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Cape Town - The Land Bank has stepped in to provide financial relief to drought-hit farmers who are facing a bleak Christmas.
"Farmers genuinely need more state support right now," the Land Bank said in reply to a question in Parliament on what it would do to help farmers facing financial ruin because of the drought.
"We are of the view that as the prevailing weather conditions continue, it is likely that more farmers will show early signs of distress," said the bank, which has about 31% market share of agricultural finance.
A drought has already been declared in KwaZulu-Natal, North West, Northern Cape, Limpopo and Mpumalanga, and the Famine Early Warning System Network (Fewsnet) warned that El Nino which is causing the dryness and reduced rainfall could continue until mid-2016.
"Acute food insecurity is already more severe than usual in the region due to low regional cereal supplies and above-average staple food prices," said Fewsnet.
Domino effect
Giving some insight into the domino effect of the drought, it explained that poor households usually prepare their land and cultivate their plots between October and December, and at the same time work on the farms of better-off households to buy their seeds, fertiliser and food.
But this year, the better-off households are hiring less labour after earning less over the 2014/15 year because of poor crop performance.
"Households that usually depend on crops and labour for their livelihoods between October and March are expected to face livelihood and food deficits during this period," Fewsnet warned.
In response to the hardship, the Land Bank has decided that farmers in drought-hit areas, who have evidence of losses, may qualify for drought relief.
The intervention would be based on merit for existing clients, and new clients would be assessed according to their existing credit criteria as set out in the Retail Emerging Market and Retail Commercial Banking Credit Policies.
Accounts that are in distress for reasons other than the drought would be excluded from this initiative, but can still apply for relief on the normal criteria.
All loans must comply with current Land Bank loan guidelines with respect to repayment ability, security and approved credit policy and exceptions will be considered on their own merit.
The relief options that would be offered to drought-distressed farmers include:
- To advance second season production loans without full settlements of the previous season production facility;
- Extend the repayment period for the remaining term of the mortgage and medium term loans;
- A repayment holiday of up to 24 months, depending on commodity and cash flow projections;
- Interest accrued write back for Retail Emerging Markets clients with inputs for the 2014/2015 production season that did not plant;
- Adjust loans from 60% to 75% (fully collateralised), where business cash supports increased borrowing;
- Subordination of existing loans, where applicable, to prevent reckless lending and over-indebtedness;
- Evaluation for assistance to be based on client’s business case merit;
- All applications approved under this initiative would require progress reports every six months.
The bank said it hoped that this would help farmers until the drought passes.
