The Land Bank will be resuming lending to new development clients with a blended finance mechanism to help commercial farmers access much-needed finance amid rising costs for fertiliser and other essentials.
The state-owned bank has operated at “suboptimal” levels since it defaulted on its debt obligations in 2020, and could not fully resume its borrowing and lending activities until a settlement was concluded.
Land Bank chairperson Thabi Nkosi told the National Assembly’s finance committee that one of their priorities was to finalise the revised funding model.
Nkosi said that as a result, the bank would launch 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.
“I am happy to report that we will be providing these details at the launch of this scheme on 24 October. We will be launching this blended finance scheme together with the minister of agriculture.
“Farmers will be able to hear how to apply for these funds, who qualifies for these funds, so that information will be made available in the coming week.”
There has been a growing concern about the country’s food security among the farming community in the absence of a highly effective and efficient blended financing mechanism since the Land Bank is struggling.
Agri SA excutive director Christo van der Rheede said the blended financing mechanism was crucial for the establishment of farmers.
However, Van der Rheede said all other banks must be included in this mechanism for it to be effective and efficient, as development finance was loaded with risks.
“It is important that all financing institutions and other initiatives be part of the process,” he said.
“Successful land reform in agriculture depends on blended financing as a collective effort but more importantly, though, the beneficiaries must be committed, have skin in the game and be resilient as farming is no child’s play.
“It cannot be the sole responsibility of (the) Land Bank. A fragmented approach to agricultural support and financing has cost the country dearly.”
Meanwhile, Nkosi told Parliament that they have finally reached an agreement with the majority of its creditors on the bank’s debt restructuring, with hopes to conclude a settlement by the end of the year or the end of March next year at the latest.
The Land Bank experienced serious liquidity challenges and its credit rating was downgraded from investment grade by Moody’s Investor Services in January 2020.
Due to cross-default clauses, the bank’s entire debt portfolio of about R45 billion, of which R5.2bn is guaranteed, was considered to be in default.
The Land Bank is in a de-facto debt standstill with lenders and has been engaging various lenders’ groups to find a solution.
Nkosi said that the board has identified the conclusion of the liability solution, addressing book quality deterioration and growth of the non-performing loans as some of immediate priorities as it begins a process to get it out of its current default status.
She said there has been a 43% reduction in outstanding liabilities since 2020, with negotiations ongoing and support received for the current liability solution from the majority of lenders.
“We are still fully hoping to have this liability solution concluded, if not by the end of this calendar year, definitely by the end of the financial year,” Nkosi said.
“These are very complicated discussions that involve a number of different lenders, including multilateral organisations, so these discussions have unfortunately taken a little bit longer than what we anticipated.”
BUSINESS REPORT
Now watch: