‘Chickens come home to roost’ for Land Bank

‘Chickens come home to roost’ for Land Bank
An urgent application brought by Standard Chartered Bank to recover debt from the Land Bank will worsen the bank’s liquidity challenges. Photo: FW Archive

Farmers who will require financing from the Land Bank in the near future will encounter difficulties in accessing such funding due to the bank’s current liquidity challenges.

In addition, it would mean that other commercial banks that offer agriculture funding had to “pick up the slack”, said Dawie Roodt, economist at Efficient Group.

This followed an announcement on 18 August that Standard Chartered Bank had served an urgent application on the Land Bank to recover a “certain debt” from the former, the Land Bank said in statement on the Johannesburg Stock Exchange’s news service.

Farmer’s Weekly previously reported that the Land Bank was facing challenges with regard to liquidity. In April, the state-owned agricultural lender defaulted on repayments of debt to the value R50 billion, leaving the South African government liable for about R5,7 billion in guaranteed debt.

Commenting on the application by Standard Charter Bank, Roodt said: “The reality is that this is one chicken that is coming in to roost.”

“If the debt that the Land Bank is being sued for is a normal loan, it will see other investors also suing for their payments, and what could possibly happen is that government will try to assist by [providing more funds], but that can only be done through legislation, or the emergency powers of the Minister of Finance.”

However, Roodt said other banks would also have difficulty “picking up the slack” as they were currently also struggling due to large-scale debt defaulting, as a result of COVID-19-related economic pressure. “But the South African Reserve Bank is keeping a close eye on these matters,’’ he added.

In June, National Treasury announced that it would inject a further R3 billion into the Land Bank.

The Land Bank announced at the time that interest payments would resume from 11 August and would be made as and when they become due and payable, in accordance with the terms of each relevant underlying agreement.

“[The] Land Bank is working with its advisers and will be opposing the application by Standard Charter Bank, [and] continues to engage with its financial creditors as it works towards the liability solution,” according to the statement.

Responding to Farmer’s Weekly’s questions on the matter, Standard Charter spokesperson, Geraldine Matchaba, said the bank maintained the highest levels of confidentiality with regard to its clients.

“As such, we cannot comment on any client matters, nor provide confidential details on specific deals,” she said.