Land Bank’s 2-year farmer loan drought will end by September, parliament says

  • The Land Bank told parliament that its liability solution would be concluded in September, after which its debts would be paid off or restructured.
  • The bank told the finance select committee that it had managed to reduce its debt to lenders by 42%, or R14 billion.
  • Acting Land Bank CEO Khensani Mukhari said the institution had earmarked 500 million rand with lenders to move towards resuming lending.

The Land Bank told parliament on Tuesday it would resolve its debt default by the end of September, ending a two-year period in which it was unable to lend to farmers .

The “responsibility solution” – which is the offer it will make to institutions that still hold its listed bonds – is dragging on, with many offers turned down by bondholders who have seen them as unfair.

Once the default is settled, it will adjust its debt profile to make it more sustainable in view of its eventual return to full operation, the bank said.

The Land Bank briefed Parliament’s select finance committee on Tuesday on its ongoing journey to return to financial stability after defaulting on payments to creditors in April 2020.

The bank has been operating in “maintenance mode” since the default, he said.

The bank said it had since reduced its debt by 42%, or R14 billion.

The government stepped in to help Land Bank after it defaulted, with a R10 billion bailout disbursed in installments over the years to 2024. The Auditor General gave Land Bank an audit opinion of non- responsibility in 2020 and a qualified audit in 2021.

The Land Bank is also grappling with leadership instability following the departure of former CEO Ayanda Kanana in April.

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Acting Land Bank CEO Khensani Mukhari said a newly formed board needed to “get going” to ensure stability. Mukhari said the institution had experienced high staff turnover due to instability in the bank.

She said that by the end of September this year, the bank’s debts will either have been paid off or restructured for sustainable repayment to creditors.

“Our service level agreements are one of the major areas where the bank has had huge challenges. They were in place about 10 years ago. Those are some of the major challenges we face,” Mukhari said.

Grateful for the bailout

Mukhari said only one lender has paid off its debt so far and the Land Bank has settled with them. She added that the Land Bank hoped to emerge from default soon and was grateful for the appropriation of R10 billion from the national treasury. She said R3 billion in credit was disbursed in December and R6 billion is expected in the current 2022/23 financial year. The remaining R1 billion will be disbursed in the 2023/24 financial year.

The 3 billion rand earmark was used to repay some international lenders, she said.

Much of the R3 billion went to local lenders and interest service, while the rest funded operations.

“We are not able to find financing in the market and this has affected us because we cannot serve the sector as we used to. We are exploring partnerships with the private sector to fill the financing gap,” said said Mukhari.

She said the bank hoped to position itself to resume operations soon with the R500 million funding it managed to secure from lenders. This amount is expected to reach R1 billion.

“The ultimate goal is to conclude the liability solution as it addresses all the risks introduced by the state of default. We are addressing the concerns of institutions and starting to generate business and fund the sector. rands with lenders to move towards resuming lending.

“We are in maintenance mode. With the help of the private sector, the blended solution will bring that R500 million to R1 billion to start funding again,” she said.

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Land Bank’s director for commercial and development banking, Sydney Soundy, said the bank still plans to fulfill its development and transformation mandate once it returns to a state of financial stability. It also aimed to achieve an unqualified audit.

“We plan to keep developing customers in our portfolio. That’s where our biggest focus will be going forward. We want a book that is largely made up of developing and transforming customers,” Soundy said.

Land Bank Chairman Thabi Nkosi said Land Bank’s “fundamental problem” was the institution’s funding model. She said the Land Bank Act of 2002 stipulated a state-led funding model, while the bank derived much of its funding from capital markets.

“Once we reach an agreement with the institutions and the liability solution is concluded, we can restructure the debt profile. Thus, a large part of the defaulted debt will be restructured, and a more sustainable will be in its place. It’s not a panacea, but allows us to resume with some normality,” Nkosi said.

Committee chairman Yunus Carrim said it was ‘very concerning’ that the entity was in a state of default, unable to operate fully, while aspiring young black farmers were left without funding amid appeals to the expropriation of land.

He said the next time the Land Bank meets with the committee on these issues, the meeting should include a delegation from the National Treasury, noting that the issue was too important for the National Council of Provinces to tackle on its own.

Futuregrowth, which coordinates a group of lenders at Land Bank, told Fin24 it had no comment on the matter beyond a statement released in March, which said it was still working with Land Bank. to work out a “fairer and better” solution. the challenges of bank liability.

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