What the Land Bank bailout means to the farming community

Less than 4 months ago, the Land Bank was facing liquidity challenges which negatively affected its loan book.

Already, there were mounting fears that the status condition of the bank would affect commercial farmers, possibly increasing food inflation.

According to Future Growth assessment management, had it not been for the R3 billion injection from the National Treasury, the country would have possibly become increasingly reliant on imported foods.

It has been an established Raison D’être that the Land Bank carried 27% of South Africa’s agricultural debt, thus making it a significant player in the lending market.

Agri SA outlook punted R18 billion over 5 years to get the bank steady. Considered the biggest commercial farmers association, Agri SA had placed fears that Land Bank had no new clients, with existing ones encouraged to seek financing from other financial institutions. “Moreover, the critical development role that the Land Bank needs to fulfil, is compromised,” said Agri SA.

In the medium term, however, the Minister of Finance Tito Mboweni said the bank will be provided with an additional R7 billion in support of its restructuring.

Future Growth – Asset Management said the bank’s liquidity shortfalls necessitated for a bailout as it defaulted on its payments and could also not afford to miss its second payment.

“We expected that IFRS9 and additional provisioning would severely affect the income statement of Land Bank, however, we are comfortable that there are still sufficient levels of capital at Land Bank, with the loan book adequately provided for.”

“A further injection to Land Bank income statement would boost the performance of the agricultural sector, as the recent good rains would also have assisted Land Bank’s farmers, resulting ‘in better debt collections from farmers,” said the assessment management company.

The Transvaal Agricultural Union (TAU) said the funds were not been channelled correctly in the form of input costs for farmers.

Some farmers were still awaiting on Land Bank’s promise to disburse the R100 million relief grant promised in June.

“The agricultural sector now needs R10 billion to start the next production season, but we are not convinced that the Land Bank will be able to fulfil that role timeously,” said Henry Geldenhuys, president of TAU.

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