The National Treasury has told Parliament that it’s working with the Land Bank to complete what could be the final version of the liability solution with the bank’s lenders in a bid to cure its default position.
The Land Bank has been in default since April 2020 after falling into serious liquidity challenges as it failed to repay about R50 billion maturing loans.
Since then, three versions of the liability solution have been rejected by the guaranteed lenders of the bank.
Treasury’s director for development finance institutions, Lefentse Radikeledi, yesterday said that R5.1bn of the R7bn recapitalisation from the government was kept in the escrow account created to protect the fiscal allocation from being accessed by its lenders.
He said this would be the situation until the Land Bank met the equity conditions attached to the R5bn, failing which the equity would be transferred back to the National Revenue Fund.
Radikeledi said they were processing the full repayment of the last two guaranteed lenders of the Land Bank from the R1 billion set to flow to the bank in the 2023/24 financial year
“We are finalising processing the repayment to the guaranteed lenders. The only guaranteed lenders that are left are the World Bank and African Development Bank, which we owe about R400 million or so, out of the R1bn that is there for the Land Bank for this financial year,” he said.
“The remainder of that money [after paying the last two lenders] will be transferred to the Land Bank for the Blended Finance programme. Otherwise, the liability solution discussions have resumed.
“Unfortunately, it still becomes very difficult for the Land Bank to agree with the lenders on a number of things, but it seems like there's progress and we are hoping that they will conclude this liability solution within this financial year.”
Treasury’s Asset and Liability Management Division presented the first quarter update for State-owned enterprises, including the Land Bank, for the three months ending in June to the Standing Committee on Appropriations yesterday.
Treasury said that as at end of the first quarter, the Land Bank recorded a profit of R135m against a budgeted loss of R80m and a prior year loss of R92m for the quarter.
This was mainly due to higher net impairment charges of R170m, up R210m from prior year’s R40m release.
This is a result of the increase in the number of days in arrears of existing non-performing loan (NPL) book which has resulted in the bank holding higher than expected credit loss.
The non-performing loan portfolio has grown from R9.7bn to R9.9bn, resulting in an increased NPL ratio of 53.6% from 51.5% in March.
The Land Bank received an unqualified audit opinion with findings for the 2022/23 financial year, following a clean audit opinion in the 2021/22 financial year due to the implementation of the remedial plan.
Radikeledi said the Land Bank was working on finalising a business case for the blended finance model which was envisioned to utilise at least R3bn of the equity allocation to the Land Bank.
The Blended Finance Scheme, which was launched in October 2022, allows the Land Bank to resume lending to new development clients and help commercial farmers access much-needed finance, amid rising costs for fertiliser and other essentials.
Agri SA executive director Christo van der Rheede yesterday commended the Land Bank for the steps taken to recover financially, the role of Treasury in this regard, and for achieving an unqualified audit.
Van der Rheede also appealed to farmers to engage with the Land Bank to fulfil their part of the loan agreement by not defaulting but paying back their loans.
“A big concern for us remains the national budget allocation towards economic development. It's less than 10% of the national budget. And what eventually ends up on the table of agriculture is a mere 1%,” he said.
“Now there's no way that we can transform the agricultural sector if there's no substantial funding from the National Treasury. We must understand that land and distribution of land serves no purpose if that land’s potential cannot be unlocked.
“So, well done to the Land Bank. I trust that they will be able to fulfil all of the obligations towards their lenders and that they will also be able to protect their loan book because non-performing loans remain their biggest challenge. We cannot continue along this route.”