New lender focuses on agricultural sector

AgMerchant, a new agricultural lender for the SA market, has been launched with the view of providing custom financing solutions to the farming sector.

Founded by Chris Venter, who has 30 years’ experience in financial services and agriculture, AgMerchant aims to provide the entire farming value chain with bespoke, digitised and long-term financial services solutions. Venter is a former CEO of agricultural services firm Afgri and has 14 years of merchant and investment banking experience.

AgMerchant is backed by two large commercial SA banks, though Venter declined to name them for “competitive reasons”. The agricultural lender is in talks with a third commercial bank about providing additional financial backing for its lending purposes, which are now largely focused on commodity and asset finance though AgMerchant wants to expand its product set.

“Our ultimate vision is to become a fully fledged commercial agri-lender offering the full range of financial products, from input finance to monthly accounts and insurance,” Venter said. “At the moment, our main focus is on the big corporate agribusinesses.”

The SA agricultural sector has faced a liquidity crunch over the past two years after the Land Bank — the state-owned lender that accounts for almost 30% of agricultural financing in the country — was forced to cease extending loans after it defaulted on its own debt in April 2020.

While the Land Bank announced in October that it would resume lending via a blended finance scheme supported by the department of agriculture, land reform & rural development, some players in the private sector have attempted to develop new lending solutions to support commercial farmers.

For example, RMB launched its Agri Harvest Funding Platform in October, which allows commercial farming businesses to diversify their funding bases beyond the traditional single commercial bank funder model. The platform enables agribusinesses seeking funding of R100m or more to obtain debt funding from the asset management or institutional investor market with the eventual aim of allowing the debt facilities to be listed via RMB’s Intengo Market platform, a digital corporate credit marketplace that was launched in October 2021.

Venter said that many large farming operations had been forced to turn to commercial banks for loans in the wake of the Land Bank’s liquidity woes. Some farmers had opted for trade credit from seed and fertiliser suppliers to alleviate their working capital constraints.

“The SA agricultural industry is critical to the continued growth of the economy, as well as to food security and job creation, and is expected to maintain and grow its food export capabilities, contributing to a positive trade balance,” he said. “It is thus essential that the industry should be supported by a robust and focused commercial agricultural lender. We have seen Land Bank reassessing its role as a commercial farmer financier. We believe there is room for a financier that understands the cyclicality of the industry and an entity that can finance the flow of the commodity, rather than just relying on the strength of the balance sheet of the farmer.”