Banking on agriculture:an assessment of Absa Bank’s Shared Growth Strategy for Agriculture.

Abstract

The study assesses whether Absa Bank lives up to its Shared Growth Strategy for Agriculture. The objectives of this study are to examine how Absa Bank is supporting and contributing strategically to the development of the agriculture sector in KwaZulu-Natal (KZN); establish whether Absa’s products and services are assisting black commercial farmer clients to escape from poverty and succeed in running sustainable businesses; to assess how Absa Bank is supporting black commercial farmers financially and non-financially; and whether Absa Bank’s Shared Growth Strategy is realised through agricultural sector financing and advisory in KZN. The research method was scheduled in-depth qualitative interviews with eight Absa clients, who are black commercial farmers. The study uses the multidimensional equity framework (MDEF) to assess the impact of Absa agricultural funding, assessing whether access to finance has transferred equity and empowered the clients. The MDEF shaped the interview content with clients to delineate whether they thought about equity issues beyond the current state of their businesses and at the same time government representatives interviewed reflected on the equity issues of the farmers’ businesses in terms of longevity and sustainability. In examining Absa Bank’s Shared Growth Strategy in specific reference to agricultural sector financing to black commercial farmers, it is clear that the funding system is not strategically focused to pay attention to this segment. It was poignantly clear that providing finance to black commercial farmers was not sufficient, therefore there was a legitimate need to provide non-financial business support to the clients as well. These lessons can also be applied to other commercial banks who provide finance to agriculture and specifically black commercial farmers. Absa has not risen to the occasion in as far as using its technical expertise; in as far as the role of the bank in black commercial farming is concerned. Clients and government representatives, including industry body representatives, revealed that the bank should be more than just a financier. The technical capability of the bank is in demand in agriculture, combined with the training and development of black farmers. The strategic challenge is to be differentiated in a competitive market by using enterprise development. The role of a bank in providing loan finance is not enough, therefore its clients, specifically black farmers emphasised the fact that a deeper engagement with Absa Bank was required in order for the relationship to be more nuanced. This is in line with the bank’s strategy to shape its operations to help small and medium-sized businesses to succeed and grow through enterprise development, therefore the bank is expected to offer innovative financial solutions and business support services to small businesses. At the centre of this, is reinventing itself in order for more people to have access to financial services to achieve financial inclusion.