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Land Bank-wanbetaling kan lei tot finansiële verderf en verwoesting van die landbousektor | Land Bank’s default risks financial contagion and devastation for agriculture

English to follow:

21 April 2020

Die Land Bank het krediteure ter waarde van R50 miljard gewaarsku oor die risiko van wanprestasie. Die tersaaklike terugbetalings is vir sy lopende kredietfasiliteit. Die bank beskryf die huidige probleem as ‘n ‘likiditeitstekort’. Dit volg nadat Moody’s die bank se kredietstatus op 21 Januarie afgegradeer het. Dit het tóé reeds die bank as “meer riskant” uitgelig, wat toegang tot finansiering moeiliker en duurder gemaak het.

Die Land Bank is ‘n belangrike speler in die landbousektor, met ‘n sterk markaandeel van 29% van Suid-Afrika se landbouskuld. Die bank dien ook as ‘n belangrike bron van krediet vir landboubesighede om die inkoop van oeste by silo’s te finansier en vir produksiekrediet wat die bank na boere via landboubesighede kanaliseer.

Die landboubedryf is siklies van aard aangesien baie boere nie ‘n vaste of gereelde inkomste het nie en die meerderheid van hul inkomste binne ‘n kort tydperk ontvang (dit verskil afhangend van die bedryf). Toegang tot krediet is noodsaaklik om voorsiening te maak vir kontantvloeibehoeftes (bv. betaling van insette en arbeid) deur die jaar, met boere wat tipies hul skuld vereffen nadat hulle geoes het.

Die Land Bank is een van die min staatsondernemings wat winsgewend bly ten spyte van ‘n toename in wanbetaling (droogtes, ens.) en het in 2019 ‘n wins van R181 miljoen aangeteken.

Die bank het ‘n belangrike mandaat om te vervul ten opsigte van ontwikkeling, maar is afhanklik van toegang tot finansiering in finansiële markte onderhewig aan kommersiële voorwaardes. Daar is skynbaar ‘n wanbelyning tussen die aandeelhouer (Regering/Nasionale Tesourie) se verwagtinge van die bank en die vlak en tipe befondsing en ondersteuning wat die bank ontvang.

Terwyl swak-presterende staatsondernemings reeds herhaaldelik hulppakkette ontvang het, verdien die Land Bank sodanige regeringshulp soveel meer. Die landbou is uiters noodsaaklik vir voedselsekerheid en die breë ekonomie van Suid-Afrika. Die sektor staan ook gereed om te help met die herstel van die ekonomie na afloop van COVID-19.

Die regering moet nou die nodige leierskap en visie toon met dringende hulp aan die landbousektor om die Land Bank se huidige wanbetalingskrisis aan te spreek. Dit sal help om die Land Bank, asook die landbousektor, te posisioneer vir groei en sodoende die herstel van die breër ekonomie ondersteun.

Ondergang van die Land Bank kan die land blootstel aan ‘n geweldige sistemiese risiko, met erge gevolge vir kommersiële boere, werkskepping en voedselsekerheid, en moet dus ten alle koste vermy word.

Ons moedig die Land Bank-raad en Nasionale Tesourie aan om konstruktief met Land Bank-kliënte en landboubefondsers saam te werk ten einde die sistemiese risiko te verminder.

Navrae:

Nicol Jansen

Voorsitter: Agri SA Sentrum van Uitnemendheid: Ekonomie & Handel

Dr Requier Wait

Hoof: Agri SA Sentrum van Uitnemendheid: Ekonomie & Handel

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Land Bank has warned debt holders of R50 billion that it is in danger of defaulting. The repayments in question are for its revolving credit facility, Land Bank cited a current “liquidity shortfall” as the problem. This follows on the Moody’s credit downgrade of the bank on the 21st of January, this already highlighted the bank as “riskier”, making access to finance more challenging and expensive for the bank.

Land Bank is a significant player in the agricultural sector, with a strong market share of 29% of South Africa’s agricultural debt. The bank is an important line of credit for agribusinesses to finance the buy-in of harvests at silos and for production credit which the bank channels to farmers via agribusinesses.

Agriculture is cyclical as many farmers do not have a fixed or regular income, rather, they earn the bulk of their income in a short period (varies based on commodity) when their produce is harvested. Access to credit is essential to meet cashflow needs (for example: paying for inputs and labour) throughout the year, with farmers typically settling their debt when their produce is harvested.

The bank is one of a few state-owned companies that remain profitable, despite an increase in defaulting loans (drought challenges, etc.), recording a profit of R181 million in 2019.

The bank is mandated to fulfil an important developmental mandate; however, the bank is mainly depended on accessing funding in financial markets based on commercial terms. There seems to be a misalignment between the shareholder’s (Government/National Treasury) expectations of the bank and the level and type of funding and support that is given to the bank.

Whilst failing State-Owned Enterprises (SOEs) has already received consecutive bailouts, the Land Bank is much more deserving of government support. Agriculture is vitally important to South Africa’s food security and the broader economy. The sector is also posed to support post-COVID-19 economic recovery.

The government must show the necessary leadership and vision to urgently support the agricultural sector to resolve the Land Bank’s current default crisis. This can help to position the Land Bank and agriculture for growth, supporting broader economic recovery.

A Land Bank failure could expose the country to a substantial systemic risk with dire consequences for commercial farmers, job creation and food security and should be avoided at all cost.

We encourage the Land Bank Board and National Treasury to constructively engage with Land Bank clients and agricultural lenders to mitigate the systemic risk.

Enquiries:

Nicol Jansen

Agri SA Chairman: Economics and Trade Centre of Excellence

Dr Requier Wait

Agri SA Head: Economics and Trade Centre of Excellence