The Board of Directors of the African Development Bank (AfDB) approved on Wednesday, a 1-billion South African rand (ZAR) (About USD 117 million) sovereign guaranteed line of credit to the Land and Agricultural Development Bank of South Africa for on-lending to the country's emerging farmers, commercial farmers as well as to agricultural cooperatives and agri-related businesses. The support will help to mobilize financial resources for the agricultural sector, ultimately contributing to job creation and income generation.
The credit, which also includes a technical assistance component for capacity building at Land Bank and at the level of its loan beneficiaries, particularly the emerging farmers, will enable the government's to support, promote and facilitate the development and transformation of the agricultural sector in South Africa given its potential for addressing poverty alleviation, enhancing food security and job creation.
As one of the most employment intensive sectors of the South African economy, agriculture's potential impact on empowerment and poverty relief is much larger than its actual weight in the economy suggests. While the primary agricultural sector contributes about 3% to Gross Domestic Product, it represents about 7% of formal employment. If the entire value chain of agriculture is taken into account, its contribution to GDP actually reaches 12%. As a result, the empowerment benefits of assisting farmers, particularly the emerging ones, are more significant than in most other economic sectors, especially when adding other crucial factors such as the stabilizing social effects of rural development in general.
Commenting on the transaction, The AfDB's Private Sector and Micro-finance Department Director, Tim Turner, said: "The LoC from the AfDB will be dedicated to the agricultural sector which is generally labor-intensive and its benefits are expected to emphasize low-skilled workers, especially with Land Bank's focus on emerging farmers."
He said that the projected 2,700 loans to be given to emerging farmers from the LoC are expected to generate some 14,000 jobs while the financing to the commercial farmers, cooperatives and agri-related businesses is expected to create at least 2,000 jobs. "This will have multiple positive inclusive growth effects by targeting underserved populations such as rural communities, women and black emerging farmers," Mr. Turner added.
