Farmers will soon be able to apply for funding to invest in alternative energy sources to help alleviate the affect of load-shedding on irrigation and cold chain activities.
The R2.5bn “agro-energy fund” will be set up at Land Bank, said agriculture minister Thoko Didiza.
She tabled the department of agriculture, land reform and rural development’s budget in parliament on Tuesday, telling MPs that her idea for the fund was one of the outcomes from a task team she established earlier in 2023 to find solutions to mitigate against the affect of energy cuts on the farming sector.
“The focus [of the fund] will be on energy intensive agricultural activities. These will include irrigation, intensive agricultural production systems and cold-chain related activities,” Didiza said.
Through the fund, farmers will be able to receive grant funding of between R1.5m and R500,000 depending on the scale of their operations.
Large-scale farmers will receive 30% grant funding to be matched with 70% loan portion, where the grant amount is capped at the maximum of R1.5m. A medium-scale farmer will receive a 50%` grant to be matched with 50% loan portion, where the grant is capped at the maximum of R1m.
Agricultural budget does not support commercial farming
Smallholder farmers will be supported by a grant portion of 70% to be matched with 30% loan. For this category the maximum grant funding is capped by R500,000. However, Didiza, said there will be a special recognition and application mechanism for small-scale irrigation schemes.
The department defines a small producer as those who achieve an annual turnover of up to R1m. Medium-scale producers are those with a turnover of up R10m per year and large-scale producers up to R50m.
The value of the fund will “total over R2.5bn”, said agriculture department spokesperson Reggie Ngcobo.
Farmers will be able to use the money to invest in any alternative energy technology, including renewable energy and diesel-powered generators.
The department, together with Land Bank, was still finalising details about the duration of the fund, Ngcobo said.
Farmers have welcomed the announcement but have sought clarity on the criteria that will used to select beneficiaries.
The establishment of this fund was in line with some of the suggestions brought to the minister by the task team to help farmers better cope with the effects of load-shedding, said Christo van der Rheede, CEO of commercial farmers’ association Agri SA which serves in the task team.
“We welcome the announcement, but we want to know how many farmers will be able to qualify for this support and what other criteria farmers will have to comply with to benefit from the fund,” Van der Rheede told Business Day.
He suggested the department should also consider partnering with commercial banks that already had experience in funding “green” energy projects. Partnering with the private sector on this blended financing scheme could help stretch the grant funding even further, he said.
The new fund might offer support for farmers to invest in alternative energy, but it did not offer a solution to the escalation in input costs that farmers were facing from having to purchase more diesel to power generators, Van der Rheede said.
Severe load-shedding and rising fuel prices were two of the main drivers of high food prices in SA. According to the Bureau for Food and Agricultural Policy’s most recent report on food price trends, food inflation has been rising for more than a year. In March, food inflation was at 14% year on year compared with consumer price inflation of 7%.
