The entire land reform budget for the department of Rural Development and Land Reform for making new, black-owned farms productive is R1.3 billion. In the meanwhile – in the middle of a debate about seizing farms without compensation and the realisation that new-job targets can’t possibly be met – the Land Bank has been sitting on more than half that amount, R745 million, in development money. It didn’t spend a cent of it in the last financial year, to the end of March, and it hasn’t been spending it since. Whether or not it will manage to spend any of it before next March will remain to be seen.

Well, it hasn’t spent nothing. The AgriBEE fund, which has R120 million in cash in the bank, spent a grand total of R132,000 in the 12 months to March. That amounts to a fraction of the interest it earned over the same period, and the payments were simply the settling of old outstanding invoices.

The second fund the Land Bank manages on behalf of the agriculture department, the Micro-Agricultural Finance Institution (Mafisa), disbursed R142 million of its R625 million. That was pretty much by accident, though. “The disbursements constitutes (sic) transfers to other institutions for on-lending on the instruction of the [department of agriculture]”.

Both funds were set up with great fanfare, AgriBEE to help community empowerment groups in rural areas, Mafisa to give black farmers tiny loans. Both are still being considered part of the broader land-reform strategy; early this month, in a prepared address for Women’s Day, President Jacob Zuma cited Mafisa as an example of opportunities women should take advantage of.

But any woman who tries to apply for a Mafisa loan, or any community that depended on AgriBEE to create opportunities, will continue to do so in vain. Thanks to corruption (or, at the moment, the suspicion of corruption, seeing that the matters are still before the courts) both are in hibernation.

“We’re not lending anything because the police are still investigating,” says Land Bank CEO Phakamani Hadebe. “The problem was not about the funds, the funds have a role to play. Until such time that I’m quite comfortable that systems have been put in place to prevent abuse, control systems, risk systems, they will not disburse.”

Both funds were the victims of fraud by people at different levels of the Land Bank. In the case of Mafisa, an employee at a satellite office allegedly roped farmers into a scheme in which the ID documents of unwitting workers were used to apply for loans, the money stolen and the loans written off. AgriBEE was the subject of a Sunday Times investigation. The paper reported that a group, including then Land Bank chief Phil Mohlahane and former Gauteng housing MEC Dan Mofokeng, diverted money from the fund for some high-class nest-feathering.

The police dug into AgriBEE while the Hawks handled Mafisa. Both funds were frozen as investigations were opened, just as in two other cases where the bank may have been defrauded, except that didn’t affect hundred of small and new farmers.

Despite its less than stellar track record, Hadebe is convinced the Land Bank can still be an effective conduit for government development money, and the theory looks solid. With a ring-fenced fund, fed by the government and foreign donors, the bank can protect its credit rating while taking on riskier business, sharing infrastructure with its traditional business to save on overheads and perhaps graduating some of those recipients to pure commercial lending. If it weren’t for all the hands in the cookie jar, that could have been the case already.

Thanks to some timely intervention from the National Treasury, not to mention higher food prices supporting the assets with which much of the bank’s loans are secured, the Land Bank is starting to resemble something with a future. At the end of its financial year it held just over R2 billion in cash and 95% of its R14.3 billion loan book was classified as performing. It still can’t say just what assets its retail customers put up as collateral (while being able to count the individual sheep and tons of maize agri-businesses pledged to back mostly one-year loans), but promises to have that sorted out shortly. Those retail customers were very profitable though, despite a decrease in interest rates to historic lows.

All of which makes for a pretty rare financial institution right now, one with clear and limited risk, tangible security and no exposure to opaque derivatives. This in an economic sector which rand for rand still can’t be beat for the number of jobs created by investment, and where foreign demand is unwaveringly high. It would be the very picture of promise of stability, if it weren’t for those two ever capricious factors: weather, and government. DM

Photo: Reuters.