Note to editors: Please find attached soundbite by Noko Masipa MP.
With the appointment of the new CEO at the Land and Agricultural Development Bank of South Africa (Land Bank), almost a full year after the departure of the previous CEO, it is crucial that Land Bank presents its strategy for the short, medium and long term.
As such, the DA is calling for the Land Bank to appear before the portfolio committee to lay out how it will survive the financial challenges ahead caused by, amongst others, grey listing and corruption.
The bank must be supported and steered in the right direction, but to do that it first needs to open up to the market and investors about its strategy to restore market confidence. The bank invests large capital on farms, therefore, cannot rely on bailouts from the state to operate its business optimally.
The state has learnt nothing from past banks’ challenges, the Land Bank CEOs contracts are short in nature and are very disruptive towards business continuity. As a result, the bank has struggled to secure long-term finance instruments from investors. And unfortunately, the new CEO comes at a time when the investors have lost confidence in the business model of the Land Bank.
The new CEO needs to make the shareholders and the board aware that:
1. Land Bank’s business model needs to change to improve capital raising.
2. Expropriation of land without compensation is going to place the final nail in the bank’s coffin,
3. To survive, the Land Bank needs private investments.
4. The bank needs commercial farmers in its book to cross-subsidize the bank’s efforts to grow the emerging Black farmers’ loan book.
5. State bailouts and grants failed to save Post Bank and other SOEs; a sound rural farmers’ banking model must be devised to ensure the long-term sustainability of the bank.
6. Good governance is key to success in finance.
Essentially, the problems at Land Bank in recent times were a result of the loan assets portfolio being entirely funded through short debt raised from the capital markets with no reserves.
While it wasn’t the main reason for the disclaimer audit finding, The AG report of Financial Year 2019/20 highlighted the bank’s poor succession planning.
The Democratic Alliance is therefore going to request that the Land Bank appear before the Portfolio Committee on Agriculture, Land Reform and Rural Development.