Farm sales are changing, not in the face of expropriation or the five-year drought parching fields in the Eastern Cape, but because many buyers cannot get loans.
Peter Warren, principal of leading local farm sales agency Warren Properties, has seen a change in sales structures, with farmers putting their farms into companies and then selling off a portion of the shares.
“Many farmers want to continue farming but cannot access capital. They are happy to take on partners who will own a share of the farm.”
It is, according to Warren, himself a farmer, a win-win solution, where experienced farmers remain on the land and new entrants, mainly black, can either involve themselves in hands-on management, or become sleeping partners.
Margaret Vigne, a farm sales specialist and principal of Vigne Estates, said most of her clients were carrying on with farming as per normal. Expropriation had not made them desperate to sell.
“The only change in current activity, compared to 2017, is deposits. In many cases the large banks, with the exception of Standard Bank, now want a 50% up-front payment of the purchase price, unless it is a business buying the farm, and then it needs a credible trading history. Land Bank is more accommodating, and accepts from 10% of the purchase. High deposits kill sales.”
Vigne said sellers were more prepared to do private deals not involving banks. “Some buyers have irregular remuneration, such as project work, and get large sums when the job is complete. They have ready cash for large deposits, then interim amounts, but not on a regular basis. Sellers are becoming more flexible with payment schedules, which work for both parties.”
“In our recent experience the buyers’ market is dominated by black buyers, both existing and experienced farmers, and working people who want to farm, and are looking for land relatively close to East London.
“The drought is the major topic of conversation amongst farmers at present, and expropriation could be described as background noise,” said Aubrey Tidbury, the farming specialist with Pam Golding Properties (East London).
“In our experience it has had no impact on sales, with 2018 similar to 2017.”
Mike Francis, a director at legal firm Bax Kaplan Russell Incorporated, said some clients were concerned about possible expropriation. “There is definite awareness in the farming communities, with natural concern about the full impact of expropriation without payment. It has created a wait-and-see attitude, especially when it comes to larger, long-term projects that require capital.”
Several farmers had approached Francis regarding covering bonds, normally used to secure overdrafts with banks. The bond stops property owners doing any transaction without their bank’s authority.
“I have advised my clients against it. It is too early to tell but it seems if, in the future, a farm is identified for possible expropriation, then a covering bond is not going to stop it.”..