KfW Development Bank signs R900m loan facility with Land Bank

The Land and Agricultural Development Bank (Land Bank) has signed a R900million long-term loan facility, secured through German Development Bank KfW, to provide a much needed boost to agricultural development in South Africa.

In a first for KfW, the loan has been priced in local currency, with favourable terms to the Land Bank.

The facility features a 10-year amortising repayment period with a two-year repayment holiday, payable from March, 2020 in 17 bi-annual instalments until 2028.

It is not the first time that the Land Bank has received this form of funding.

Last year, it secured similar funding through the World Bank and its Multilateral Investment Guarantee Agency (MIGA) of an amount of $300million (R3.5billion) loan facility with a 10-year maturity period, in support of a long-term commercial loan from Standard Chartered Bank and DZ Bank.

Next week, the Land Bank is also expecting to sign a similar facility with the European Investment Bank (EIB) to the tune of R50m.

The bank said there was a broader story on it being able to secure sustainable funding from investors to boost its transformation and development mandate which is to bring more black farmers/agribusiness into the sector.

“It is especially significant because we don’t receive any direct funding from the government, only guarantees, and we have to raise all funds dispersed to our farmers on the capital and debt market,” it added.

This will help to increase the bank’s long-term liquidity for the benefit of the agricultural sector in South Africa.

The funds are earmarked for agricultural development and will supplement the Land Bank’s sources of transformational and development funding.

Land Bank chief executive Tshokolo Nchocho said the facility would enable the bank to continue supporting greenfield projects.

“We are encouraged by the confidence investors are showing in the important work we are doing to support rural development, as well as in our ability to meet all the commitments to our key stakeholders.

“With secure lines of funding such as this, the Land Bank remains best positioned to drive productivity, growth and job creation, as well as promote food security in the country,” Nchocho said.

The Land Bank’s partnership with KfW Development Bank represents another significant milestone in its efforts to diversify the bank’s sources of funding in order to drive its development mandate.

Dr Thomas Duve, KfW director for sub-Saharan Africa, said KfW Development Bank was excited about its growing partnership with the Land Bank.

“Funding by KfW will be targeted at providing financing solutions to commercial farmers and end-to-end business support for emerging farmers, with a view to enabling access to long-term finance at competitive conditions.

"We are convinced that this agreement will contribute significantly to the small and medium-sized enterprises in the agricultural sector of South Africa,” he said.

KfW Development Bank has been supporting development in South Africa since 1994.

It has done so by providing financing and technical support to help the country overcome structural problems, including inequality, unemployment and poverty.

In addition to agriculture, KfW is already working in the areas of energy and climate; health and crime prevention.