South Africa -Treasury to back up depleted Land Bank

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The beleaguered Land Bank, which defaulted on R50bn of its debt in April last year, appears set for another state bailout even as the government battles to stave off a fiscal debt crisis amid a worsening Covid-19 pandemic that has strained its finances to breaking point.


The state-owned bank, SA’s biggest agricultural lender, reported an annual loss of more than R2.8bn for the year ended March 31 2020, according to financials posted on its website shortly after the early 12pm market close on New Year’s Eve. The results showed nonperforming loans almost doubled to R8.18bn, accounting for 18.1% of the Land Bank’s total gross loan book of R45.142bn.

However, the most shocking aspect of its 2020 results was an accompanying report from the office of the auditor-general that slated its management and said the results were not supported by sufficient evidence to provide a sound audit opinion. This resulted in the auditor-general assigning a “disclaimed opinion” to the results while also citing a litany of problems with the statements, ranging from a lack of internal controls to offset credit losses to the astounding admission that they were not supported by the complete and proper records required by law.

Nevertheless, the Treasury says it is backing the bank as well as its new management team. While it had noted the bank’s deteriorating financial performance “with concern”, it was working with the lender to stabilise its finances and ensure proper internal controls and governance in line with requirements of the Public Finance Management Act. 


“Information regarding additional fiscal allocation to the Land Bank will be provided by the minister when the 2021 budget is presented to parliament,” the Treasury told Business Day in response to questions on whether the Land Bank would receive another bailout. The Treasury “remains committed to the successful restructuring of the Land Bank”.

That suggests the Land Bank will receive a bailout over and above the R3bn injection it received in finance minister Tito Mboweni’s supplementary budget of June 2020.

Bloomberg data shows the ailing bank has about R3.83bn in debt, the bulk in the form of bonds held by local financial institutions. Among the holders of that debt listed on Bloomberg are Absa Bank, Old Mutual Life, Discovery Life, Volkswagen SA’s pension fund, Polmed, Sanlam, Sygnia, Sasfin, the Development Bank of Southern Africa, the Momentum Income Fund and Transnet’s Defined Benefit Pension Fund.

The Treasury told Business Day the Land Bank requires an additional R7bn to assist in its restructuring, though government is only legally obliged to act as guarantor for about R4bn of debt. “National Treasury is supporting the Land Bank to ensure that all its debt obligations are paid. The bank is negotiating with its bondholders for repayment terms to meet its defaulted debt.”


While bondholders will be relieved to hear that, the real victims of the Land Bank’s financial woes (other than taxpayers) will be the farmers it is meant to help, particularly emerging black farmers, who often battle to get credit. 

Agri SA executive director Christo van der Rheede says “heads must roll” at the Land Bank to account for its diabolical financial position. That responsibility lies with the finance minister, who appoints the Land Bank’s board, which he consults when appointing the CEO. When asked whether action would be taken against current management, the Treasury said the CEO and CFO were appointed only after the financial issues became apparent.

CEO Ayanda Kanana was appointed on March 1 2020 while CFO Khensani Mukhari started in February that year. This followed a series of resignations that began when former CEO Tshokolo Nchocho, who had been at the helm since 2015, left in December 2018 to head up the Industrial Development Corporation (IDC). CFO Bennie van Rooyen moved to acting CEO after Nchocho’s departure but resigned five months later. That led to Konehali Gugushe, who was acting CFO under Van Rooyen, stepping in as acting CEO, but she resigned in January 2020. The Land Bank’s board then appointed strategy and communications executive Sydney Soundy as acting CEO until Kanana’s appointment.

The Land Bank declined to comment. Kanana did not respond to calls or text messages to his mobile phone.