A partnership with a purpose
A Public Private Partnership in the Eastern Cape is creating commercial farming opportunities for emerging farmers in the province through availing finance, mechanization, technical support and markets. Mr Victor Mongoato, chairperson of the Matatiele Grain Corporation (PTY LTD), explains the benefits of pulling resources together to achieve a common goal.
In July 2018, a group of farmers from Matatielle, a quaint little town lying at the junction of three provinces (Free State, Eastern Cape and KwaZulu Natal), witnessed their first shipment of yellow maize set sail for Vietnam from the Durban harbor. This was a historic and proudest moment for this group who has for many years, battled to access a formal and direct market for their grains.
All this was made possible by a partnership between the farmers themselves (Matatiele GrainCO), Grain Farmer Development Association (GFADA), the Masisizane Fund, Eastern Cape Department of Rural Development and Agrarian Reform (EC-DRDAR) as well as the National Department of Rural Development and Land Reform (DRDLR).
Mr Victor Mongoato, was part of the delegation from the fourteen-member cooperative to see off this shipment. Victor is a grain farmer who’ve started his farming career in 2000, following a long career as an educator. He leases government land which forms part of a military base on the outskirts of Matatiele. Since the beginning of his career, Victor has gone through the ropes, from a trainee farmer to being on several leadership roles of agricultural formations such as the Board of Grain SA, Committee Member of Agri Eastern Cape, and AgriSA Transformation Committee, and now interim chairperson of a newly formed South African Grain Association (SAGRA). SAGRA was formed solemnly to look after interest of black grain producers.
Establishing the GrainCO
According to Victor, one of the biggest challenges facing small farmers is their inability to benefit from economies of scale. This, in his opinion, makes farming expensive, and prevents small farmers from becoming competitive players in their industry. Something that actuated the establishment of the Matatiele Grain Company (PTY LTD) which he is the Vice-Chairperson of.
After battling for a long time to expand and mechanise his own farming operations, Victor saw an opportunity in bringing together farmers in his area and combining their resources to form Matatiele GrainCO. The company contracts mechanisation services for 3 500 hectares of land, held by 26 small farmers, making a real impact in the lives of farmers clustered around Matatiele.
Matatiele GrainCo was originally established with R5 million seed capital in 2014 from Old Mutual’s Masisizane Fund. To date, the initiative has had financial support of over R110 million, part of which was a loan and another part a government grant. The money has been invested in purchasing assets, including high-tech machinery, leading to farmers reaping the benefits of large, cost-effective Agribusinesses. It has also allowed black farmers enter the Agribusiness value chain and become competitive in the market.
For Victor, the relationship/partnership formed between themselves, government, Masisizane Fund and GFADA is the most valuable part of the entire project. The partnership demystifies the narrative that black people cannot farm. He says traditional agribusinesses (input suppliers) and financiers have not made it easy for black farmers due to their tedious funding model, especially lending against land as collateral. “The industry’s stereotypic thinking about titled land as the only way of being commercially viable is wrong. There are many ways to make funding available for black skilled farmers, such as using the actual crop as security,” explains Victor. “This model has been proven to be highly successful in many instances it was used, without anyone having to produce a title deed,” he stresses.
Victor says the Masisizane Fund has gone beyond any of the current agricultural financier has been willing to go, not even the Land Bank. He added that the intervention from GFADA played a pivotal role, not only through benefits such as mentorship, soil corrections and insurance, but through linking them to international markets, something foreign to majority of black farmers. For deep rural farmers like them, according Victor, formal markets are inaccessible due to the system designed by the apartheid government. This system intentionally excluded former homelands from economic activities except only to provide cheap labor as migrant workers. “In the former Transkei, there is no agricultural infrastructure and storage facilities such as silos, which therefore forces us to transport our products some 400km away from our farms,” explains Victor.
The involvement of Wipwise through securing the Vietnam market beforehand, assisted to in mitigating costs implications, such as transport, storage, etc. The arrangement secured a farm gate price for the maize, removing hidden costs which erode profit margins. This as a result, saw the farmers making revenue of over R8 million. The achievement of this partnership goes beyond exporting maize. The company has improved production for its members and clients. “As a single farmer, I was only able to farm between 50 and 60 hectares. Now I farm 150 hectares” Victor explains. “Also, the business is taking shape in such a way that I’m able to also supply local schools with beans, and have an impact on farming activity and the rural community. Everyone who has been letting their fields lie fallow now has an interest in farming their land again,” he adds.
According to a DRDAR representative in the Eastern Cape, the total tonnage estimated from Matatiele farmers when they all complete harvesting is 8,658 tons, and is estimated to earn for farmers about R18.7-million. The initiative has also created over 200 job opportunities benefiting more than 200 families. “The project, we believe, is what exemplify radical economic transformation,” Victor says.
The partnership is working in such a way that farmers have already secured a market for 30% of the next crop. There are negotiations in place with other potential international buyers for our grain. The negotiations, according to him, also include a favorable exchange rate (rand/dollar) to avoid dependency on the SAFEX rates. The project will continue to develop farmers for the next five years, and the partners remain hopeful and optimistic that it will yield more results, contributing in transforming the agriculture sector and increasing farm net income for farmers.
Victor says through modern technology they have the power to produce food for the growing urban population, as well as provide opportunities for young people. “The youth won’t have to move to the cities to look for jobs, and we hope that the use of science, high-value and technologically advanced machinery can be exciting enough for them,” he points.