The situation the Land Bank finds itself in is a result of National Treasury neglecting its oversight role of this strategic institution. Many of the bank’s continuous problems stem from the lack of political will to support it in fulfilling its mandate. This was demonstrated when National Treasury allowed the bank’s former CEO, TP Nchocho, to leave without having an immediate replacement or succession plan in place.
The bank has had three acting chief executives since the departure of Mr Nchocho. No institution can attain normalcy under three different acting CEOs in one year. Twelve months later, the bank still did not have a CEO. This resulted in a number of downgrades by Moody’s credit rating agency, which caused investor panic, resulting in many investors withdrawing their funding from the bank.
This leadership vacuum was created by the ANC’s lack of political will to see the Land Bank fulfil its mandate of supporting qualifying farmers, rather than a handful of those with political connections. This is the final nail in the coffin for this institution and its proud legacy of empowering new farmers.
According to the South African Reserve Bank regulatory consistency assessment programme, the total capital adequacy ratio of the South African banking sector is well above the regulatory requirement of 10%, averaging below 15%. This means that all banks are compliant with Basel III’s capital adequacy requirement and that same capital adequacy is applicable to the Land Bank. The lack of leadership and political will has ensured that the bank isn’t able to source funding from the open market.
Emerging and smallholder farmers can be supported through programmes such as blended finance.
The DA has always been in support of blended finance because it mitigates the bank’s risks. The ANC government allowed President Cyril Ramaphosa to allocate a bold R3.9-billion medium-term budget for blended finance towards emerging farmers, while knowing that the Land Bank is about to collapse because they failed to provide the support that it needed. In turn, the government, as the sole shareholder, is expecting the bank to fulfil its mandate of supporting agricultural reforms, growing the agriculture economy and food security.
For the Land Bank to find investors and continue with its mandate, the bank needs to restore faith in the local and international market. There are two policy uncertainties that must be addressed with immediate effect:
- Expropriation of land without compensation must be scrapped. It is going to kill agricultural jobs and the economy of South Africa. The Constitution makes sufficient provision to address land reform in South Africa.
- The Land Bank’s mandate must be clear as to whether it is supportive of commercial as well as emerging farmers. The uncertainties created by agrifinance programmes, designed to support the bank’s land reform agenda, that are never implemented is causing confusion in the market about the government’s seriousness about agriculture reforms. The Land Bank must be clear about its support for commercial farmers.
Investors want clarity, bold statements and a robust implementation plan, but the ANC government has continued to make statements with no implementation intent. This has led to the failure of the bank.
National Treasury and the Department of Agriculture, Land Reform and Rural Development (DALRRD) must ensure that farm jobs are protected, farmers’ contributions to the economy are prioritised and the country’s food security is preserved.
While the concerns raised in the Auditor-General’s disclaimer audit opinion report are alarming, the problem lies in leadership at a senior level of both National Treasury and the Land Bank. National Treasury failed to play its part in conducting proper oversight, which led to the departure of many senior staff. Both National Treasury and the Land Bank must address the matters raised urgently, with an immediate focus on the bank’s ineffective human resources management. DM