agro energy

SA launches agro energy fund to combat load shedding impact

Amid the ongoing energy crisis in South Africa, the agricultural sector is facing a severe hurdle due to prolonged load shedding.

agro energy

The ongoing load shedding in South Africa has become a serious constraint on growth and profitability for various sectors such as agriculture. To address the negative impact on farming operations brought about by the load shedding crisis, the Land Bank and Department of Agriculture, Land Reform and Rural Development (DALRRD), recently launched a blended finance fund. The Agro Energy Fund is geared towards financing alternative energy solutions with a focus on energy intensive agricultural activities which include irrigation, intensive agricultural production systems and on-farm cold chain related activities. 

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The Fund aims to support all South African citizens, producers in the agricultural sector, including smallholder, medium scale, large scale and mega commercial producers.

The launch of the Agro Energy Fund follows the successful introduction of the R2 billion Blended Finance Scheme (BFS). The BFS is a blended finance programme established in partnership with the DALRRD and the Land Bank with the objective to facilitate meaningful participation of black producers a in the agricultural value chains.

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The BFS was launched in October 2022. Speaking at the launch, DALRRD Minister Thoko Didiza emphasised that the purpose of the Agro Energy Fund is to incentivise farmers to invest in alternative energy sources, and will run parallel to other existing financial instruments that are designed to support farmers with production, infrastructure and market access, amongst others.

Minister Didiza explained that applications for the fund will be directed to the Land Bank and will be subjected to approval guidelines of the bank. “The funding will be deployed through a blended finance structure which is a combination of a loan and grant. DALRRD will contribute a grant portion to a total value of R500 million which will be matched with a loan portion to a total value of R710 million from Land Bank.

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Curbing energy crisis

This will effectively create a R1.21 billion fund size.” Minister Didiza said the fund will be available in the market until the allocated funds are completely drawn down. The Minister added that the priority will be on supporting dairy farming, piggeries, poultry, all irrigated commodities and on-farm processing.

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Land Bank Board Chairperson, Thabi Nkosi, expressed the bank’s appreciation to be in partnership with the department for the implementation of the Agro Energy Fund, and also commended the department’s allocation of the R500 million grant. “The fund aims to support all South African producers – from smallholder farmers to large commercial producers – in a manner that ensures a balanced allocation of funds across various farming cohorts, according to need,” Nkosi said. –