Land Reform Empowerment Facility

Khula Land Reform Empowerment Facility

What is the Khula Land Reform Empowerment Facility?

Khula Land Reform Empowerment Facility (LREF) is a Black Economic Empowerment Fund capitalised by the Department of Rural Development and Land Reform and supported by European Union.

The fund is housed in and administered by Khula. LREF is a wholesale financing facility through which Khula lends money to commercial banks and other reputable agricultural lenders for on-lending to Land Reform beneficiaries. The aim of LREF therefore is to broaden the control, management and ownership by Black South African citizens in land-based high-value income generating assets in the agricultural sector.

To increase the commercial success of LREF-funded projects, LREF via Khula Mentorship scheme, assists these projects with training and skills development intervention through a training grant.

Who qualifies for LREF funding?

Black farm workers and other Black people who aspire to invest in the following sectors:

Primary Agriculture; and
Agro-processing

Financing facilities under LREF

1. Mortgage Loan Facility

This is a financing facility which enables the target market to buy and own land for agricultural production purposes, under the following criteria:

Maximum loan R10m per project;
Maximum loan of R800 000 per black person participating in the project;
Loan repayment period not exceeding 20 years;
Business Venture must be commercially viable;
Funding available to South African citizens only; and
The Business Venture must be a registered legal entity..

2. Equity Share Scheme

An equity share scheme is a business arrangement in which both land reform beneficiaries and private sector partners buy equity in the form of shares in a land-based agricultural enterprise.

What do I need to do to get access to LREF finance?

The enterprise must be commercially viable, with potential to maintain and or create new employment opportunities.

Qualifying criteria

Finance is available to South Africans only;
The project must be a registered legal entity;
The business venture must be commercially viable;
Enterprise to be financed must operate within South Africa;
Maximum loan of R600 000 per black person participating in the Business Venture; and
Loan repayment period not exceeding 20 years.

How to apply

Aspiring black farmers identify a farm that they want to acquire and then approach their nearest office of the Department of Rural Development and Land Reform where they apply for Land Redistribution for Agricultural Development (LRAD) grants.

Aspirant black farmers then apply for additional funding at the nearest commercial bank of their choice (If LRAD grants are not sufficient to meet all the requirements of the business venture).

The banks agricultural specialist visits the project to conduct an economic and financial evaluation to determine the credit worthiness of the project.

If the bank approves the loan application, the commercial bank in turn applies to Khula for a concessionary Land Reform Empowerment Facility.

Upon receipt of the bank's loan application, Khula conducts a site visit to the business venture (farm) to meet and interview the business venture participants. If satisfied with the project's BEE credentials, Khula approves the commercial bank's loan application and disburses funds to the bank and bank disburses to the project.