For many South African entrepreneurs, access to funding remains one of the biggest barriers to growth. Whether you are operating in manufacturing, agro-processing, or another priority sector, incentives from the Department of Trade, Industry and Competition (DTIC) – such as the Black Industrialist Scheme (BIS) or the Agro-Processing Support Scheme – can play a meaningful role in unlocking capital.
One of the most common questions we receive at Decusatio Working Capital Solutions is deceptively simple: can land be used as collateral when applying for DTIC incentives? On the surface, owning a large piece of land – especially if it is unencumbered – feels like a strong position to be in. In practice, however, land carries surprisingly little weighting in the eyes of most funders involved in DTIC-backed transactions.
A real-world funding discussion
This issue came into sharp focus during a recent engagement with an entrepreneur who approached us for support in raising capital through either the Black Industrialist Scheme or the Agro-Processing Support Scheme. The business had a compelling growth story and was aligned with the DTIC’s developmental objectives. However, when it came to the required “matching” portion of the grant, the entrepreneur’s primary source of comfort was a sizeable piece of land.
The assumption was that this land could be used as collateral to satisfy funders and strengthen the overall application. It is a view we encounter often – and one that deserves careful unpacking, particularly for entrepreneurs who are serious about raising capital in South Africa.
Why land carries limited weight with funders
From a credit committee’s perspective, land is a non-income-generating asset. Unlike machinery, equipment, receivables, or a well-performing operating business, vacant or underutilised land does not produce cash flow. And cash flow, not asset value, is ultimately what services debt and de-risks funding transactions.
Even where land is unencumbered, funders remain cautious. If a business fails and a lender is forced to enforce its security, it may end up holding a property that is difficult to sell, illiquid, or highly dependent on market conditions. In rural or semi-industrial areas – where many agro-processing businesses operate – this risk is amplified.
There are also practical challenges. Land often has multiple owners, whether through family structures, trusts, or community arrangements. This can make it difficult to agree on a single, credible valuation. Disputes around ownership, zoning, or land use rights further complicate matters and introduce delays that credit committees are reluctant to absorb.
The result is that land, while not ignored entirely, is typically discounted heavily or treated as secondary comfort at best. It is rarely sufficient on its own to support the matching funding required for DTIC incentives.
Understanding the “two stakeholder” reality
Another critical point that entrepreneurs need to grasp when applying for DTIC grants or incentives is that they are effectively dealing with two different stakeholders with two different mandates.
On the one hand, the DTIC is driven by a developmental mandate. Its focus is on industrialisation, job creation, transformation, localisation, and long-term economic impact. Schemes like BIS and the Agro-Processing Support Scheme are designed to catalyse growth in priority sectors and support black industrialists and value-adding businesses.
On the other hand, most DTIC-funded projects still require the introduction of debt finance or capital from commercial lenders, development finance institutions (DFIs), or private funders. These institutions operate under a credit and risk mandate. They are concerned with repayment ability, balance sheet strength, cash flow sustainability, and downside protection.
A common mistake is to prepare an application that speaks convincingly to the DTIC’s objectives, but falls short when scrutinised by a credit committee. Land may sound persuasive in a developmental narrative, but it rarely addresses the commercial lender’s core concern: how will this business generate sufficient cash flow to meet its obligations?
What funders actually want to see
For South African entrepreneurs looking to raise capital, the emphasis needs to shift away from static assets and towards funding readiness. This includes:
- Clear, realistic cash flow projections linked to identifiable contracts, demand, or off-take agreements.
- A balance sheet that demonstrates appropriate gearing and owner commitment, whether through cash injection or other productive assets.
- An understanding of how working capital will be funded, especially during growth phases.
- A funding structure that aligns DTIC incentives with complementary debt or equity in a way that is bankable.
Land can still play a role, but it should be positioned correctly – as part of a broader, well-thought-out funding strategy rather than the cornerstone of the application.
A call to action: focus on funding readiness
If you are an entrepreneur considering applying for DTIC grants or incentives, the starting point should not be the asset you own, but the story your numbers tell. Funding success is far more likely when you understand the mandates of the various lenders involved and prepare accordingly.
At Decusatio Working Capital Solutions, we work closely with entrepreneurs to assess funding readiness, structure applications that speak to both developmental and commercial stakeholders, and position balance sheets to give businesses the best possible chance of success. Before submitting a DTIC application, take the time to ensure your funding strategy is robust, realistic, and aligned with how funders actually make decisions. The difference between approval and rejection often lies in that preparation.
