A comprehensive guide to government grants, funding and incentives for the agriculture sector.
Whether you are a new entrant into the agribusiness sector, or have an existing farm, funding remains one of the top concerns for starting and growing an agribusiness.
Fortunately, the South African government has prioritised the growth of irrigated land production and agriculture, as well as developing industries such as agro processing, fisheries and small enterprises in the National Development Plan.
There are various grants, funding and incentives that have been made available by the government in an effort to assist new entrants and existing farmers in developing agriculture. Find out which ones you can qualify for.
Related: Grants, funding and incentives for Manufacturing in South Africa
Often start-up entrepreneurs make the mistake of trading from their personal bank account. This makes it harder to differentiate between your personal expenses and business expenses. It also doesn’t allow you to build up a credit risk profile for your business, which is an important factor should you ever want to approach a bank for financing. Rather, start trading as a business from the get-go by opening up a Business Current Account.
What is an agricultural government grant?
An agricultural government grant is the awarding of financial assistance to your agribusiness. Grants generally don’t need to be paid back by the recipient. However, there will be specific criteria for determining who will be eligible for a grant and once awarded, strict guidelines around what the fund can be used for.
Here is a list of the government grants available to the agricultural sector:
Land Redistribution for Agricultural Development (LRAD)
The LRAD programme was developed to support previously disadvantaged citizens to buy both land and agricultural equipment specifically for the purpose of an agribusiness. The LRAD grant is a non-refundable financial contribution from government.
This grant only supplements your existing funds to support you in growing your agribusiness. You need to have some kind of capital contribution to begin with. Cash contributions can be a minimum of R5000, which will qualify you for a minimum grant of R20 000, and a maximum of R100 000, which will qualify you for a maximum grant of R400 000.
Your contribution doesn’t have to be cash only. Agricultural assets integral to your operation can be counted as contributions. The total monetary value of these assets will be calculated to determine your contribution amount. Payments still outstanding on financed assets will not affect your contribution amount – the full value of the asset will be taken into consideration. Examples of assets that will be considered are:
Land that you obtained through a previous grant, restitution, tenure security grant or donation cannot be used as your own contribution.
Labour can also be considered as part of your contribution, but the labour units can only be equated to a maximum of R5 000 of your own contribution.
How to apply
In order to qualify for this agribusiness government grant applicants will need to comply with the following criteria:
- Previously disadvantaged individuals.
- At least 18 years of age.
- Have the intention to use the land only for agricultural purposes.
- Have the intention to farm on a full-time basis, unless you’re taking part in a safety-net project.
- You can’t have a current position inside government structures.
- After you’ve acquisitioned the land, be prepared to participate in a training programme.
- You’ll need to be in a position to make your own contribution, whether by monetary funds, assets owned or labour units.
- If you’re applying as a group, you’ll need to be an organised business.
- Have your own bank account.
For information about the LRAD agricultural government grant programme along with the application process please contact(012) 319 7020or visit your closest Land Affairs or Agricultural Provincial offices.
Related: Types of funding
Sector Specific Assistance Scheme (SSAS)
The SSAS is a reimbursable cost-sharing government grant that can be applied to the agricultural sector, where financial support is given to business that are supporting the development of industry sectors and businesses contributing to the growth of SA’s exports.
The objectives of the SSAS agricultural government grant are to:
- Develop entire industry sectors.
- Develop new export markets.
- Improve employment opportunities.
- Expand the export base.
- Develop solutions to inhibitors of export growth.
- Promote comprehensive participation of black owned business and SMME’s to the economy.
This agricultural government grant is divided into three subsections:
Generic funding – R50 000 grant for establishing an export council. This grant can be used for marketing, advertising and publicity costs on a 2:1 ratio, reaching a maximum of R1 million.
Project funding – 80:20 cost-sharing grant for projects that are enhancing eligible sectors, like agriculture, identifying new export markets and promoting black SMME’s, women, youth and people with disabilities.
Project funding for emerging exporters – Costs of travel, accommodation, exhibition costs, transportation of samples and marketing material will be covered to a maximum of R1.5 million.
SSAS projects objectives
These projects have a specific task that can be pre-determined and have a specific short-term time period and measurable milestones. They are developmental or promotional in nature, which means they uplift your sector and highlight your business and SA as a good export partner.
These projects can benefit the entire sector by promoting SA’s products internationally. The SSAS also funds non-profit businesses in your sector and sub-sector to uplift the entire sector.
How to apply
To find out about the application process, apply or find out other information please contact:
- Mr. Donald Manuela
- Tel: +27 (12) 394 1716
- Email:[email protected]
- Website: Financial Assistance (Incentives)
Related: Small business funding in South Africa
What is agricultural government funding?
Agricultural government funding is typically when a project or business derives part or all of its financial support from government. This funding needs to be repaid after a specific period of time, which is agreed upon by both you and the government. Here are some of the government funding options available to the agricultural sector:
Isivande Women’s Fund (IWF)
The Isivande Women’s Fund funds the improvement of women’s economic empowerment in the agricultural sector. This fund is specifically aimed at businesses that require:
- Start-up funding
- Business expansion
- Business rehabilitation
- Bridging finance.
The fund specifically supports the development of self-sustaining women-owned business within South Africa by offering these businesses primary financial and non-financial support.
How to apply
In order to be eligible businesses that are women owned need to meet the following criteria:
- Running for six months.
- Requires early stage capital for expansions and growth.
- 50% plus one share owned and managed by women.
- Has potential growth and commercial sustainability.
- Improving social impact with employment creation.
Companies that are suitable and require funding between the amounts of R30 000 and R2 million are invited to submit their application. Applications to the IWF should be made through http://www.idf.co.za or call +27 (11) 772 7910. Application forms can be downloaded from www.idf.co.za
Strategic Business Unit (SBU): Agri-business and agriculture
The aim of this agricultural funding opportunity is to develop competitive processed food, beverage, fibre, and forestry and derivative industries.
This applies to industries that specifically use and develop local and regional resources that supply domestic demand, as well as increase participation in international trade. These businesses intend to achieve this by expanding the capacity of production and encouraging value adding expansionary which will lead to an increase in processing activities.
This agricultural funding opportunity is eligible to a wide range of economically viable businesses in the agro-processing sector like:
- Wheat and sugar
- Livestock such as cattle, poultry, pigs and game
- Fishing and aquaculture
- Horticulture including fruit, vegetables, nuts, tea and coffee.
The purpose of the fund
The outcomes for this agricultural funding programme is to fund and support development activities and have the following impact on South Africa’s economy:
- Promotion, expansion and extension of new and existing industries. Resulting in the creation and preservation of employment prospects as well as driving sustainable economic growth opportunities.
- Enabling local industries to better utilise resources and infrastructure.
- Enabling local industries to enhance operating margins as well as improve and maintain competitiveness.
How to apply
Agri-businesses that are new or existing, are within agro-processing and the agriculture sector that are planning to create new or expand their industrial capacity with the economy can apply to this fund.
The specific criteria for South African investment opportunities are:
- The funding must be used to facilitate the creation of new industrial capacity and the creation of job opportunities.
- Operating private-sector investment partners need to be risk-sharing and the shareholders need to guarantee the funding of any shortfalls.
- Specifically equity related funding only applies to large investments, strategically important investments and minority interests.
- The funding’s limits are:
- Funding can only amount to 60% of total funding requirement for a start-up businesses
- The fund will cover the whole business expansion if the equity structure at peak is a minimum of 35%
- The preferred equity structure for start-ups is minimum 50% at its peak.
- BBBEE conditions: All business partners will need to have at least a level 5 or 4 accredited BBBEE rating, or provide a strategic plan to achieve this rating within an agreed upon period of time.
If you want to apply or ask for further information https://protected.idc.co.za/Register.aspx
The Land Bank provides financial services to the commercial farming sector. It was created by government for the specific purpose of financing, agri-business as well as financial products that would promote new entrants into the agriculture industry.
