The Land Bank has decided to approach the National Treasury and ask it to help with conducting a forensic investigation of third-party agents who were disbursing and managing more than R10 billion debt owed to it in bad loans.
This comes after the Land Bank aggressively went after clients who owe it billions of rand in outstanding loans after it resumed new lending activities to commercial farmers after a two-year hiatus.
Non-performing loans are part of the reasons why the cash-strapped bank entered a serious liquidity crisis when it failed to make interest payments due on its R50bn borrowings in April 2020, triggering a cross default on substantially all of its borrowings.
Land Bank chairperson Thabi Nkosi yesterday told Parliament’s select committee on finance that there were a number of transactions managed by their previous Service Level Agreement strategic partners (SLAs) that had given the board cause for concern.
The Land Bank has since insourced at least 98% its loan portfolio from SLAs, but a significant portion of this has a significant level of 60% of non-performing loans, down from 66% in March 2022.
The non-performing loan book has decreased from R12.3bn in March 2022 to R10.3bn in February 2023, which is attributable to the continued implementation and execution of non-performing loans remediation strategy.
Nkosi said the board had prioritised resolving outstanding instances of confirmed or potential misconduct against the SLAs that had led to the bank’s current financial position.
She said the bank had established a board-level accountability and consequence-management task team, which was given the responsibility of assessing the status of investigation, gathering data, and prioritising matters for recommendation on the way forward to the board and to the National Treasury.
“One of the biggest concerns that this task team identified was the deterioration to the Land Bank’s loan book,” Nkosi said.
“This deterioration of the loan book, which is evident in the high ratio of non-performing loans, has significantly compromised our ability to timeously conclude our debt restructuring. We have also seen significant value destruction in the entity given this performance of the loan book.
“So , just to deal with these issues we have requested the assistance of the National Treasury in conducting a forensic investigation focusing on a number of transactions and loans that were granted and managed by our previous SLA partners on our behalf.
“We are also currently in a process of a number of investigations, both internally and externally, to deal with a number of allegations that have been raised in the market regarding our loans collection process and other areas of concern.
“And this is in an effort to ensure that we not only clean house from an audit perspective but to ensure that these instances of potential misconduct are fully dealt with and we can really say we are running a clean operation.”
Since the occurrence of the event of default in April 2020, the Land Bank has caught up and restored all interest due on funding, with the cumulative debt capital reduction of 45%, or R18.1bn as at March 23, of the original amount still outstanding.
Newly-appointed Land bank CEO Themba Rikhotso said the bank had made a “significant amount of progress” regarding negotiations with lenders on the debt-restructuring process.
Rikhotso said the bank remained solvent and liquidity remained healthy.
“The next step with regard to the Liability Solution will be to finalise the Term Sheet negotiations. We have already started discussions with the National Treasury,” Rikhotso said.
“We believe that very soon we should have something that our lenders should accept and we will get to sign this Liability Solution.”
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