SA farmers may soon have greater financial protection with a bill before state parliament to make farm debt mediation mandatory.
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Last week the Farm Debt Mediation Bill 2015 passed its second reading vote in the Upper House. It requires creditors, usually a bank, to enter discussions with a farming business through an independent mediator before any foreclosure action.
Similar models have been operating successfully in NSW and Vic since 1994 and 2011.
SA has an outdated voluntary code agreed upon by the Australian Banking Association, PIRSA, SAFF and the Rural Financial Counselling Service of SA, in 2007.
Opposition Agriculture spokesperson David Ridgway, who introduced the Bill, said there was a significant power imbalance between farmers and creditors which could be alleviated with mediation.
“This Bill will ensure everyone has a chance to sit around the table and discuss the best way forward.”
“Primary production is the backbone of SA’s economy and we need to be doing everything we can to ensure farmers have the best possible opportunity to keep their farms operational, “he said.
Minister for Small Business Martin Hamilton-Smith said the Bill was “under consideration”. In the meantime services for dispute resolution between farmers and financial institutions were available at the Small Business Commission’s offices.
“The Farming Code is prescribed under the Small Business Commissioner Act which provides the Commissioner with extensive powers to instigate alternative dispute resolution processes,” he said.
Rural Business Support chief executive officer Brett Smith says they have given the Farm Debt Mediation Bill “in-principle” support as the Farm Finance Strategy, a voluntary code of practice set up in 2007 was effectively defunct.
“Although parties were continuing to work together in good faith, the absence of the current voluntary code of practice being updated and signed by new signatories means there needs to be more certainty, therefore we believe that the proposed mandatory process provides this certainty for all parties,” he said.
RBS deals in “crisis financial management” through their Rural Financial Counselling Service of SA on a regular basis and from this Mr Smith said they recognised the importance of early intervention.
“In many cases people make the decision to exit the farm before they are made to do it but it is an extremely difficult decision for many having a huge emotional attachment to their farms. “It is human nature to hold on but often holding on gets them in a situation where they are worse off owing even more money.”
“This is a clear cut process initiated by either the bank or the farmer and gives set time frames and a process to go through,” he said.
Mr Smith said with fluctuating commodity prices, lower water allocations and vagaries of seasons there would always be a need for farm debt mediation. Upper SE farmers entering their third dry year were particularly vulnerable.
