It is imperative that the Land Bank must be saved from its current liquidity crisis, because South Africa needs it as developmental bank to build an inclusive agricultural sector, says Neo Masithela, chairperson of the African Farmers Association of South Africa (Afasa).
The bank, with a large market share in the agriculture sector, is in dire straits after defaulting on loan repayments in April. Treasury this week indicated that it could not extend a bailout of R20 billion that was requested to keep the institution afloat.
Masithela, however, says that the bank must be saved from its financial woes. This, according to Masithela, is fundamental in ensuring that the Land Bank stands as the developmental bank Mzansi’s agri-sector needs.
Speaking to Food For Mzansi, Masithela explains that the bank has played a pivotal role in the commercialization of farmers in South Africa. He believes in order for the Land Bank to continue doing similar work, it has to be saved.
“If we don’t have a development bank in the country there is no way that we are going to have inclusivity and economic recovery in South Africa’s agricultural sector.”
“Currently, parliament is debating land expropriation without compensation. If those benefiting farmers do not have money to work the land, this country will go down,” Masithela exclaims.
He cautions that when or if the struggling bank receives a financial lifeline from the National Treasury, the institution will need to be repositioned. It should largely support agricultural development, enhance agricultural production, and fund the entire value chain processes.
“As Afasa we want Land Bank to be repositioned in a way that it appropriately addresses agricultural growth and inclusivity of the agricultural sector in this country. If the sector is not inclusive, we are going to have major problems,” Masithela says.
He further adds that it is pivotal for the Land Bank to help support emerging black farmers to grow into commercial farmers.
Crisis at bank will hit its clients
As an integral part of the South Africa’s agricultural economy, the Land Bank’s fate has a significant direct impact on clients financed by the bank.
Speaking to Food For Mzansi’s Sinesipho Tom, Agri SA deputy executive director Christo van der Rheede paints a dire picture for the Land Bank. Van der Rheede explains that the Land Bank faces serious finance and liquidity challenges.
Since the Land Bank is a significant player and contributor in the agricultural sector with a market share of 29%, its challenges will have a significant and direct impact on farmers who are financed by the bank, he explains.
“The bank’s current development and transformation book amounts to R8,9 billion. The total loan book sits at R45 billion. The commercial book amounts to R36 billion,” Van der Rheede says. The 2015/16 and 2018/19 droughts, avian flu, listeriosis and foot-and-mouth disease caused a massive liquidity challenge.
The international ratings agency Moody’s downgrade of the Land Bank to junk status also worsened the bank’s cash flow and access to funding. The covid-19 lockdown had a major impact on government’s willingness to support Land Bank.
READ MORE: Land Bank’s junk rating ‘disastrous for farmers’
Government approved guarantees for the Land Bank’s fund-raising programme in September 2019. The loan defaults however disrupted funding that was in the pipeline on the back of this guarantee.
“The Land Bank’s liquidity position has now reached distress levels,” says Van der Rheede.
The bank is engaging funders and lenders for debt restructuring and arrangements to cure defaults. Without government’s intervention as well as the implementation of the long-awaited turn-around plan, the Land Bank will cease to exist, he says.
Forestry farmer and Land Bank client Musawenkosi Kubheka from Newcastle in KwaZulu-Natal says his experience with the Land Bank has never been stellar.
Speaking to Food For Mzansi, the 29-year-old farmer said: “Land Bank is not for black people. They say they are a development bank, but all I am finding is pressure after pressure.”
“Their policies are not for us. The amount of stretch that I have had to go through in order to put together some collateral is unbelievable,” Kubheka adds.
