The National Treasury on Wednesday threw the embattled Land Bank a R3 billion lifeline.
“Government will also be allocating R3 billion to recapitalise the Land Bank. This Bank holds 29 per cent of South Africa’s agricultural debt. The National Treasury is supporting the Land Bank to find a solution to its default and craft a long-term restructuring plan. Details on this recapitalisation are provided in the Supplementary Budget Review,” Finance Minister Tito Mboweni said.
The supplementary budget review showed that the Land Bank sought an emergency liquidity bridge facility of R3 billion while the restructuring plans are finalised. National Treasury in the document said the restructuring plan will inform possible further funding requirements to ensure the bank’s sustainability.
In January, rating agency Moody’s downgraded the Land Bank’s credit rating, citing its deteriorating financial position, a constrained agricultural sector and fiscal constraints that may reduce financial support.
The downgrade led to a significant liquidity shortfall as numerous investors did not refinance debt and despite government guarantees of R5.7 billion, the Land Bank could not raise adequate funding and defaulted on its debt obligations in April.