SA to bailout Land Bank after debt default

South Africa’s National Treasury allocated R7 billion ($481 million) to recapitalise the country’s distressed state-owned agricultural lender after it defaulted on its debt last year.

The Land and Agricultural Development Bank of South Africa will receive R5 billion in 2021-22, and R1 billion in each of the two subsequent fiscal years, the National Treasury said in the Budget Review on Wednesday. This will be funded by reallocating money from other departments and programs that will be identified in the October medium-term budget policy statement.

The Land Bank has been battling to repay its debt since a drought caused many of its customers to default on their loans. Its allocation is the only major bailout to a state-owned company in this year’s budget.

The minister of finance “will impose appropriate conditions on the equity support to put the Land Bank on a stable and sustainable development path,” the Treasury said.

The Land Bank had proposed that the Treasury partially guarantee new notes it would issue as part of a restructuring, but the finance ministry rejected that option last month.

The 109-year-old bank, which owns almost 30% of loans to South African farmers, received R3 billion from the Treasury last year, which allowed it to resume interest payments and cover arrears on its debt.