South Africa struggles to save troubled Land Bank

The troubles of the Land Bank - South Africa's ailing state-owned development finance institution - can be directly attributed to the apartheid era, according to Lulama Xingwana, the agriculture and land affairs minister.

Speaking during the Parliamentary portfolio committee hearing into a new turn around strategy for the bank, she said to former agriculture minister, Kraai van Niekerk: "I want to tell Mr. van Niekerk that we are in this mess because of the apartheid government. The apartheid government never cared to develop black farmers."

She added: "If he, as minister of agriculture in the apartheid government, had bothered to assist black farmers in this country, we would not be in this position." She said the Land Bank served poor whites. Long loans were given to farmers who left them to their sons and their grandsons so that the land could remain in white hands. "The apartheid government gave money to white farmers. They bailed out white farmers."

Van Niekerk asked some pointed questions of the Land Bank management team giving evidence at the hearing. He wanted to know whether the bank had the ability to execute the turn-around strategy. He pointed out that the Land Bank earned its money from lending money to commercial farmers, and using the interest for its development work. Now its loans have shrunk from Rand 9 billion ($1.3 billion) to R5bn, and the commercial banks have taken over the best clients, leaving the Land Bank with the higher risk loans.

The bank used to have 300 hundred people on the ground to look after farmers it was involved with, but now it has only 30. "How are you going to secure your loans on the ground?" He asked. "You have assets to protect."

Lungile Mazwai, the bank chairperson, explained to the committee that the bank's new strategy involved using a R700m ($100 million) grant from the government to support emerging and subsistence farmers. "The shareholder (the government) wanted to accelerate our development mandate," he said "The new model is underpinned by great emphasis on shareholder support."

Philemon Mohlahlane the acting chief executive - who has been in the position since Alan Mukoki gave up the struggle after failing to turn the institution around - told MPs that its modus operandi has always been to rely on other people for support in the field. "We engage the services of cooperatives, government and NGOs," he said.

Mukoki's decision to quit came soon after the resignation by retired Absa CEO Nallie Bosman, who had been roped in to fix the problems at the bank when Mukoki and three senior managers temporarily stepped aside following allegations of mismanagement at the end of March.

Xolile Ncame, the chief financial officer, who was one of the three executives who stepped aside with Mukoki, told members that the apparent drain of the bank's capital reserves, from R3bn to R1bn, was due to revaluing old loans, in terms of the new international accounting standards.

Fin24