Following years of financial difficulty, the state-owned agricultural financial institution Land Bank will from next week enter into a debt restructuring solution effectively ending Land Bank’s debt default position.
The bank said it has successfully concluded the debt restructuring solution with all its lenders. Official notices had been issued, signalling the implementation of the solution.
In a briefing earlier today, minister of finance Enoch Godongwana, board chairman Thabi Nkosi, and chief executive officer Themba Rikhotso addressed the media in Pretoria on the latest development.
According to the bank, scheduled repayments to lenders will occur every six months to March 2028. The government’s equity contribution will play a critical role in this plan, positioning Land Bank on a sustainable path forward.
Financial stability key for Land Bank
Godongwana expressed the government’s concern over the prolonged negotiation process, noting its impact on the bank’s lending activities, which is vital for the bank’s socio-economic influence on South Africa’s economy, especially the agricultural sector.
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“At its prime, Land Bank contributed R45 billion to the bank’s agricultural debt finance which represented a share of approximately 28% of the South African farming debt. The bank’s loan book has since been reduced to a loan book of R17 billion owing to the four years of the Bank’s debt default status.
“Whilst this is a commendable achievement, this has resulted in the bank’s reduced support of the agricultural sector. It is for this reason that in providing a total of R10 billion of fiscal support to the bank, we have ensured that a significant portion of the fiscal allocation is dedicated to support the bank’s agricultural development and transformation mandate,” he said.
Godongwana said R3.7 billion from these funds is towards the blended finance scheme.
“Going forward, we want the bank to adhere to the covenants set out in its debt restructure agreement, and to begin a process to address its funding structure so that we never find ourselves in a similar position again.”
Finance minister Enoch Godongwana
Godongwana called on the board to remain focused and steadfast in ensuring the bank’s turnaround strategy is effectively and successfully executed.
“A closer relationship and collaboration between the bank and the department of agriculture, as well all relevant state departments and entities is required to ensure that coordinated efforts and economies of scale of the state’s entities and the private sector are leveraged to deliver effective impact in the agricultural sector,” he said.
‘Fixing our house’
Meanwhile, Nkosi said it has been one of the most intricate and extended debt restructuring efforts in South Africa’s financial history.
“Coordinating a large number of lenders consisting of local lenders, a multilateral development finance institution, and international banks, as well as the different types of debt instruments, and tenures added to the challenge.
“Thankfully, all parties showed remarkable patience and good faith with lenders respecting a standstill arrangement since the bank defaulted on its debts. We believe the solution we’ve reached is in the best interest of all stakeholders and the agricultural sector,” she said.
Rikhotso said the entity has marked a significant milestone for its farmers, employees, brand and supporting shareholders.
“In line with our motto, we stand with you. When Land Bank went into debt default in April 2020 our lenders adopted a stance posture and stood by us, our clients, farmers and agribusiness stood by us, and continued to honour their payments obligation to the Land Bank.
“Our shareholder, the national treasury stood by us and committed R10 billion. Truly your commitment to the Land Bank during this complex and restructuring process has not only restored the ongoing concern status of the Land Bank but also renewed hope to many struggling farmers and the country’s food security,” he said.
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