The Land Bank poser
The next wave of agricultural sector consolidation may occur sooner rather than later, writes Anthony Clark
When a century-old lender like the Land Bank defaults on its debt — triggering a liquidity contagion in the R280bn farming sector — the repercussions are bound to ripple through the wider economy.Investors in agribusinesses will need to watch developments over the next few months closely.The Land Bank’s problems started early in 2020, when it was unable to repay a debt instrument due to a liquidity crunch. The bank did the unthinkable — it defaulted on its debt. Panic ensued.International ratings agencies Moody’s and Fitch moved swiftly to cut the bank’s credit rating, further exacerbating its precarious financial and liquidity position.The default was to fall back on a cash-trapped Treasury. It had already, in February, increased guarantees to R5.7bn to the bank, which was unable to raise its own funding.The Land Bank is responsible for 25% of all lending in the agricultural sector. Total debt in the sector is estimated at R170bn.The bank plays a leading role in areas of agricultur...
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