The Land Bank has told Parliament that credit rating agency Moody’s decision to downgrade it to junk status at the beginning of the year, coupled with the COVID-19 pandemic, impacted negatively on the bank’s balance sheet.
The bank’s senior executive has virtually briefed Parliament’s Select Committee on Finance on funding related matters. The Land Bank provides finance for emerging farmers in pursuit of capable equitable ownership of land, agrarian reform and land distribution.
Chief Executive Officer Ayanda Kanana says the downgrading of the bank led to insufficient cash flow.
“In January, that downgrade took place. When that downgrade took place, a lot of financial struggles were eminent. You found that some of the investors started to review their investment policies and cash started to dry up in the Land Bank. When I joined in March, there was a huge scramble to make sure that we are funded even though we had a government guarantee, it became difficult to get money in the bank, the COVID-19 hit at the same time.”
Reacting to the news of the downgrade in January, Acting Chief Executive Officer Sydney Soundry said that the credit strength of the organisation was as a result of external factors including climate change.
“The climate change issues affected the economy in the agricultural sector in the form of persistent drought. So, that in itself provides for organisations such as ourselves, who operate purely in the agricultural sector in as far as our financing is concerned, challenges with customers that are unable to repay their loans due to effects of drought.”
Soundry said that this led to non-performing loans: