Intensive energy-using farmers in South Africa have been thrown a lifeline against the impact of rotational load shedding through a R1.2 billion fund aimed at helping players in the sector to procure equipment for alternative energy sources.
INTENSIVE energy-using farmers in South Africa have been thrown a lifeline against the impact of rotational load shedding through a R1.2 billion fund aimed at helping players in the sector to procure equipment for alternative energy sources.
The government on Tuesday launched the Agro-Energy Fund (AEF), a blended finance programme to provide funding support for the acquisition of alternative energy assets to alleviate the impact of load shedding on farming operations and the agricultural sector.
The fund was established by the Land Bank in partnership with the Department of Agriculture, Land Reform and Rural Development (Dalrrd), and will support all producers in the agricultural sector, from smallholder, medium scale, large scale to mega commercial producers.
The focus of the AEF is on energy intensive agricultural activities such as irrigation, intensive agricultural production systems, and on-farm cold chain related activities.
The ongoing load shedding in South Africa has become a serious constraint on growth and profitability for various sectors, agriculture included, as the crippling power cuts affect productivity.
Minister of Agriculture Thoko Didiza said they felt it prudent to also intervene in providing a solution to enable food production and minimise production interruptions particularly for producers who rely largely on energy.
“I must emphasise that the purpose of the Agro Energy Fund is to incentivise farmers to invest in alternative energy sources,” Didiza said.
“This Fund will run parallel to other existing financial instruments that are designed to support farmers with production, farmer infrastructure, market and other. Applications 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 R710m from the Land Bank, effectively creating a R1.21bn fund size.
The fund will provide a combination of grant funding and loans for farmers to acquire the equipment and infrastructure needed for energy-intensive farming.
Small-scale farmers will be able to access grant funding up to R500 000; medium-scale farmers up to R1m; and large-scale farmers up to R1.5m.
Land Bank will provide the blending loan at 30% for smallholder up to 70% for large commercial.
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.
Land Bank chair Thabi Nkosi said the AEF would enable the bank to contribute to building resilience against energy shocks in the sector, which had negatively impacted productivity and profitability in farm operations.
“We are delighted to be in this partnership with the department for the implementation of the Agro Energy Fund which is important to provide energy security to ensure that farming continues uninterrupted even during load shedding hours and there will be extra energy stored through this funding,” Nkosi said.
“This may also reduce the electricity bill of the farms as they will no longer buy full units but use solar-generated energy.”
Agri SA also welcomed the launch of the AEF, saying it was one of the interventions stemming from the Task Team established by Didiza to mitigate against the impact of the energy crisis on the sector.
Agri SA executive director Christo van der Rheede said the fund would provide vital support to the farmers who safeguard South Africa’s food security, given the cost pressures facing farmers, notably as a result of load shedding.
“This vital funding is essential to help maintain the financial viability of the sector, thus also protecting the livelihoods the sector sustains,” he said.
“While the funding will not address the magnitude of the challenges facing South Africa’s farmers or the extent of the impact of the energy crisis on their enterprises, it is a strong indicator of the department’s commitment to protecting the nation’s food security.”
– BUSINESS REPORT