Ayanda Mdluli
Afgri subsidiary Grocapital is selling its farmer lending book to the Land Bank in a deal to restructure the former’s balance sheet, improve its financial position and increase its access to funding.
According to Afgri’s statement to the JSE, the Land Bank will purchase about 55 percent of the lending book valued at more than R3.3 billion.
The portion sold to the Land Bank comprises the farmers’ component of the total lending book, which also consists of other debtors books such as corporate services.
Chris Venter, the chief executive of Afgri, said:
“We are gearing on the balance sheet which will allow us to continue expansion of the food business. We are in the process of deleveraging the balance sheets and we will continue to grow farmer debt with the Land Bank,” he said
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The firm was still “absolutely” committed to supporting emerging farmers, and the deal would enhance the group’s ability to support more farming enterprises in the country.
“We will be in a good position to grow Afgri through further acquisitions and expansions,” Venter said.
The Land Bank refused to comment about the transaction and released the following statement: “Afgri has issued a cautionary as a listed entity in terms of the JSE rules regarding the matter. It would therefore not be advisable on our side to comment on the matter at this stage.”
However, Afgri noted that its Grocapital unit had the capacity and infrastructure that would enable it to act as an agent of the Land Bank “in respect of the administration functions relating to the farmer lending book”.
Under the terms of transaction, Grocapital would continue to originate farming debt in its own name and would offer to sell this debt to the bank.
Venter said Afgri’s relationship with the Land Bank would continue to grow as the company had offered something to the state-owned financier that would enhance its service.
At the launch of the Land Bank’s annual report last month, it was revealed that close to R1 billion had been allocated to bank from the National Treasury, which would help finance loans for emerging farming.
A pilot project had also been established to look at new ways to provide loans and to finance the debt of struggling farmers.