Agriculture is a crucial element of the economy, and agro-processing makes up a big chunk of the gross domestic product in our rural economies. In the past 20 years, the IDC has built its presence in the sector.
Agro-processing is one of the mainstays of the South African economy. According to Statistics South Africa, it contributed R280-million to the gross domestic product in 2011 – 20% of the total amount coming from the manufacturing industry.
The Industrial Development Corporation is not currently focusing on primary agriculture, but its contributions to agro-processing, and previously high value agriculture, which it does through its Agro-Industries Strategic Business Unit, has had a massive impact on farming and food production – which means job creation in rural areas.
Its approach has been to focus on high-value crops and on the labour-intensive segments of the industry, in line with the desire of the democratic government to boost job creation and reduce rural poverty. Special funding schemes have been in place since 1994 to ensure clients grow financially while also creating jobs. In the 20 years since the new government came to power, the corporation had a major impact, approving R7.6-billion for the industry and helping to create 84 000 jobs.
The IDC supports projects countrywide, such as the table grape industry in Northern Cape. Between 1994 and 1999, it approved more than R500-million (at 2013 prices) for the sector. In the same period, it injected R400-million into the wine industry in Western Cape.
Karsten Boerdery, the largest table grape producer in the country, situated in the Northern Cape, has benefited substantially from the IDC since 1994. The corporation owns 36% of the farm, making it the second largest shareholder. It was instrumental in establishing various subsidiaries of Karsten Holdings, inclusive of New Gro. This project – which focusses on table grapes, livestock, sweet melons and watermelons – aims to empower 50 women shareholders.
The citrus sector has also benefited significantly from IDC's funding over the years. IDC is one of the largest equity players in the citrus industry. It has supported projects in Limpopo, Eastern Cape, Western Cape, Northern Cape and Mpumalanga. The IDC believes citrus farms are able to create more jobs per hectare than most other kinds of farm. The IDC has been involved in the development new citrus growing areas, especially in black spot free areas, the introduction of high value varieties especially around soft citrus as well as the introduction of black growers in the sector.
In another innovative move to help farmers, in 2000, the IDC set up its Flood Relief Scheme for farmers affected by major floods. The scheme was put into use again in 2011, when floods hit farmers in Northern Cape and KwaZulu-Natal.
Red Sun Dried Fruit, for example, was able to continue operating after two floods hit the town of Keimoes, Northern Cape. Raisin farmers in the area had R767 000 worth of crops damaged. As a result, Red Sun went from producing 4 900 tons the previous year to just securing 1 300 tons. The IDC approached the company with a flood relief plan that carried it through 2011 and the first quarter of 2012. The company was able to keep on operating and hold on to its 79 workers.
With the coming of democracy, the IDC implemented a number of schemes to ensure the agro-processing sector remained a vital cog in the manufacturing industry. In 1994, the Orchards funding scheme was launched to stimulate investment in the labour-intensive export fruit industry. Over the next six years, 270 farmers benefited from this scheme to plant new or expand their operations.
In 2004, the Nguni Cattle project was launched in Eastern Cape and similar corporate social investment projects have since been rolled out in five other provinces. The IDC is examining ways to commercialise the concept. The corporation also tried its hand at bio-fuels from 2006, when it started work with the Central Energy Fund to determine the viability of establishing a bio-fuels industry.
By 2008, IDC had diversified its agro-processing portfolio and it funded the first marine aquaculture project in Eastern Cape. It approved R22-million for initial infrastructure and operational funding for Oceanwise, a kob fish farm located in the East London Industrial Development Zone. It has been green-listed by the World Wildlife Fund-Southern African Sustainable Seafood Initiative as its impact on the ocean is minimal. The IDC was also instrumental in the establishment of the commercial abalone industry.
One of the most innovative schemes is the Agro-Processing Linkage Scheme, created in 2011. It channels funding through a big company that, in turn, loans money to small, resource-poor farmers. It gives these farmers access to finance, a fixed supply of raw materials, and extra technical support they did not have previously. The scheme was successfully implemented for the Gledhow Sugar Mill in KwaDukuza, KwaZulu-Natal. With funding from the IDC and a private investor, 480 jobs were created.
More recently, the corporation's focus has shifted to supporting agro-processing with a view to maximise local beneficiation while realising the benefit of backward linkages into the agricultural sector, especially where these link with emerging black farmers.