Treasury mulls recapitalising Land Bank after default on R50bn debt

CAPE TOWN – The National Treasury is considering recapitalising the Land and Agricultural Bank, and providing it with further guarantees, after the bank warned it might not be able to make repayments on its R50billion debt, due to liquidity constraints.

But the Treasury said yesterday any further assistance “would have to be accompanied by balance sheet optimisation of the Land Bank to correct the structural liquidity risk embedded in the balance sheet”.

In January, the Land Bank sought financial support from the Treasury in the form of equity recapitalisation as well as government guarantees. This was as a result of the downgrade of the global credit rating, and consequence liquidity challenges.

In February the Treasury approved R5.7bn in government guarantees for the Land Bank.

This month the Land Bank, supported by the Treasury, met with lenders where an appeal was made to lenders not to exercise the rights they may have to call on debt that is at risk of default, but to continue supporting and lending to assist in managing pressure on the fiscus at a time of limited fiscal space, and constrained market liquidity, Treasury said.