While the Land Bank remains in default to its creditors, Finance Deputy Minister David Masondo says the institution has managed to repay 43% of the debt that was outstanding in 2020 and only R1.5 billion of guaranteed debt remains.
Masondo made the remarks on Wednesday when National Treasury and the Bank appeared before Parliament’s Standing Committee on Finance. The department appeared before the committee to provide a briefing on the policy direction for the Land Bank, as well as to request the committee to support the amendment of Section 45 of the Land Bank Act, as presented previously by Treasury.
Masondo said a further reduction of debt is expected in the current financial year.
“The bank has also significantly improved its governance, financial reporting and internal control mechanisms. This resulted in the bank achieving a clean audit from the AG in the past financial year, against a qualified audit in the 2021 financial year, and a disclaimer in the 2020 financial year,” he said.
Financial performance, he said, has also improved.
“The bank is in a healthy liquidity and solvency position and reported a net profit of R1.4 billion 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 R11.7 million.
“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,” he said.
Masondo said government wants the Land Bank to make a positive contribution to the transformation of the agriculture sector.
“The restructuring of the Land Bank is crucial if we want to re-establish the Land Bank as an effective and efficient development finance institution. The Land Bank needs to prioritise its developmental impact and improve its support of development or emerging farmers, most importantly, the marginalised individuals in the agriculture sector,” he said.
He said it is 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 is feasible, and to ensure that the Bank prioritises the provision of assistance to small and emerging farmers.
The Deputy Minister said Treasury continues to support the Bank in its debt restructuring process and is working with the entity to ensure that it continues to play its vital role in the agricultural sector while work on the Liability Solution continues.
“We have also provided fiscal support to the Land Bank. Since the default, we have recapitalised the Land Bank with a total of R10 billion,” he said.
He said the R3 billion of this recapitalisation was transferred in 2020, which assisted the Land Bank to:
– Continue paying interest on all outstanding debt;
– Start paying down capital on its outstanding debt; and
– Undertake limited disbursement to performing clients.
The remaining R7 billon is still available to be transferred to the Land Bank, subject to the Land Bank concluding the Liability Solution, which will cure the default position of the bank.