Die inploffing van die Land Bank en Moody’s se afgradering, ‘n reuse terugslag vir groei en transformasie in die landbousektor |Implosion of the Land Bank and Moody’s downgrade, a major setback for growth and transformation of the agricultural sector
English to follow:
22 Januarie 2020
Agri SA bevraagteken die stand van korporatiewe bestuur van die Land Bank, wat tot die afgradering by hierdie instansie gelei het. Moody’s se afgradering van die Land Bank is bewys van die ongesonde stand van sake by die bank. Dié afgradering is ’n terugslag vir groei en transformasie in die landbousektor.
Moody’s se afgradering behels direkte implikasies vir die landbou, met ‘n wyer impak op die ekonomie. Die Land Bank se langtermyn volhoubaarheid en sy vermoë om sy mandaat uit te voer, word nou as “meer riskant” beskou. Dit maak dus toegang tot finansiering moeiliker en duurder vir die bank.
Die landbou is siklies van aard en talle boere verdien nie ‘n vaste of gereelde inkomste nie. Hulle verdien die grootste gedeelte van hul inkomste in die kort tydperk wanneer hulle produkte verhandel word (wat kan verskil afhangend van die produk). Toegang tot krediet by, onder andere die Land Bank, is noodsaaklik om aan hul kontantvloeibehoeftes (byvoorbeeld, betaling vir insette en arbeid) gedurende die jaar te voldoen. Boere sal tipies hul skuld betaal wanneer hulle geoes het. As gevolg van klimaatsverandering en gepaardgaande droogtetoestande is menigte boere egter onder groot druk.
Die Land Bank se verhoogde koste sal na hul boere-kliënte afgewentel word, wat dus kredietkoste sal verhoog. Talle agribesighede het ook hul leningsboeke aan die Land Bank verkoop en so die bank se rol in die landboukredietstelsel vergroot. Dit beteken dat boere wat produksiekrediet via hierdie agribesighede verkry, se kostes kan verhoog. Dit plaas verder druk op boere se finansies en volhoubaarheid, met verbandhoudende risiko’s vir die res van die waardeketting en die eindverbruiker. Dit is moontlik dat verbruikers uiteindelik hoër pryse binne ‘n beperkte omgewing sal moet betaal.
Tesame met die afgradering het Moody’s ook die bank se vooruitskouing van ‘Onder Hersiening’ na ‘Negatief’ verander. Die Land Bank is in November 2019 onder hersiening vir afgradering geplaas terwyl Moody’s drie risiko’s wat aanleiding gegee het tot die hersiening uitgelig het:
- ‘n Toename in nie-presterende lenings (landbou onder druk / moeilike bedryfstoestande);
- Omgewingsrisiko’s; en
- Onteiening sonder vergoeding (beleidsonsekerheid).
Hierdie breë faktore beklemtoon die bank se aansienlike blootstelling aan omgewingsrisiko’s soos klimaatsverandering, droogte, veranderende en ongewone voorkoms van hael en groter biosekuriteits-/siekterisiko’s.
Moody’s se verslag ontbloot verder die regering se voortdurende fiskale uitdagings en sy onvermoë om staatsbeheerde ondernemings te ondersteun, veral in tye van nood. Dit word verder bevestig deur die negatiewe vooruitskouing vir Suid-Afrika se soewereine gradering.
Ander uitdagings sluit in die onvermoë van die Land Bank om ‘n permanente uitvoerende hoof aan te stel asook bestuursfaktore wat ‘n negatiewe invloed op sy finansiële prestasie en beleggersvertroue het.
Agri SA doen ’n dringende beroep op die raad en die bestuurspan van die Land Bank om ’n omkeerstrategie in plek te sit wat ’n totale inploffing van die instelling kan teenwerk.
Navrae
Nicol Jansen
Voorsitter: Agri SA se Sentrum vir Uitnemendheid – Ekonomie en Handel
(S) 082 948 2629
Omri van Zyl
Agri SA Uitvoerende Direkteur
(S) 082 417 5724
*****************************************************
22 January 2020
Agri SA questions the state of corporate governance at the Land Bank. Moody’s downgrade of the Land Bank is evident of an unhealthy state of affairs at governance and management level within the bank. And it is a setback for growth and transformation of the agricultural sector.
Moody’s downgrade holds direct implications for the agricultural sector with broader spill-over economic impacts. The Land Bank’s long-term sustainability and ability to execute its core mandate are now viewed as “riskier”. It therefore makes access to finance more challenging and expensive for the bank.
Agriculture is cyclical in nature, and as a result many farmers do not have a fixed or regular income. They earn the bulk of their income in a short period of time (varies based on commodity) when their produce is sold. Access to credit, from amongst others the Land Bank, is essential to meet cashflow needs (for example: paying for inputs and labour) throughout the year. Farmers will typically settle their debt when their produce is harvested. However, climate change and corresponding drought conditions have placed many farmers under pressure.
The Land Bank’s increased costs are passed on to farmers borrowing from the bank, increasing their cost of credit. Many agri-businesses have also sold their loan books to the Land Bank, increasing the Land Bank’s role in the agricultural credit system. This could mean higher input costs for farmers accessing production credit through these agribusinesses. This places further pressure on farmers’ finances and sustainability, with associated risks to the rest of the value chain and the end consumer. Consumers could end up paying higher prices in a constrained environment.
Along with the downgrade, Moody’s changed the bank’s outlook to Negative from Rating Under Review. The Land Bank was placed on review for a downgrade in November 2019, therefor, Moody’s highlighted three risks leading to the review:
- An increase in non-performing loans (agriculture under pressure / challenging operating conditions);
- Environmental risks; and
- Expropriation without compensation (policy uncertainty).
The broad concerns highlighted the bank’s high exposure to environmental risks such as: climate change, drought, changing and unusual patterns of hail and heightened biosecurity/disease risks.
Following on this, Moody’s report exposes government’s continued fiscal challenges and its inability to support state-owned enterprises, specifically in case of need. This is also illustrated by the negative outlook assigned to South Africa’s sovereign rating.
Other challenges include the inability by the Land Bank to appoint a permanent CEO and other operating factors which impact negatively on its financial performance and on investor confidence.
Agri SA therefore calls on the board and management team at the Land Bank to act decisively and to implement a turn-around strategy to reverse the implosion of this institution.
Enquiries
Nicol Jansen
Agri SA Chairman: Economics and Trade Centre of Excellence
(C) 082 948 2629
Omri van Zyl
Agri SA Executive Director
(C) 082 417 5724
