Land Bank must refocus - Manuel
February 16, 2009 Edition 1
Donwald Pressly
Reforms that focused the attention of Land Bank management on strengthening its balance sheet should allow the troubled institution "to better deal" with its core mandate - helping emerging farmers - finance minister Trevor Manuel told MPs last week.
Addressing the finance committees of parliament the day after delivering his budget in the national assembly, Manuel warned that even emerging farmers should not take the state-owned bank for granted.
Those who used capital borrowed from the Land Bank to buy luxury cars instead of inputs for the farm would be playing with fire, he said.
It was necessary that the bank should focus on lending to promote agricultural activity, said Manuel, who replaced agriculture and land affairs minister Lulu Xingwana as minister with oversight over the bank last year.
The treasury's estimates of national expenditure say that the bank is refocusing its strategy on development as core to its business.
It is candid about the weaknesses of the Land Bank, reporting that a minority of loans went recently to development projects.
About R2 billion was currently invested in financing "development", including emerging farmers and related agricultural businesses.
The estimates say that the biggest concern is the declining loan book, which has dropped from nearly R15 billion in 2005/06 to R12.9 billion in 2008/09. It is projected to increase to R14.2 billion this year and R15.4 billion in 2011/12.
The estimates note that the bank will put initiatives in place to improve its liquidity position. It will lengthen the maturity profile of investments, minimise short-term refinancing risks, as well as increase rollovers and the issuing of new funding.
The treasury has reported that the bank's revenue is on a declining trend.
Treasury director-general Lesetja Kganyago reports in the estimates that this is largely because of decreases in interest income as some clients fail to service their debts.
The estimates note that there will be a significant increase in expenses in 2008/09, including professional fees for the "clean-up" project, anticipated claims against the bank and employee-related expenses.
The bank found itself in a number of scandals in the last few years over loans provided for non-agricultural purposes.
In terms of financial information provided in the estimates, the bank recorded a deficit of R10 million in 2006/07 but this changed to a surplus of R170 million in 2007/08. The Land Bank now expects a surplus of R252 million in 2008/09.
