The National Treasury has agreed to make a R1,5-billion loan guarantee and a cash injection of R700-million for the Land Bank to make the state agricultural financier more effective, an official said on Friday.
”Given the Land Bank’s strategic developmental role, we felt that we should do so,” Phakamani Hadebe, deputy director general for assets and liabilities at the Treasury, said in a telephone interview.
”The National Treasury has been working on the turnaround strategy of the Land Bank. It was a business strategy putting emphasis on the developmental side of the Land Bank,” he added.
The Land Bank provides financial services to the commercial farming sector and to agricultural-based businesses. Its annual results for the year ended March 2006 posted on its website show that it had a net loss of R125,4-million after a R207,6-million loss in 2005.
A separate statement issued jointly by the Treasury and the Agriculture Ministry said the move is in line with ”the government’s initiatives to strengthen the bank’s role as the main driver in ensuring the country’s food security and promoting sustainable development in the agricultural sector”.
In March, rating agency Fitch affirmed the Land Bank’s long-term ”AA-(AA minus)(zaf)” with stable outlook and short-term ”F1+(zaf)” ratings. But it said this was based solely on the high perceived level of support that the bank would receive from the South African government.
The agency said the Land Bank’s core operations continued to be loss-making during 2006 despite some one-off gains relating to the realisation of security and sale of properties in possession. — Reuters