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CHAPTER 1
financing of producers and agricultural co-operatives were the right action. They
also pointed out that there was a great need for co-ordination between agricultural
co-operatives and government institutions with respect to technical and economic
counselling to producers.
Most of the Jacobs Committee’s recommendations were accepted in principle by
the Ministers of Agriculture and Finance, particularly those that applied to the pric-
ing policy, in order to adjust producers’ profit margins. The committee’s report
eventually led to a decision by parliament to subsidise producers’ interest rates.
Financial support by the government and
the Burger Commission
The declining profitability in many parts of the agricultural sector would have led
to material decreases in farming income if it had not been for the government
aid to producers. Despite the government’s considerable financial assistance
to producers, arrears on loans increased constantly as the financial crisis on
farms deepened.
In 1979 the government introduced a drought aid scheme to the summer sowing
areas, similar to a scheme that was introduced in the Swartland shortly before.
The aim of the scheme was to grant special aid to stock and grain producers who
experienced financial problems because of drought. It was limited to producers
who were still creditworthy and who could prove that their losses were caused by
the drought.
In terms of the scheme, the repayment of production credit that producers could
not settle because of the drought was postponed. This applied only to produc-
tion credit granted for the 1979/1980 production season and offered producers an
opportunity to repay that production debt over a maximum period of four years.
The interest on the relevant debt was subsidised by 3,5% by the government. The
scheme also made provision for special credit to creditworthy producers to pur-
chase animal feed in areas declared to be emergency grazing areas.
However, the government’s financial aid over several years did not succeed in halt-
ing the structural deterioration in the profitability of farming and the debt load
constantly increased.
A material component of the producers’ short-term debt, which was mainly owed
to co-operatives, consisted of transfer schemes for production credit guaranteed
by the government. The state guarantee with respect to the producers’ carry-over
debt was originally introduced after the severe drought of 1982/1983. Producers
of the time recount that it was a complicated system in terms of which the maize-
producing areas were divided into regions according to the type of soil. On the
basis of the classification of his soil a producer could apply for a certain part of
his debt to be carried over to the next year, which was then guaranteed by the
government. The production debt was eventually repaid by the producers at the
subsidised interest rate.
In 1992 it was estimated that the total benefit from the government’s interest-rate
subsidy to producers from 1983 to 1992 amounted to about R1,31 billion.
The government guarantee on carry-over debt in effect became a permanent meas-
ure after 1983 and the value of this guarantee increased over time from R800 in 1983
to R2,4 billion in 1992. The drought of 1991/1992 had a major effect on this debt.
In 1992 the state announced 13 aid schemes to agriculture on the basis of the report
of the Burger Commission. This included a drought aid package of R2,8 billion that
was allocated to assist agriculture in the drought-ravaged summer sowing areas.
Some sources refer to an amount of R3,4 billion, but this was not the final amount
that was ultimately agreed on with the government.
The drought aid package consisted of a subsidy calculated at R375/ha, which was
paid to co-operatives and comprised the following:
• A carry-over debt subsidy of R175/ha to every qualifying producer, based on the
average proven area under cash crop production for the 1989/1990, 1990/1991