Johannesburg - Fitch ratings agency's upgrade of the Land Bank's national long-term rating shows the bank's turnaround strategy has been successful, ANC Chief Whip Stone Sizani said on Wednesday.
“After consultations with the then minister of agriculture... the administrative powers entrusted by the Land and Agricultural Development Bank Act 2002 were transferred to the minister of finance in July 2008,” Sizani said in a statement.
“Following a successful turnaround, the Land Bank has now turned into an entity of distinction that is aligned to deliver on its legislated mandate.”
Fitch said on Thursday the Land and Agricultural Bank of SA's (Land Bank) rating had been upgraded from AA to AA+.
“(The) Land Bank's upgrade is a result of Fitch's consideration that there is an increased likelihood of support from the South African government after (the) Land Bank successfully dealt with a number of internal challenges over the past few years,” the agency said in a statement.
The Land Bank's rating reflected the high perceived level of support it would receive as a state-owned development finance institution.
Fitch also affirmed the Development Bank of Southern Africa, Sanlam Capital Markets Limited, and Genbel Securities Limited's ratings.
“The rating actions follow a peer review, which included all of the Fitch-rated South African financial institutions except for the five major banks.”
Sizani said the Land Bank's corporate governance had become more robust with the necessary controls in place.
“The bank is demonstrating healthy growth signs and has reclaimed its rightful place in the South African agricultural landscape,” he said.
“The positive rating on an important state-owned entity like the Land Bank more broadly reflects Fitch's confidence in the South African government's willingness to support the entity.”
Together with the bank's turnaround strategy, the finance ministry approved the recapitalisation of the bank through an increased guarantee of R3.5 billion.
“These steps were designed to ensure that the Land Bank would be financially sustainable, and would be a viable conduit to promote effective economic development in rural areas,” he said.
The bank aimed to expand its development loan book to R5 billion by 2016 and raise its market share to 35 percent, contributing to the creation of over 300,000 jobs mainly in rural, impoverished areas.
“These positive developments undoubtedly led to Fitch's upgrade of the Land Bank's national long-term rating,” he said.
“The Land Bank as a viable institution in fulfilling its mandate has identified rural development as a priority.”
The upgrade was a further demonstration of confidence in the South African government's financial controls. - Sapa