The persistent issue of load shedding in South Africa has cast a shadow over growth and profitability in various sectors, with agriculture being no exception. To combat the adverse effects of the load-shedding crisis on farm operations’ productivity and profitability, the Land Bank and the Department of Agriculture, Land Reform and Rural Development (DALRRD) have jointly introduced the Agro Energy Fund.
This blended finance initiative, launched on August 29th, aims to finance alternative energy solutions, particularly focusing on energy-intensive agricultural activities like irrigation, intensive agricultural production systems, and on-farm cold chain operations.
The Agro Energy Fund is designed to provide support to all agricultural producers and agri-businesses in South Africa, ranging from smallholders to large-scale and mega commercial producers.
Minister Didiza emphasized the fund’s objective, stating, “The purpose of the Agro Energy Fund is to incentivize farmers to invest in alternative energy sources. This Fund will run parallel to other existing financial instruments that are designed to support farmers.”
Operating on a blended finance model, the fund involves a combination of a loan and a grant. DALRRD will contribute a grant portion of R500 million, matched by a loan portion of R710 million from the Land Bank, resulting in a total fund size of R1.21 billion. The fund will remain available until the allocated funds are fully utilized. The primary focus of the Agro Energy Fund will be on aiding dairy farming, piggeries, poultry, all irrigated commodities, and on-farm processing.
As part of this initiative, the Land Bank will introduce its Green Finance product, which will facilitate financing for solar panels, biogas, and biomass plants. This will lead to the implementation of energy efficiency projects across the nation, helping to offset electricity consumption from the grid. The introduction of the Agro Energy Fund is a proactive step toward enhancing resilience in the agricultural sector against energy shocks that have negatively impacted productivity and profitability.
The initiative aligns with the sector’s priorities of ensuring food security and fostering rural development. By providing support to producers, the fund indirectly contributes to maintaining jobs within the growing agricultural sector.
Mr Andrew Makenete, Deputy Chairman of the Land Bank Board, highlighted the significance of the partnership, stating, “We are delighted to be in this partnership with the Department for the implementation of the Agro Energy Fund, which is important to provide energy security to ensure that farming continues uninterrupted even during load shedding hours.”
The launch of the Agro Energy Fund builds on the success of the Blended Finance Scheme (BFS), launched in October 2022 through the collaboration between Land Bank and DALRRD. This initiative marks the commencement of lending activities under the Agro Energy Fund, furthering the country’s efforts to mitigate the impact of energy challenges on its vital agricultural sector.
