GOBABIS – The agriculture sector contributes over 8% to Namibia’s gross domestic product (GDP) and accounts for over a fifth of the local workforce, but the sector still remains largely unappreciated, as it received only 4% of total loans and advances from private banks in the last eight years.
The inadequate funding from private banks was particularly noticeable between 2017 and 2021, where the local agriculture sector, which is the sole source of income and food security for over 70% of the population, was last on the list of commercial banks’ funding priorities.
Vice President Netumbo Nandi-Ndaitwah described the private banks’ continuous insufficient funding of local farmers as uninspiring and amounting to the deliberate exclusion of the country’s neediest farmers from mainstream financing tools and mechanisms.
She was speaking at a recent farmers’ engagement day with Omaheke farmers and residents at Gobabis.
“The local private banks must also start coming on board, and assist our farmers. Many of our local farmers are in need, and government alone cannot resolve all the problems the farmers face. That’s why local banks need to step in and help fund various projects and initiatives of farmers.
The banks are nowhere to be seen in this space, and it is very concerning to us as a government. They need to step up and do more for our farmers, and assist in financing local value addition and production chains,” she said.
The Omaheke farmers engagement day was held under the them: ‘Navigating Challenges, Cultivating Opportunities’.
It was further stated that the agricultural sector is a cornerstone of the country’s economy, but remains unacknowledged and faces a myriad of challenges that threaten its sustainability and growth.
“They [banks] need to come up with innovative ways and products that will make it easy for our farmers to access funding – because at the moment, it is almost impossible for farmers to get assistance from private banks.
That has to change, as development cannot take place in such a setup – and there is no way our farmers will grow their operations without help from all of us – from both government and the banks. We all need each other. The banks also need our farmers for their sustainability, and so do the farmers as well. Let’s all work together,” she emphasised.
Disparity
Meanwhile, Nedbank Namibia’s head of business banking John-James Tromp equally agreed there is discrepancy and disparity when it comes to credit allocation to agriculture when compared to other sectors.
“There is a clear need for increased financial support in this sector, which is a common issue across Africa, where many agricultural small and medium enterprises (SMEs) struggle to access bank loans, and are too large for microfinance. This has resulted in a US$100 billion gap in unmet financing demand continentally. Bridging this gap is crucial for reviving the agriculture sector and, in turn, ensuring future food security’,’ she said.
Tromp added that while the bulk of financial assistance to farmers has long come from government-owned entities, such as Agribank and the Development Bank of Namibia, private banks also need to do the work to democratise credit access to smaller-scale farmers and those in rural areas.
A survey of small and medium farmers in northern Namibia by Harvard’s Growth Lab, as part of a research project undertaken in collaboration with government from 2020 to 2023, highlighted the challenges faced when it comes to accessing finance.
These included unclear information about formal credit availability and conditions, burdensome and difficult-to-meet requirements as well as the insufficient presence of regional officers to understand local needs.
“In response to this pressing need, Nedbank has introduced a new agribanking offering by employing a decentralised operating model. Credit managers, equipped with a comprehensive understanding of the Namibian agricultural landscape, aim to visit selected clients to gain deeper insights into their risk environments.”
Reaching out
Loans such as Nedbank’s agribanking solutions are available to individuals, partnerships, companies, close corporations and trusts, said Tromp.
At Nedbank, specifically, these solutions cater to both full-time and part-time farmers, who derive more than 50% of their income from sustainable agricultural activities, game farming, land-based environmental preservation, as well as timber and forestry activities.
These financial products include short-term finance, providing working capital through overdrafts that are repayable within one year or a seasonal cycle; asset-based finance for procuring equipment and machinery, as well as medium-term loans for purchasing equipment, livestock, seed and other necessary farming inputs.
For property purchases, land acquisition, fixed long-term improvements as well as establishing long-term crops, long-term financing vehicles are also available.
“Any financial services company aiming to support agriculture in Namibia must grasp the unique challenges faced by farmers navigating Namibia’s unforgiving landscape. Given the unpredictable weather and uncertainty surrounding crop and livestock performance, cash flows for farmers often fluctuate. This underscores the importance for banks to comprehend industry cycles that may impact repayment ability,” cautioned Tromp.
As the driest country in sub-Saharan Africa, Namibia encounters severe limitations in agricultural development.
Persistent issues, such as land degradation and bush encroachment, have drastically reduced land fertility and carrying capacity.
Moreover, climate disasters like floods and droughts have led to significant losses, particularly in livestock farming.