Land and Credit

I have been a missionary in Africa for about 30 years.  About mid-way through that period, there was a significant paradigm-shift in terms of helping people.  This happened to some extent because of the end of the Cold War and also the emergence of a few Third World countries like the Asian Tigers.  (Some of these have consolidated in BRICS - Brazil, Russia, India, China & South Africa).  The Clintons also promoted this shift – from a charity mentality to “micro-loans”.  Certainly I have noted that Canadian thinking is less inclined towards welfare “projects”, even in Canada, but more so in their approach to overseas aid.  In fact, just the word “aid” is played down; “trade” is preferred.

South Africa’s population is more urbanized and less rural than most African countries.  Most citizens grow up in “townships” not on farms.  So the twin issues of land and credit - both of which are needed by emerging farmers – are mission-critical to overcoming the “triple conundrum of poverty, unemployment and inequality”.

Credit

To begin with, one has to distinguish between consumer lending and business lines-of-credit.  The truth is that too many South Africans are too deep in domestic debt, and that is becoming a social evil of huge proportions.  However, that is not what I am talking about.  The topic of micro-loans or “unsecured credit” is what I mean.  I have quoted Muhammed Yunus who founded the Grameen banks before: “The banks ask, are the people credit-worthy?  We ask, are the banks people-worthy?”  On this note, I have often lamented that Credit Unions are conspicuous by their absence in South Africa.

The emergence of Africa Bank coincided with C4L’s first campus – both started in 1999.  AB rose much faster, of course!  “The bigger they are, the harder they fall”.

For a long time, AB’s strategy worked.  It focused on the poorer provinces.  It won the confidence of investors.  It loaned to South Africans ignored and deemed too risky by conventional banks.  It charged as much as 60% annual interest rates, because his customers didn’t have collateral.

But It overestimated its 3.2 million customers’ ability to pay back their loans when the global economic slowdown caught up with South Africa - just after the 2010 FIFA World Cup.  The AB just posted a loss of R8.5 billion and asked the Reserve Bank for a bail-out.  This is reverberating into credit downgrades for all banks, and possibly for South Africa as a country.

Frankly, this could not have happened at a worse time for C4L!  We have had a 2-year “funding drought” due largely to our SETA being placed under administration for corruption.  We have had 3 funding approvals from this SETA during this period, but the payments are “queued”.  So we have been consolidating C4L alumni who have already finished their entrepreneurship training, and trying to link some of them into a micro-franchising scheme.  To get going, they need Credit and Land.  But in the current credit climate, who is gonna lend money to poor and unemployed youth?  Eish.

The way financial institutions work, the default on debt of some customers will only make the interest rates higher for the remaining borrowers.  A common fallacy is that garnishees of wages are inappropriate when the borrowers are poor.  The fact is, eliminating these orders would have a devastating knock-on effect on the economy.

Micro Finance South Africa has just released a study that recommends that “unsecured lenders” should have a different set of guidelines than conventional banks.  When caps are so low that credit providers cannot make profits, they become price controls.

Land

Now for the first time in its 15-year history, C4L is experiencing first-hand what is means to have  clients who are landless.

Here is what happens… we suggest that a 25-meter by 25-meter plot will be enough to plant a small orchard of Chaya trees.  I won’t go into the technical details about this Mexican tree spinach, but we feel that it is a huge opportunity for youth to “get back on the land”.  It requires minimal training - to use a familiar phrase, it basically grows itself!  Not even from seed… you place cuttings in the ground and it takes off.  It is water-wise, nutritious, compact, adaptable, and even medicinal.  Youth growers basically just need to cultivate it, as the marketing is all in place with the Franchisor.  It can be picked every month all year round, so it provides steady income – good for repaying bank loans!

But this is a vicious circle.  One of the reasons that youth are poor and unemployed is that their parents are landless.  So where are they gonna grow their Chaya trees?

Then you hear these horrendous statistics about the result of land claims over the past 20 years.  In those specific cases where people can remember being dispossessed, not generally but at an actual address, there has been restitution and/or resettlement.  But the latest research suggests that these farms rapidly fall into disrepair and become unproductive.  The new Deputy Minister of Agriculture has recently released figures that indicate this as a trend.

So you get white voices saying that land re-distribution is a recipe for food imports.  And thus a tendency - as a new Chaya micro-franchising scheme emerges - to go to the white farmers and get them to grow it.  They have land, know-how, tools and staff.  They can put up fence, fertilize, water and buy saplings on a grand scale.  They can plant several hectares each – as opposed to a plethora of small growers organizing themselves loosely into Coops (for purchasing and marketing only – not collective farms).  This approach seems at once reactionary and common sense.  I even wonder if black youth (even the poor and unemployed) want to risk debt to grow Chaya, when it is ultimately sold as products that are popular among the rich and famous?  These youth are known for their defiance.

When one thinks of land re-distribution, Zimbabwe scenarios come to mind.  When one thinks of the Freedom Charter which says that the people shall benefit from natural resources, one thinks of Marikana.  There is a need for more inclusion of black people in the ownership of the land, just as there is a need for their inclusion in the ownership of the mining of mineral resources that still command the South African economy.  This has become clear to C4L as it tries to expand Chaya Tree Spinach programming in favour of poor and unemployed youth.  You need land and credit to farm.  As long as - when you get your hands on the “means of production” - you rise to the challenge and work hard and produce.  Failing black farms will only compound the problems of credit institutions.

Connecting the dots

While C4L Bulletins like this one are issues-centred, they are also part of our networking and fundraising efforts.

We encourage you once again, to consider setting aside some of your reserves, in favour of poor and unemployed youth.  Don’t give this wealth away – just park it, until you need it.  Either your broker or one known to C4L can then release the “increase” on that wealth over the period stipulated.

C4L is not a bank, but the microfranchising scheme allows its Chaya company - Koperano Trading (Pty) Ltd – to make “revolving loans” to new growers.  They won’t get cash, they will get the fencing materials, inputs and saplings needed.  Then they can make their loan payments in Chaya leaves!