Land Bank continues to fund distressed farmers

The Land Bank entered the financial year under review amidst significant financial market changes.

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According to the bank’s 2016 annual report, a general liquidity pull-back in markets and extreme volatility made the raising of capital a challenge.

National Treasury (NT) had provided the Land Bank with R4 billion government guarantees in 2015 to assist the bank in raising its profile, and a further R2,7 billion in 2016 so it could execute its mandate.

The bank’s financial support of emerging farmers increased to R982,2 million during the year under review against a target of R700 million.

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The bank said that it expected to further utilise its innovative mechanism for financing emerging farmers through other structures in the forthcoming financial year.

According to Tshokolo Nchonco, Land Bank CEO, the bank would use the forced stock sale deposit customer data to contact farmers to ascertain the need for assistance, while technical support will be provided to emerging black farmers.

Land Bank Insurance Company (LBIC) will provide insurance products, and the bank will ensure regular cashflow forecasting to ensure availability of facilities to clients.

The bank negotiated with the Industrial Development Corporation (IDC) for a concessionary loan scheme to assist distressed farmers in drought declared areas.

The loan scheme was launched in March 2016, and the bank’s financial contribution to drought relief amounted to R400 million in concessionary funding, with R250 million charged at prime minus 3%.

Nchoncho said that the drought had reversed the many gains made by land reform as smallholder and emerging farmers lost their livestock and could not sufficiently produce commodities. He added that the sector could only grow through continued investment.

“The ratio of investment to debt has steadily declined since 2007. From 2004 to 2013, investment in the sector decreased by 5,9% compared to 19,8% and 11,9% for net farm income and total farming debt respectively,” said Nchoncho.

However, the bank was wary that should adverse weather and economic conditions prevail, its distress loans could increase in the short- to medium- term.

Digital editor for South Africa's oldest and most read farming magazine.