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Land Bank fingered as the weak link in financial stability of sector

The liquidity and management challenges at the Land Bank and their negative implication for the agricultural sector at large could potentially have a greater impact on the sector than that of the Covid-19 pandemic, if not resolved. Photo: Reuters.

The liquidity and management challenges at the Land Bank and their negative implication for the agricultural sector at large could potentially have a greater impact on the sector than that of the Covid-19 pandemic, if not resolved. Photo: Reuters.

Published Jan 25, 2021

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DURBAN - The liquidity and management challenges at the Land Bank and their negative implication for the agricultural sector at large could potentially have a greater impact on the sector than that of the Covid-19 pandemic, if not resolved, national head of Nedbank Agriculture John Hudson said in an interview last week.

In December, the Land and Agricultural Development Bank of SA, which was bailed out by the government in 2020 after it defaulted on debt, reported a R172 million loss for the six months to September 30.

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Hudson cautioned that farmers, agribusinesses and intermediaries who required financing from the Land Bank would continue to encounter difficulties in accessing such funding due to the bank’s current longstanding liquidity challenges.

“To a degree the commercial banks will step in, but a fully functioning Land Bank is critical given its developmental mandate,” said Hudson.

The state-owned bank has asked the National Treasury for R7 billion to go towards reducing its debt as part of the proposed liability solution.

In August, it resumed interest payments after the state gave it R3bn. In October, the bank announced a revision of its strategy aimed at improving its services and financial performance that included building on its technological strengths, improving cost and profitability management, expanding its developmental mandate and taking steps to diversify revenue streams.

Hudson said there was significant private investment going into packing, processing, cold storage and logistics infrastructure.

“But this needs to be matched by government. Improvement to road, rail and port infrastructure is crucial to cater for the anticipated increase in export volumes. Along with the investment in infrastructure, improved market access is a critical success factor going forward for all export crops,” said Hudson.

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