20 September 2023
By: Jasper Raats
African Farming spoke with Themba Rikhotso, CEO of the Land Bank, and Theo de Jager, director of the Southern African Agri Initiative (Saai), about the bank’s decision to assist rather than prosecute farmers who have defaulted on their loans.
It appears the family farming association Saai and the Land Bank have reached an agreement on various points of contention about the bank’s business plan and the aggressive sequestration of more than 120 farmers who could not meet their obligations to the bank on time.
Many farmers suddenly found themselves in trouble when their debts, previously held by intermediary agricultural businesses such as cooperatives, were transferred back to the Land Bank.
“Most farmers used those loans as revolving credit, much like an overdraft. When the bank took back its book from the cooperatives, they were handled summarily and without warning as production loans that had to be repaid in full by a certain date,” says De Jager.
Rikhotso says the bank did this because it saw that some intermediary businesses were charging farmers exorbitant interest rates, but he admits that the whole picture was not considered.
“We have agreed with Saai that they will provide us with a list of their members whom we can assist with further financial support – these are the ones we believe can get back into production with a little help,” says Rikhotso.
“We are also looking at our other clients who are struggling for various reasons. Some have not fully recovered from the financial impact of Covid-19, and others could not make the payments when intermediary businesses’ accounts were transferred back to the Land Bank. The bank has allocated R500-million for this.”
Saai is concerned about attorneys who sequestrated prosperous farmers and destroyed their farming enterprises, and the Land Bank has decided to terminate the services of those attorneys and withdraw them from all cases except those that are close to resolution.
The law firm Adams & Adams has been appointed to investigate the conduct and practices of these attorneys, and a report will be issued shortly. In addition, the National Treasury has initiated a forensic audit of the sequestration practices of these attorneys and related service providers such as liquidators and auctioneers.
Dimitri van der Westhuizen, a director of the Land Bank, has been instructed to assess the consequence and reputation management the bank must undertake to restore its image among farmers and reclaim its place as the anchor financier of agriculture.
<caption>Theo de Jager, director of Saai, and Themba Rikhotso, CEO of the Land Bank. Photo: Willem van Jaarsveld
Open for business
The Land Bank is negotiating with its creditors for the restructuring of the bank’s debt. It is also speaking to the Treasury about ways to restructure financing so the bank can be sustainable in the long term and have funds to finance farmers.
“When farmers talk to us, they need patient capital: long-term loans at favourable rates,” says Rikhotso. “It’s going to take a while, but I believe we are making progress. We have some money that we received from the Treasury, which will help.”
Although the bank is open for business and grants bonds, production loans and revolving credit to farmers, as well as financing equipment, it will need recapitalisation.
Experts believe it will need between R10-billion and R15-billion to get fully back on its feet, and everyone agrees the government does not have the money for a one-time bailout. The funds will probably be allocated over five to eight years.
This will lay the right foundation. “From discussions, it appears that we will get long-term capital on the capital markets and be able to assist farmers with patient loans and favourable rates,” says Rikhotso.
He refers to the Development Bank of South Africa, which was recapitalised by the government with about R7-billion and gained access to another R100-billion on the capital markets as a result. “That’s our approach. We need a bit of help from the government and we will get the rest in the market.”
The bank hopes it will be out of its current predicament by April 2024, and in the meantime it will make R1.2-billion in mixed financing available for an agricultural energy fund to be launched later this month.
The bank has committed itself to ensuring there is no discrimination based on race or age linked to this financing. The financing mix includes R700-million in loan capital and R500-million in subsidies.
