Land reform must be 'holistic'

2005-07-29 14:18

Johannesburg - Successful land reform is not about how much land is transferred, but about how it improves the lives of South Africans, the Land Bank told the land summit in Johannesburg on Friday.

A Land Bank general manager, George Oricho, was discussing the challenges of financing land reform in the country.

Some of these challenges were interest rates, people not having title deeds, farmers not having collateral, a lack of training, and more finance innovation needed.

Oricho said enough financing for a new farmer would not guarantee the viability of his farm.

"You need a holistic approach such as good marketing and research," he said.

Challenges farmers' face

Oricho said one of the main challenges facing farmers was that many of them could not get conventional financing because they did not own the land to use as collateral.

In South Africa many people have access to land, such as employees with tenure rights on a farm.

In these cases banks should attempt to help by using the crops produced on the land as collateral, or livestock, or farming equipment such as a tractor, he said.

Oricho said his bank had often been criticised for giving the value of a piece of land a low price. But when the bank had to evaluate land not owned by the farmer, it had to evaluate the enterprise of the farm, such as its crops.

"When you borrow money based on enterprise and you cannot sustain the debt, it's a no go (for the bank). The production value is often much lower than the commercial value," he said.

Mobilising resources

Oricho said the main function of the Land Bank, a government body, and other development finance institutions were to mobilise resources from the private sector to fund land reform.

He said 90% of the money his bank loaned to farmers was from the money market. The remaining 10% came from the bank's own resources.

The reason for this was the government's resources were limited.

On innovation in the sector, Oricho said South African finance institutions could consider demanding only that farmers pay the interest of a loan and not the principal as was done when buying a house.

Oricho said this was no different than leasing the property, and by using it effectively the burden of debt would be lightened.

On complaints about the bank's interest rate, he said this could not be lowered because the rate was market-based as the cash was lent from the money market.

The bank tried many options before repossessing land when people defaulted on payments.

When this did happen, a person involved in land reform was given first option to purchase the property before it went to the money market, Oricho said.

- SAPA