Deputy Finance Minister David Masondo has assured MPs that the state-owned Land Bank is making progress in reducing its debt.
The Land Bank experienced liquidity challenges and defaulted on its debt obligations in April 2020, but the government provided fiscal support and has recapitalised the bank with a total of R10 billion since the default.
Speaking before Parliament’s standing committee on finance on Wednesday, Masondo said the bank had managed to repay 43% of the debt that was outstanding in 2020 and only R1.5bn of guaranteed debt was outstanding.
Masondo also said that a further reduction of debt is expected in the current financial year as R7bn of the R10bn bailout was still available to be transferred to the bank, subject to the conclusion of the Liability Solution.
“The bank is in a healthy liquidity and solvency position and reported a net profit of R1.4bn in the most recent financial year against a net loss of R711 million in the 2021 financial year. At the operating level, Land Bank reported a profit of R11.7m,” Masondo said.
“While recovery efforts continue, we are encouraged by the bank’s efforts to close its mandate gaps and are working closely with the Land Bank team in the implementation of its new developmental finance programme.”
Masondo also said it was important for the Land Bank to work closely with the Department of Agriculture, Land Reform and Rural Development to ensure that transformation in the agricultural sector was feasible, and to ensure that the bank prioritised the provision of assistance to small and emerging farmers.
Land Bank chairperson Thabi Nkosi said that the board had identified the conclusion of the Liability Solution, addressing book quality deterioration and growth of the non-performing loans as some of immediate priorities for its attention as it begins a process to get it out of its current default status, stabilise the institution and begin the turnaround process.
Nkosi said there had been a 43% reduction in outstanding liabilities since 2020, with negotiations continuing and most lenders supporting the current Liability Solution.
“The board is focused on finalisation of the Liability Solution that is an essential dependence for the bank’s turnaround. A clear and development focused strategy has been developed and adopted,” Nkosi said.
“The bank will be resuming lending to new development clients with the launch of the Blended Finance Scheme in partnership with the Department of Agriculture, Land Reform and Rural Development.
“Significant progress has been made to stabilise the bank, however the long-term financial sustainability of the bank requires a revision of its funding model.”
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