THABI NKOSI: Land Bank emerges from four-year state of default

The Land Bank has successfully concluded its debt restructuring process. After years of rigorous negotiation and collaboration we have reached a comprehensive agreement with the bank’s lenders. All conditions have been met, official notices have been issued to creditors, and the first payments under what we call “Liability Solution 5” will begin on September 16. 

This agreement not only brings an end to the Land Bank’s four-year state of default, but positions the bank firmly on a sustainable path to recovery, signalling a new era of strength and stability.

As some may be aware, the Land Bank first encountered liquidity challenges in April 2020, leading to a default on our debt obligations. Due to cross-default provisions, all of the bank’s debt became due, making us the first large state-owned entity to face such a default.

From that moment we engaged in intensive negotiations with our lenders to create a solution that would protect both the bank’s financial viability and its development mandate in agriculture.

This effort culminated in the crafting of what we call the Liability Solution. In partnership with our lenders we were able to enter an informal standstill in 2020, securing their co-operation in not calling on debts while we developed a lasting agreement.

With the support of the national government, which injected R10bn in equity, we were able to stabilise the bank, preserve its development role and pave the way for the successful restructuring we celebrate today.

The journey has been challenging, but the result is a balanced solution that both services our outstanding debt and enables the bank to continue providing the capital needed to grow, develop and transform SA’s agricultural sector.

This process undertaken by the Land Bank and its creditors has been one of the most complex and extensive debt restructurings in SA’s financial history. Co-ordinating a wide range of local and international lenders across various legal jurisdictions and debt structures was no small feat.

However, through patience, perseverance and the goodwill of all parties involved we’ve reached an outcome that serves the best interests of the bank, our lenders and the agricultural sector. 

Resilience

Despite the challenges that we faced over the past four years the Land Bank has demonstrated remarkable resilience. During this period of default it has remained solvent, reduced its outstanding debt by over 60%, and consistently met interest payments on all debts.

In addition, in partnership with the department of agriculture we launched the Blended Finance Scheme in October 2022, and thus far over R1.5bn has been approved under this lending programme, supporting 205 developing farmers.

Going forward, in addition to continuing to support our commercial client base as we have in the past we will deploy an additional R4bn from the National Treasury’s initial equity injection to support agricultural development and transformation. 

As we emerge from this period of default our focus shifts to the execution of our turnaround strategy. Supported by a new operating model and a streamlined organisational structure, this strategy is designed to position Land Bank as a specialist development finance institution that balances financial sustainability with meaningful development outcomes for SA’s agricultural sector. 

This process would not have succeeded without the support of finance minister Enoch Godongwana and the National Treasury. The more than 50 lenders of the Land Bank also showed patience, commitment and optimism about the bank’s future, which all contributed to our success and progress thus far.

Agriculture is a vital part of the SA economy and will continue to play an essential role for years. Thus, a vibrant Land Bank supporting both transformation and the sector’s sustainability is vital.

Our progress thus far is a first step in the journey of progress and supporting the growth of agriculture and food security in SA. 

• Nkosi, an agricultural economist, chairs the Land & Agricultural Development Bank of SA.