Land Bank distress adds to pressure on government

The Land and Agricultural Development Bank of SA is in talks with lenders after missing a loan payment and triggering a default, leaving its government owner liable for about R5.7 billion of guaranteed debt.

The state-owned lender to the farming sector is seeking a waiver after failing to pay what it owed under the terms of a revolving credit facility, according to a statement on Monday.

The Land Bank said it was suffering from a liquidity shortfall and may need to postpone further financial obligations.

The news adds to a long list of financial headaches for President Cyril Ramaphosa’s government, which provided the loan guarantee to the bank less than two months ago.

The National Treasury is under pressure to come up with ways to stimulate an economy set to contract this year, while assisting small businesses and poor communities pushed to breaking point by measures to contain the Covid-19 coronavirus pandemic.

READ: 'Our lockdown has revealed a very sad fault line in our society' - Ramaphosa

Meanwhile, other state-owned companies are queuing up for support. SAA was denied a further R10 billion bailout last week and has now started the process of firing its 4 700-strong workforce.

In the event the carrier defaults on loans or is liquidated, government may need to repay at least R16.4 billion of debt, according to the most recent budget statement in February.

Moody’s Investors Service cut the Land Bank’s debt rating to junk earlier this year, partly over concerns government may not be able to support the business in case of need.

The bank, which accounts for 28% of the country’s agricultural debt, slumped to a loss of R185 million in the six months through September. – Bloomberg

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