Agricultural loans: Money for nothing at the taxpayers’ expense

Issued by Retief Odendaal, MPL
Shadow MEC for Rural Development and Agrarian Reform

The Eastern Cape Rural Development Agency (ECRDA) has been dishing out taxpayer’s money, as loans, with apparently no intention of getting it back, despite offering some of the lowest interest rates in the country.

The ECDRA, which falls under the Department of Rural Development and Agrarian Reform, has been granting agricultural and non-agricultural loans to individuals at an interest rate as low as 3%.

This means that the Eastern Cape government is literally granting loans to individuals at an interest rate cheaper than that of the Reserve Bank repo rate.

Despite this, the ECRDA has continuously written off bad debts, because they are unable to get people to repay these loans.

A capable state would ensure that, while boundaries to accessing funding are lowered, funds loaned are provided to viable ventures and that proper measures are put in place to ensure the capital amount is guaranteed.

This clearly has not happened, with the ECRDA dishing out funds with no apparent plan in place of getting the money back.

In response to a parliamentary question from the Democratic Alliance, DRDAR MEC, Nonkqubela Pieters, revealed that over the past five years the ECRDA wrote-off loans to the value of R59 million, with R42 million of these write-offs in the last financial year (2020/21).

The total loan book for the financial year 2020/21 was R138,8 million, but the ECRDA only managed to recover R6 million in repayments for the financial year – this equates to just 4 cents on the Rand.

During the same financial year, some 87% of all loan recipients have defaulted on their payments.

SEE IQP 02 3rd session (6th) Q46

The ECRDA is a registered credit provider with the National Credit Regulator and currently makes agricultural and non-agricultural loans available to applicants residing within the boundaries of the Eastern Cape.

The agricultural loans are for individuals that require seasonal input capital for primary production and/or the purchase of assets or farming infrastructure. Non-agricultural loans are short term loans that provide tender entrepreneurs and hawkers with financial assistance.

The lending practises by ECRDA is grossly negligent and is exposing the Eastern Cape Provincial Government to adverse financial risk. Given the parlous state of public finances, reckless lending practises by state entities is criminal and have to be stopped at all costs.

The DA has written to both Provincial and National Treasury to endeavour to investigate the lending practises of the ECRDA. We will continue to fight to ensure that the funds entrusted to the government are used correctly.