Since the relaunch of Land Bank’s blended finance model in October 2022, a total of 13 farmers have been approved and 18 farmer projects rejected.
According to Land Bank’s executive for commercial and development banking, Sydney Soundy, a lack of economic and financial viability are key reasons why some farmers’ applications have been given the boot.
Relaunched in October 2022, the blended finance model is aimed at black farmers and signalled a new era for the controversial bank.
Applications stream in
Since resuming its lending activities, following a more than two-year hiatus after defaulting on its debt obligations, Land Bank has had an influx of applications, Soundy told Food For Mzansi.
“Since the launch, 13 clients to the value of R 155 million have been approved, and an additional twenty-eight clients to the value of R280 million are in the advanced stages of the process,” he said.
A total of 18 farmer projects worth R282 million have so far been rejected, Soundy explained, due to projects showing little financial promise.
Soundy said those that were rejected were also scrutinised on the negative repayment ability and affordability.
Information sessions
Meanwhile, Soundy said significant inquiries have been experienced across all the bank’s provincial offices. In provinces with a higher influx of inquiries, weekly client information sessions were hosted.
“This was to enable sharing of information with farmers to assist them with a better understanding of the blended finance scheme and the requirements for applications.
“Thus far, an application pipeline in excess of R1.6 billion is being processed across the provinces,” Soundy said.
A further allocation of R325 million has been budgeted for the next financial year as part of the ten-year scheme’s agreement between the department of agriculture, land reform and rural development, Soundy said.
“The department has provided a grant allocation of R325 million to be used by Land Bank for the current financial year and is being complemented by the bank’s loans. This will enable the deployment of R650 million of financing in the sector,” he explained.
Debt recovery
Soundy said while the bank wants to ensure that as many applications are successful, qualifying farmers need to be aware that the bank would continue to collect scheduled repayments from farmers.
Where arrears are experienced, the bank institutes actions to ensure that outstanding repayments are collected.
“It should be appreciated that farmers constantly navigate through risk factors that create headwinds including droughts, diseases, floods, competition, exchange rate volatility, and inadequate access to funding their capital-intensive operations.
“These headwinds place underlying farming operations under stress and give rise to instances where farmers default on their loan obligations,” Soundy explained.
So far, the banks have successfully collected R5 billion on the client’s defaults during the current financial year.
Working closely with farmers
“For the bank, the most effective way to maximise the probability of recovering debt from distressed farming operations has been to work closely with the farmers and provide the appropriate financial forbearance measures and non-financial assistance following tough financial [times] and sector-related challenges.”
Soundy said with the assistance they offer, the bank strives to assist farmers and only proceeds with legal action against farmers as the last resort.
ALSO READ: Land Bank: How to get blended finance
Sign up for Mzansi Today: Your daily take on the news and happenings from the agriculture value chain.
