Bank service

RMB intervenes with the financing platform in the absence of the service of Land Bank

Financial services provider Rand Merchant Bank (RMB) has launched an Agri Harvest finance platform, the first of its kind, which will facilitate financing for the agricultural sector to ensure a sustainable food supply for South Africans.

The platform, which RMB launched as an alternative solution in response to funding problems at the South African State Land and Agricultural Bank (Land Bank), can be used by multiple industry stakeholders to bring together asset providers and investors.

Co-Head of RMB Debt and Commercial Solutions Chris Alderson explains that the bank was prompted to find an alternative financing solution for the agricultural sector, as Land Bank’s financial losses increased by 211% to R2.8 billion in the financial year 2020 alone and it has since been unable to lend money to Farmers.

The 110-year-old bank will be liquidated if it fails to restructure its 40 billion rand debt.

Alderson says the new platform bridges the funding gap between farmer and investor. “We believe the Agri Harvest Funding platform will be a key enabler for the agricultural sector, particularly the sector being the foundation of food security and vital to the socio-economic fabric of South Africa.”

The platform, which provides access to funding from institutional and commercial lenders, will allow agribusinesses to diversify their funding base at a potentially lower cost than the traditional single commercial bank model.

The RMB points out that this can lead to a lower price paid by the farmer to the benefit of consumers.

Senior RMB Cover Banker Wimpie Snyman explains that the loans will be ring-fenced and that there is therefore no risk of cross-contamination between issuers and lenders.

He says the platform will reduce the high cost of entry barrier for agricultural companies and banks to obtain finance from the capital markets, while meeting environmental, social and governance needs.

The Agri Harvest Funding platform facilitated its first successful transaction on July 15, for financing a farmers debtor ledger initiated by GWK, an agricultural company and debt originator in the Northern Cape, resulting in a first drawdown a R1.4 billion facility. .

Flagship investors on the platform include Stanlib, Ashburton Investments, and RMB.

Alderson believes the platform paves the way for other mandates to be agreed with originators of agricultural sector assets who need liquidity and funding, while simultaneously accessing capital markets.