03 May 2023
by Vida Booysen
Land Bank will request help from the treasury to do a forensic investigation of the intermediaries they previously used to lend money to farmers.
This was made apparent in a presentation that the state institution did in front of the National Council of Provinces’ chosen committee for finances wherein they reported on their progress in getting out of his defaulter status.
Land Bank argues that the majority of its non-performing loans are precisely those that were previously managed by intermediaries. It attributes the deterioration of the loan book to the way in which the service level agreements were concluded, managed and monitored.
“There are a number of transactions and loans that were managed by our previous service level agreement partners, which gives Land Bank’s board cause for concern. We have asked the treasury to help us to launch an investigation into these transactions and loans entered into on our behalf,” said Thabi Nkosi, the Chairperson of Land Bank’s board.
The bank started to use intermediaries in 2011 that, in terms of service level agreements, gave loans to farmers, managed loan books and collected instalments on behalf of the bank. These intermediaries were agriculture companies that also sold inputs like seeds and fertiliser to farmers and many farmers used these loans for revolving credit. As soon as it was paid at the end of a season, they used the facility again to purchase inputs for the next season.
By 2020, however, the percentage of non-performing loans increased to such an extent that Land Bank had to take control of its loan book itself. Intermediaries like Suidwes, GroCapital and Obaro’s loan portfolios were taken over by Land Bank in 2020 while Unigro’s was completed by September 2021.
According to Thabi, the bank now manages 98% of its loan book itself.
Non-performing debt
Dr Philip Theunissen, a forensic accountant and part-time farmer from Bethlehem, did an analysis of Land Bank’s non-performing debt in October 2022. He found that loans that were granted regarding grain cultivation made a very large contribution to the non-performing debt.
“Non-performing grain loans, which were managed by intermediaries for the most part, totalled R13,6 billion in 2020 or 76% of Land Bank’s total non-performing loans of R17,9 billion,” wrote Dr Theunissen in an article in Landbouweekblad. He pointed out that grain harvests were above average at this time, especially in summer sowing areas.
“These abnormal non-performing loans can be attributed to financial obligations that were not met by grain-producing lenders or because financial discipline was not forced onto them, be it by Land Bank itself and/or its intermediaries,” wrote Dr Theunissen.
How much debt has Land Bank already paid?
Three years ago, Land Bank had to notify debenture holders that it was unable to pay back about R40,2 billion.
As of 23 March 2023, the bank still owes R18,1 billion of this amount. It is also up to date with the repayment of the interest on the debt and will be able to pay another instalment of the capital amount soon, according to Khensani Mukhari, the Chief Financial Officer of Land Bank.
The non-performing part of the loan book has decreased from R12,3 billion in March 2022 to R10,3 billion in February 2023.
