify what are the main sources of loan and grant finance to farmers, and to indicate what is known about the reach and effectiveness of these various institutions / products / programmes. The paper also briefly considers what we know about selffinancing, while also touching on sundry other financial services and issues, in particular input subsidies, e-money and insurance. While doing so, the paper traces recent policy discussions and debates regarding the provision of agricultural finance. The most salient policy development in recent years is the emergence of a consensus that grant finance should be reduced in favour of loan finance, which has been followed by an abortive attempt to introduce ‘blended finance’. Overall, the paper demonstrates that, while there are many financing tools in place to support black farmers in general as well as land reform beneficiaries in particular, their collective footprint is modest-to-small relative to current needs, and grossly inadequate relative to the needs implied by a significantly scaled up redistribution programme aiming to support meaningful numbers of SF and SSBCF beneficiaries.