Land Bank to cushion farmers hard hit by drought

In an oral reply to a Parliamentary question submitted by Annette Steyn, the DA MP serving as shadow minister for agriculture, forestry and fisheries, on whether the parastatal would put plans in place to assist farmers with soft loans to fund the next season, Land Bank said its drought relief intervention initiatives were aimed at deferring of payment, payment holiday, and interest write-back for retail emerging markets, among others.

“The Land Bank has been closely monitoring the distress signals of our farmers in an attempt to proactively intervene and support. We are of the view that as the prevailing weather conditions continue, it is likely that more farmers will show early signs of distress. Farmers genuinely need more state support right now,” the bank said in its response.

The bank said its lending committee, at its own discretion, would consider options as follows on a case by case:

  1. To advance 2nd season production loans without full settlements of the previous season production facility.
  2. Extend repayment period for the remaining term of the mortgage and medium term loan.
  3. Granting repayment holiday to a maximum of 24 months depending on commodity and cash flow projections.
  4. Interest accrued write back for Retail Emerging Markets clients with inputs for the 2014/2015 production season that did not plant.
  5. Adjust loan to value from 60% to 75% (fully collateralized) where business cash supports increased borrowing.
  6. Subordination of existing loan where applicable to prevent reckless lending and over-indebtedness.
  7. Evaluation for assistance will be based on client’s business case merit.
  8. All applications approved under this initiative will require progress reporting every 6 months.

These interventions would be available to existing and new clients. For existing Land Bank clients the drought relief loans intervention would “be based on own merits” and new client “will be assessed according to the existing credit criteria”.

Steyn welcomed the Land Bank’s response, saying it showed the bank understood the seriousness of the financial situation farmers faced due to the impacts of the drought.

“This is exactly what farmers affected by the drought need now, the financial support to see them through this difficult time,” she said.

Steyn was also encouraged by the Land Bank’s decision to extent relief intervention initiatives not only to its existing clients, but also to new clients.

“I am just concerned that Land Bank will not have the capacity and necessary capital to provide these relief interventions to all the farmers who are likely to approach the bank for assistance,” she said.