The establishment of a cession security registration platform for agricultural financiers in South Africa

Abstract

The aim of this study is to conduct a thorough theoretical study on the establishment of a web-based cession collateral registration platform for agri-financiers in South Africa. The agricultural industry is earmarked for growth due to pressures of food security and the role it could play in rural development, job creation and social upliftment. Agri-finance to farmers for primary input costs, is the catalyst which kick-starts the agricultural value chain. Due to many reasons, the traditional asset-based collateral in the fashion of mortgage bonds will become more and more unavailable to agri-financiers to secure their loans. Agri-financiers will have to rely on commodity-based collateral (cession) as security for repayment of their loans. The law of cession and trite common law principle of first in time first in right creates an undue credit risk to agri-financiers. A market gap exists to establish a cession collateral registration platform in South Africa to mitigate the aforementioned credit risk assumed by agri-financiers. This platform is an entrepreneurial opportunity which could be operated as a viable and sustainable business enterprise. The results of the empirical research have shown that the market will embrace such platform as solution to the credit risk associated with commodity-based collateral in the form of a cession of crop income.