Land Bank shrinks debt but is not out of the woods

The Land Bank’s debt and loan book had been cut by more than half, its officials said on Monday, as the state-owned agricultural lender prepared to emerge from more than four years of default.

Land Bank defaulted on its debt in April 2020, becoming the first large SA state entity to do so. It had failed to agree restructuring terms with its lenders, but the government said last week a deal had been reached.

The lender’s CEO, Themba Rikhotso, told reporters its debt had fallen from more than R45bn at the time of default to R16bn. About R4bn would be repaid when the “liability solution” takes effect later in September, leaving R12bn to be repaid until March 2028.

Rikhotso said the Land Bank would be allowed to “incur further borrowings provided this is done within set parameters to ensure that current lenders’ rights are protected”.

Finance minister Enoch Godongwana said it was commendable that the bank had been able to repay via its own cash flow 60% of its funding liabilities since defaulting. But he said the bank’s financial support to the agricultural sector had fallen from R45bn at its peak to about R17bn.

“We want the bank to adhere to the covenants set out in its debt restructure agreement, and to begin a process to address its funding structure so that we never find ourselves in a similar position again,” Godongwana said.

Of the R10bn in state bailouts given to the Land Bank at about the time of its default, R3.7bn had been allocated to a blended finance scheme, he said.

“We also ensured that the bank found self-help measures while keeping fiscal support to a minimum,” Godongwana said.

With the reconfiguration of government departments in the government of national unity, and the separation of the agriculture department from land reform & rural development, agriculture minister John Steenhuisen wants the Land Bank to fall under his department rather than the National Treasury. 

Reuters