Following a string of scandals that plagued the Land Bank in the past few years, the state-owned institution today not only announced improved financial performance, but also launched a brand-new blended finance scheme.
The scheme, announced moments ago, was developed in partnership with the department of agriculture, land reform, and rural development. It also follows a two-year lending hiatus.
During a media briefing held at the Big Red Barn in Olifantsfontein in Gauteng, Land Bank chairperson Thabi Nkosi said the launch of the new blended finance scheme signalled the bank’s resumption of lending to new clients who meet the criteria.
“This is a significant milestone for us as Land Bank as we have essentially not been [approving] new finance to new clients since we went into our position of default in April 2022.”
The event not only marked the launch of this very important funding scheme, but was also an opportunity for the bank to provide progress on the Land Bank’s performance. It is also to table the way forward in the revitalisation of the bank as they move closer to their goal of more effectively supporting the agricultural sector, Nkosi said.
The bank recently announced that it had finally reached an agreement with the majority of its creditors. Land Bank hopes to conclude a settlement by the end of the year or end of March 2023 at the latest, chairperson Nkosi told parliament’s finance committee last week.
“We have been able to craft a solution that not only focuses on the repayment of debt, but also has the long-term sustainability of the bank at its core,” she said.
Didiza’s message to bank and farmers
Meanwhile, in her keynote address, agricultural minister Thoko Didiza spoke extensively on the lessons learned with the previous blended finance scheme that left many black farmers exposed, with their businesses at risk.
Long delays and empty promises had characterised the process.
Didiza said the new scheme is launched with many lessons learned from the past, which would ensure the success of the scheme.
“Lessons were learned from it [and we saw] what improvements needed to be made in the scheme, so that we can achieve intended objective of improving repayment ability from farmers,” she said.
“It is important to know that blended finance as a concept is well accepted in the market, and government system particularly in the infrastructure fund,” Didiza added.
Didiza also urged financial institutions, including the Land Bank, to be patient with farmers and not expect immediate repayment. “I am not sure how you (Land Bank) are going to do it… but we must appreciate the conditions in which this enterprise is in.”
Conditions such as drought and floods needed to be taken into consideration, she explained. However, she cautioned that it did not mean funding must not be paid back.
“To my farmers, you cannot when you see the returns looking good, start enjoying it yourself. When you do your expenditure put Land Bank first, because you going to come back wanting more money, but failed to pay.”
How the new scheme works
According to Nkosi, the blended finance scheme seeks to address several industry challenges.
Furthermore, it contains many of the funding elements that have proven effective in the past while taking into account the current realities and nuances of modern agricultural finance.
During her address, Nkosi pointed to how historical state support contributed to a successful agricultural sector which can be seen today.
“In seeking to effectively support the new entrants of today, important lessons must be learned from the past successors of agricultural development.”
Also inherent in the finance scheme is the use of a blend of grants from the state and loans from the Land Bank. This, the bank said, is to make the financing of agricultural transactions more commercially viable, bankable and affordable.
The bank have come under scrutiny after some of their clients came forward alleging aggressive methods of liquidation.
Nkosi added that the scheme, which essentially serves as a credit enhancement tool, provides the bank with an opportunity to improve the bank’s lending profile.
“[This will be done] by reducing the risk of repayment failure through transactions that are structured and have relatively lower gearing rates, than would be the case without the grant component.”
To further reduce lending risk and enable the provision of comprehensive support, the bank said it would be working with various commodity organisations and other strategic partners.
The goal, Nkosi said, “is to leverage their extensive capabilities and tailored resources to support the clients of the bank, both pre and post finance”.
The bank will also today release its integrated annual report and annual financial results.
- Stay tuned to Food For Mzansi for the latest developments.
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