R7bn set aside to bail out 'distressed' state-owned Land Bank
Despite Covid-19 pandemic, agricultural sector performed well
Finance minister Tito Mboweni has set aside R7bn to bail out the state-owned Land Bank, which “is in financial distress”.
Tabling his 2021 budget in parliament on Wednesday, Mboweni said the bank would be allocated R5bn in 2021/2022 and another R1bn each for 2023 and 2024.
Mboweni told MPs that the money would be used to help the bank service its debts after it defaulted on its loans last year.
He would soon be imposing “appropriate conditions on the equity support to put the Land Bank on a stable and sustainable development path”.
The office of the auditor-general, in the financial statements of 2019/2020, last year identified weak internal controls at the bank. “The Land Bank has provided a remedial plan to address these adverse findings,” Mboweni told MPs.
By the end of March 2020, the Land Bank's total assets amounted to R46.2bn, while liabilities stood at R43.7bn.
During that period it suffered losses of R2.1bn.
“Sustained droughts, combined with a higher frequency of livestock and crop disease, contributed to a cost-to-income ratio of 114% and non-performing loss of 18.1%,” said Mboweni.
The budget documents tabled by Mboweni stated that the Land Bank “plays a significant role in social and economic development by advancing loans in the agricultural sector”.
“Historically it has supported commercial agriculture. By 2019/2020, 18.5% of the bank's asset base was focused on transformation and development. Funding of emerging farmers constituted 5.9% of the loan book.”
The government has prioritised the agricultural sector to stimulate economic growth and job creation as the industry emerged as one that managed to grow during Covid-19.
Meanwhile, Eskom has been allocated R31.7bn for 2021/2022 “subject to compliance with the conditions” of the Special Appropriation Act passed by parliament in 2019.
Eskom was also due to receive further allocations worth R42bn in 2023 and 2024.
Mboweni said the unbundling of Eskom into three separate entities was ongoing, with the transmission division due to be legally separated by December 2021.
The separation of distribution and generation divisions was expected to be concluded by December 2022.