The Land Bank will be aggressively going after clients who are owing it more than R12 billion in outstanding loans as it has resumed new lending activities to commercial farmers after a two-year hiatus.
In its integrated report released yesterday, the Land Bank said that it was implementing a strategy to remediate its significant non-performing loans (NPLs) portfolio.
The bank said the settlement of client facilities has had the obvious effect of reducing its loan book concomitant to the reduction of its liabilities and has brought about an increase in the NPL ratio.
Land Bank chair Thabi Nkosi said this challenge of a deteriorating overall loan book quality has received special attention by the board.
Nkosi said they had developed and begun the execution of the strategy to address the challenge of NPLs that were predominantly originated by the bank’s previous cohort of intermediaries.
“I am pleased that the bank’s NPLs remediation efforts have begun to bear fruit with a reduction of the NPL book from R13 billion in February 2022, to R12.3bn in March 2022 and subsequently R12.1bn in June 2022,” Nkosi said.
“As part of this programme, the bank is placing significant effort on preserving the performing clients through appropriate interventions to assist them with financing needs necessary to sustain their businesses.
“Additionally, the bank’s capacity to increase its debt collections and recoveries capability is receiving close attention and monitoring.”
In partnership with the Department of Agriculture, the Land Bank yesterday launched a R3.2bn blended finance scheme to assist financially-struggling farmers.
The programme will be implemented over a 10-year period with the department investing a minimum of R3.2bn over the period.
The funding will be on a blended finance structure which is a combination of a loan and grant with the focus on commodities as per the agriculture and agro-processing master plan.
The department and Land Bank have each invested R325 million per annum, which will effectively result in the creation of a R650m fund a year, growing to R1.95bn by the end of the third year.
Access to blended finance scheme will be directly through the Land Bank and the department will perform an oversight role including reporting to all its relevant structures.
Agriculture Minister Thoko Didiza said that the received expression of interest from other private banks and engagements were at an advanced stage as part of the goal of broadening access to finance by producers.
“Strategic partnerships like these are critical to ensure growth, food security, development of farmers and transformation of the agricultural sector, and contribute towards job creation,” Didiza said.
The cash-strapped bank entered a serious liquidity crisis when it failed to make interest payments due on its R50bn listed notes in April 2020, triggering a cross default on substantially all of its borrowings.
As at the end of the 2021/22 financial year, the Land Bank had managed to reduce its outstanding debt with its lenders by 28.4% since the start of the default, with a cumulative debt capital reduction of 42.8% being achieved by June 2022.
“This achievement would not have been possible without the efficient collections of client repayments and settlements of their accounts and the reduction of the bank’s loan book,” said Finance Minister Enoch Godongwana.
“The consequence of this is the need for the bank to implement a fit-for-purpose revised operating model in line with the size of its business and an appropriate operating costs structure for the business.”
The group achieved a net profit of R1.4bn during the period, and a clean audit from the auditor-general.
During a media briefing, Nkosi reiterated that they were working together with the bank’s lenders with the objective to reach agreement on the liability solution by the end of 2022.
“We have been able to craft a solution that not only focuses on the repayment of debt, but also has long-term sustainability of the bank at its core,” she said.
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