SOUTH AFRICA – Land and Development Bank of South Africa (Land Bank), government owned development bank and the biggest lender to farmers in the country has requested for an additional R10 billion (US$604.3m) bailout from the government over the next few years.
According to reports by Reuters, the financing is aimed to help the struggling lender refocus on growing its developmental book and becomes less dependent on state funding in future.
“We have proposed R7 billion (US$423m) in 2021/22, and R1 billion (US$60m) per annum for the following three financial years for development,” said Land Bank.
The bank has also planned an asset reduction programme with other aspects of the new strategy involving improved access, marketing and visibility, increased services across the agriculture value chain, the provision of transactional banking products and services and the leveraging of state land to enhance the collateral position.
The turnaround times for loan applications, approvals and delivery of services would also be improved.
The plan to improve the operations of the bank would depend on support from private sector partnerships, the National Treasury, and national and provincial agriculture departments, indicated the reports.
“We have proposed R7 billion (US$423m) in 2021/22, and R1 billion (US$60m) per annum for the following three financial years for development.”
Land and Development Bank of South Africa
The proposition comes days after the bank, received R3 billion (US$181.3m) cash injection from the government, thus no longer requiring the emergency liquidity facility that it was negotiating with certain existing funders aimed to settle debts.
The Land Bank, which holds 29 percent of the debt in the agriculture sector, said although the immediate support was sufficient to ensure immediate default risk, there remained execution risk in the delivery of its corporate plan.
And if it did not receive a cumulative R7bn (US$423m) equity injection, it might have to reallocate capital from development to its commercial operations.
The percentage of its development and transformation loan portfolio had grown to 18.6 percent of its total portfolio in financial year 2020, from 6 percent in 2016.
The bank said a reduction of its role in the economy would compromise the agriculture sector and create a threat to food security.
State firms have been a long-term drain on the finances of Africa’s most industrialised economy, requiring bailouts at a time of weak economic growth which have helped to tip its sovereign credit rating into “junk” status.
In January, Land Bank became the first big state-owned company in SA to be relegated to junk status by Moody’s.
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