Struggling state-owned agricultural lender Land Bank has asked the government for an additional R10 billion bailout for the next few years as it refocuses on growing its developmental book and becomes less dependent on state funding in future.
The Land Bank said it had already received a R3bn cash injection from the government, and was in talks with its lenders after it started defaulting on its debt in April.
The bank proposed R7bn from the government in 2021/22, and R1bn a year for the following three financial years, the Land Bank said in a presentation released on Friday on its website.
The bank also planned an asset reduction programme.
The Land Bank is one of a number of state-owned companies seeking financial assistance. The National Treasury said last month that the Post Office, the SABC and Airports Company South Africa were seeking R10bn in bailouts.
Its new strategy entailed providing R1bn of annual equity funding for the bank’s developmental mandate, and lower debt to less than 400 percent of net debt to equity.
Other aspects of the new strategy involved improved access, marketing and visibility, increased services across the agriculture value chain, the provision of transactional banking products and services and the leveraging of state land to enhance the collateral position.
The turnaround times for loan applications, approvals and delivery of services would also be improved.
The plan to improve the operations of the bank would depend on support from private sector partnerships, the National Treasury, and national and provincial agriculture departments.
The Land Bank, which holds 29 percent of the debt in the agriculture sector, said although the immediate support was sufficient to ensure immediate default risk, there remained execution risk in the delivery of its corporate plan, and if it did not received a cumulative R7bn equity injection, it might have to reallocate capital from development to its commercial operations.
The percentage of its development and transformation loan portfolio had grown to 18.6 percent of its total portfolio in financial year 2020, from 6 percent in 2016.
The bank said a reduction of its role in the economy would compromise the agriculture sector and create a threat to food security.