Land Bank creditors offer loan default

Creditors of South Africa’s largest lender to farmers are offering to come to the table and help the Land and Agricultural Development Bank recover from a loan default.

The Land Bank, which provides about 30% of loans in the agricultural industry, failed to make repayments on a credit facility, triggering a cross-default event on a R50 billion ($2.6-billion) bond program, the Pretoria-based lender said in a statement. It anticipates skipping payments falling due on Friday as well.

The state-owned Industrial Development Corp. of South Africa, which provides funding to agro-processing as well as other manufacturing industries, will continue to work with the Land Bank and “other financial-services providers,” the institution said in an email on Thursday. “IDC has a long-standing relationship with Land Bank as a development finance institution and we operate along the same value chain.”

This comes after Futuregrowth Asset Management Ltd., which manages about R194 billion, including Land Bank debt, said it was willing to work with the lender to resolve its liquidity position. Sorting out the the lender’s problems requires “coordinated, speedy and constructive engagement among all stakeholders,” it said Thursday.

The nation’s largest farmers’ group has appealed to President Cyril Ramaphosa’s government to step in and bailout the lender to avoid a surge in borrowing costs and a threat to food security. While the National Treasury said it is considering support for the Land Bank, this would have to be met with structural changes to the company’s balance sheet.

The government’s finances have been left in tatters by years of mismanagement and corruption that have crippled state companies. Finance Minister Tito Mboweni is still to announce how a R500 billion support package aimed at reigniting growth and supporting those worst affected by the coronavirus lockdown will be carved up. The measures include R200 billion worth of guarantees for banks to encourage them to lend.

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