Related: 10 Tips for finding seed funding
Products and services
The Land Bank offers the following products and services to the commercial farming sector:
- Long Term Loans
- Medium Term Loans
- Short Term Loans
- Establishment Loans
- Large Live Stock
- Instalment Finance
- Special Mortgage Loans
This South African development finance institution serves all farmers equally.
What is an agricultural government incentive programme?
A government incentive is an incentive programme that is offered by various government departments. These incentives are used to stimulate and assist sustainable, competitive development within industries. This is accomplished by offering accessible incentives that can successfully improve national priorities.
There are several programmes that support development and growth of commercially viable and sustainable business opportunities along with incentives specific to funding or tax relief. Incentive programmes aim to ensure the creation of new and sustainable jobs.
Government incentives were created to increase the level of participation in certain developing areas that may have otherwise been too costly for businesses. The Department of Trade and Industry has several incentive programmes but various other government departments also offer own incentive programmes.
Here are government incentives offered that are not specific to the agricultural industry but an agribusiness could apply for:
Business Process Services (BPS)
The BPS government grant was developed to attract new investments from international businesses in a bid to create additional employment opportunities in South Africa. This specific grant has already created 9077 new jobs and has had an annual growth rate of 26% over the last three years.
The purpose of the incentive
The primary objective of the BPS government grant is to create jobs through servicing offshore business. Its secondary objectives are:
- To create youth job opportunities.
- To contribute to the export revenue of the country using offshoring services.
The benefits of the BPS government grant are:
- Incentives are calculated based on projected international employment created.
- Incentives are offered on a two-tier structure for non-complex and complex jobs.
- Incentives are paid for five years from the date the offshore job is created.
- Incentives are determined at application stage, depending on fully loaded operational costs.
- A bonus incentive is paid at the end of the five year period.
How to apply
In order to be an eligible your business must meet the following requirements:
- Performing BPS activities; starting a new operation or expanding an existing operation in order to perform BPS activities.
- Needs to have created 50 new offshore jobs after three years.
- Must commence no later than six months from grant approval.
- Must have at least one party registered in SA as a legal entity.
- Employ at least 80% youth.
- Secured an offshore contractor.
- Financially viable project.
- Compliance with all statutory requirements.
- Be a going concern.
If you want to apply or find out more information please visit the DTI here.
Related: Aquaculture for beginners – Part 1
Aquaculture Development and Enhancement Programme (ADEP)
This agricultural government incentive programme offers businesses a reimbursable cost-sharing grant of up to R40 million. The ADEP is available to companies that are engaged in the primary, secondary or ancillary aquaculture activities within both marine and freshwater options.
The ADEP agricultural government incentive programme’s objectives are to:
- Increase your production.
- Sustainable and creation of job opportunities.
- Encouragement of the geographical spread of companies throughout South Africa.
- Broadening of participation throughout the sectors within South Africa.
The purpose of the incentive
ADEP offers a reimbursable cost-sharing grant of up to R40 million as part of its incentive programme, which specifically covers:
- Bulk infrastructure
- Owned land/or buildings
- Improvements on leases
- Activities to improve competitiveness.
How to apply
Businesses that are eligible for the ADEP aquaculture government incentive need to be involved in the following processes:
- Primary aquaculture operations
- Brood stock
- Seed production
- Juvenile operations, including facilities for a hatchery and nursery.
- On-growing procedures, such as rafts, net closures, net pens, cages, tanks raceways and ponds.
- Secondary aquaculture operations
- Primary processing
- Secondary processing
- Tertiary processing
- Waste stream handling for aquaculture
- Ancillary Aquaculture Operations
- Aquaculture feed manufacturing
- Research and Development projects
- Privately-owned aquaculture veterinary
For more information and to find ADEP application forms.
Applying for government funding can be a difficult process, however should your businesses application be successful the necessary funding and business support will go a long way to starting the business of your dreams, or growing your existing farm into a sustainable agribusiness.