AGRI SA HAS raised concerns about the Land Bank’s prospects to continue as a going concern following the bank’s admission about its reduced ability to support the sector and service its existing debt.
The Land Bank yesterday said that its ability to perform these key functions remained significantly constrained in the absence of any new funding.
This could have serious implications for both commercial and emerging farmers who are dependent on the Land Bank’s loans instead of borrowing from commercial banks, putting the country’s food security under threat.
The cash-strapped bank entered a serious liquidity crisis when it failed to make interest payments due on its R50 billion listed notes last year.
The Land Bank’s default saw it projecting an unaudited loss of nearly R1bn for the 2020/21 financial year after making a R2.8bn loss the previous year.
However, the bank yesterday said it remained focused on turning this state of affairs around.
The Land Bank said it had recorded some progress in critical areas of the stabilisation exercise, in collaboration with the lenders and funders with the support of its shareholder, the government.
The National Treasury allocated a capital injection of R7bn over 2021/22 to 2023/24 financial years in a bid to reduce debt and provide a baseline for future growth of the bank.
Agri SA executive director Christo van der Rheede said they had been in talks with the Land Bank and the government for the past year, but they were still none the wiser about the way forward. Agri SA is the biggest federation of agricultural organisations in South Africa and consists of provincial affiliates, commodity organisations and corporate members.
Van der Rheede said the current model of the Land Bank was unsustainable and required bold steps to turn it around.
However, Van der Rheede said the government must clarify the future role of the Land Bank first on whether its role was going to be limited to an agricultural development financing institution or a commercial financing institution. “The bigger challenge, however, remains the commercial farmers who depended on the Land Bank for financing,” he said.
“In this regard a new entity for commercial farmers must be created that will be managed by the private sector in collaboration with commercial banks and the Treasury. Guarantees from the Treasury will serve as a guarantee for commercial banks to invest into such an entity in order for it to provide agricultural loans at more favourable terms.
“A large group of small scale farmers have the potential to become commercial farmers, however the cost of financing is too expensive.
“Such a commercial entity will serve as a stepping stone for developing farmers and our existing group of small scale commercial farmers to grow into fully fledged commercial farmers.”
Meanwhile, the Land Bank said it was working with lenders on the Liability Solution, now on its third iteration, in order to take it out of its default position.