The government will be allocating R3bn to recapitalise the Land Bank, the troubled state-owned specialist lender to commercial and emerging farmers, finance minister Tito Mboweni announced in his supplementary budget speech on Wednesday.
The Land Bank, which skipped payments on some of its debt in April, triggering a cross default on bonds worth R50bn, has been trying to get money after lenders refused to saddle it with more debt and roll over maturing loans. The government has guaranteed R5.7bn of Land Bank debt. The bank, which, until recently, was held up as an example of a financially sustainable SOE, has reached an arrangement with creditors whereby no interest or capital payments are currently being made.
In January, Moody’s Investors Service downgraded the Land Bank’s credit rating, citing its deteriorating financial position, a constrained agricultural sector and fiscal constraints that may reduce financial support.