Whoever was responsible for the Land Bank’s financial loss of R2.8 billion must be held accountable. Also, the auditor-general’s damning report on the bank’s financial sustainability necessitates urgent intervention.
This is the view of Christo Van der Rheede, the executive director of Agri SA, who is worried about the impact of the Land Bank’s financial woes on farmers across the country. The bank’s shocking financial results were sneaked out just before midnight on New Year’s Eve. This also exposed that non-performing loans almost doubled to 18.1% of its total gross loans.
So grim are the Land Bank’s results that the auditor-general’s office has casted doubt on its ability to survive or even continue trading as a going concern. This, warns Van der Rheede, puts farmers at risk.
“Remember, (not all) farmers… have collateral. They need the support of the Land Bank. They require soft loans. They require blended financing; a whole range of assistance that only government can provide.”
He warns that the Land Bank’s woes may be also threaten food security in Mzansi.
“We are fooling around with food security… (an issue) of national importance and people don’t realise that. What are we going to do if people start going hungry or if there is no proper food production in the country? We cannot just take these things for granted. What is government going to do about the situation?”
Van der Rheede warns that the auditor-general’s report must be taken seriously.
“The fact that the auditor-general could not express an opinion on the financial statements of the public entity, cannot be swept under the carpet. The auditor-general was unable to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion on the consolidated and separate financial statements! This is a grave concern!”
The auditor-general attributed problems at the Land Bank to an exodus of competent managers, a lack of oversight by the National Treasury, the downgrading of the bank’s credit rating by Moody’s, and drought conditions which had made it difficult for farmers to repay their loans.
“This, however, is merely the tip of the iceberg,” Van der Rheede reveals. The report also referred to a lack of internal control measures implemented by management to effectively offset credit losses, a decline in the value of extended loans or the collateral offered when loans are applied for.
Poor financial leadership
Van der Rheede says the auditor-general also mentioned that the financial statements submitted for auditing were not in line with the prescribed reporting framework, and were not supported by complete and proper records, as required by law.
“According to the auditor-general there was also a lack of sufficient, appropriate audit evidence to serve as basis for an audit opinion. This means that the leadership did not exercise adequate oversight with regard to financial reporting, compliance and related internal control measures,” says Van der Rheede.
Meanwhile Dr John Purchase, Agbiz chief executive, says that already a number of farmers could not been financed by the Land Bank this season due to its shocking financial status.
“The Land Bank is obviously in a dire financial state. National Treasury also knows this, and that is why they have already made provision in the supplementary budget in June to provide R3 billion to the Land Bank to meet its obligations.”
“For the medium-term budget policy statement that was delivered in October they made another R7 billion available to support the Land Bank. So, National Treasury is fully aware of the dire situation, and they are doing what they can within their means to support them. But the bank will need to come up with a restructuring plan. It will have to look at a new business model to make it sustainable going forward.”