Land and Agricultural Bank of South Africa 2018/19 Annual Report & 2019/20 corporate plan

NCOP Finance

10 March 2020
Chairperson: Mr Y Carrim (ANC: KwaZulu Natal)
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Meeting Summary

The Land Bank briefed the Committee on its 2018/2019 Annual Report and 2019/2020 corporate plan, stressing its shared role as a commercial bank and Development Finance Institution (DFI). It gave details of its funding sources, and reported that commercial funding grew by 5.3% from R40.07 billion in 2018, to R42.17 billion in 2019. Owing mainly to the late start to the grain planting season and diseases in various livestock sectors, as well as the drought experienced in several areas across the country, the agricultural sector had declined. There had been a 32% decline in skilled agricultural jobs between the first quarter of 2017 and the first quarter of 2019.

At the national level, South Africa could be regarded as food secure, but at the household level food security remained a challenge. In 2017, 6.8 million people experienced hunger and 20% of households did not have adequate access to food. The main challenges were related to continuous drought conditions, debt, land reform and the downgrade by Moody’s Investor Service. The ongoing drought and changing weather patterns had affected the Bank’s ability to grow its loan book. It reported an interim loss of R184.7 million in the six months to the end of September, which it attributed this to the drought, late harvests and loan repayments.

There was a call for the Land Bank to provide its stance on land expropriation without compensation, and loan accountability in that regard. However, the Chairperson ruled this line of questioning out of order, stating that the Land Bank should not be asked to address policy-related issues, as these would be discussed in Parliament. 

Members questions covered the money budgeted for loans for emerging farmers; the impact of loans on expropriated farms, the issue of land as security, loan accountability and the impact that downgrading would have on the Bank, its funders and its business interactions with customers. They wanted the Bank to detail its role as a commercial bank and/or development institution. They raised the Coniglio rabbit farm liquidation issue, and the Bank’s role in assisting the large number of small-scale farmers who were affected. It was asserted that although rural development was part of the Bank’s strategic goals, the Eastern Cape remained without vital developmental infrastructure, and it was suggested that the Bank consider becoming an activist people’s bank to service more black commercial farmers. The Bank refuted rumours that it was closing down, or shutting some of its provincial servicing points.  

Meeting report

Land Bank 2018/2019 Annual Report and 2019/2020 corporate plan

The Land Bank briefed the Committee on its 2018/19 Annual Report and 2019/20 corporate plan. It emphasised its shared role as a commercial bank and Development Finance Institution (DFI). It described its funding sources, saying that it obtained or raised funding for two distinct business purposes – commercial and development operations. Commercial funding grew by 5.3%, from R40.07 billion in 2018, to R42.17 billion in 2019. Although the size of development funding was significantly smaller than commercial funding, it had grown faster between 2018 and 2019. It had increased by 48%, from R1.9 billon in 2018 to R1.77 billion in 2019.

Owing mainly to the late start to the grain planting season and diseases in various livestock sectors, as well as the drought experienced in several areas across the country, the agricultural sector had declined. In the first quarter of 2019, it had contracted by 13.2%. Employment in the agricultural sector between 2015 and 2019 had remained relatively low. There had been a 32% decline in skilled agricultural jobs between the first quarter of 2017 and the first quarter of 2019.

At the national level, South Africa could be regarded as food secure, but at the household level food security remained a challenge. In 2017, 6.8 million people experienced hunger, and 20% of households did not have adequate access to food. The main challenges that were facing the agricultural sector and the Land Bank were related to continuous drought conditions, debt, land reform and a downgrade by Moody’s Investor Service.

With respect to the performance indicators that related to development outcome and transformation, corporate governance and climate risk and environmental sustainability, the Bank had achieved good results. However, with respect to financial sustainability, only 37.5% of the targets had been met. Factors contributing to this poor performance were related to the ongoing drought and changing weather patterns that had affected the Bank’s ability to grow its loan book. More attention needed to be placed on the issue of financial sustainability, as it had a direct bearing on how the Bank carried out its mandate.

Although the Land Bank had made a strong financial recovery since its interim loss, it was expecting a full-year profit, or at least to break even. The 2019/20 profits would be much lower than in previous years though. It reported an interim loss of R184.7 million for the six months to the end of September. The deterioration in its financial position was due to muted loan book growth and a higher impairment charge, which rose from the previous corresponding period. Non-performing loans had increased to 9.9%, from 5.8%. The Bank attributed this to the drought, late harvests and loan repayments.


Mr S du Toit (FF+, North West) wanted to know about the amount of money budgeted for loans for upcoming farmers. The Land Bank had provided broad figures in its presentation, but he would like more clarity on that. He asked what type of security would be given by emerging farmers, since they might not have collateral and there had been no clarity provided on the title deed issue for these farmers. He asked how high-risk loans would impact on the overall financial stability of the bank, and commented that two of the speakers had mentioned that the drought was a definite issue. Other factors had also been mentioned.

At the beginning of the presentation, the Land Bank had indicated that Moody’s had downgraded it because of the drought’s impact and the Section 25 that was in the process of revision. When farmers came to the Land Bank and applied for loans, they did not necessarily receive the big percentage of loans as in previous years because of the droughts and the fall in farm prices. The amount of security in the value of the land was less than it used to be, so the amount of money that could be provided by Land Bank to these farmers to cultivate crops would also be significantly decreased.

If expropriation without compensation proceeded, the Land Bank would have a huge problem on its hands because it would not be able to obtain the funds it provided to farmers. There would be no security and it would be sitting with loans that it had obtained from elsewhere. He asked the Land Bank for its opinion on that.

Mr D Ryder (DA, Gauteng) indicated that it was the first time of meeting with the Land Bank, so putting it into context would have been useful. He said it had provided a few snippets of information without developing it further. He referred to one of the key issues mentioned on page 9 of the presentation. The Land Bank, by definition, was a DFI, but it seemed to be operating as a commercial bank at the same time. He asked whether it was one or the other, and what its model would be going forward. He wanted to know if some sort of a hybrid would be adopted that would cross-subsidise development from good commercial banking.

He made reference to paragraph 3 of the Act as having excluded a couple of words – points 3g, 3h and 3i on slide 7 -- where it explained that programmes were designed to stimulate the growth of the agricultural sector, to promote and develop environmental sustainability, and to contribute to agricultural aspects. He wanted to know if the Bank had any running programmes and if it proactively went out to fulfill its mandate, or if it adopted a more reactive attitude. He also noted, on slide 9, that agriculture was currently one of the fastest contracting sectors of the economy. A number of factors played into that, and it had also been mentioned in the presentation that there was uncertainty around expropriation without compensation.

Considering that part of Land Bank’s mandate involved food security, he wanted to know South Africa’s current position regarding food security, and how the Land Bank would project it going forward. What would need to happen in order for the country to ensure the sustainability of its food supply?

Lastly, he commented that the Land Bank was in a position to make a massive difference in agriculture, particularly where things had fallen to pieces and there was a need for entrepreneurship. He mentioned Coniglio – a company closely involved with the rabbit farming industry and underpinning an estimated 500 small-scale rabbit farmers -- who had gone into liquidation last year. This had caused a massive hole in that particular part of the agricultural economy. He asked if the Land Bank had played any role in terms of assisting the smal-scale farmers that were affected by the Coniglio liquidation.

Mr S Aucamp (DA: Northern Cape) expressed interest in receiving more information and more interaction with the Land Bank in future. He observed that financial downgrades had had a huge impact on the Land Bank. In its figures and calculations, he wanted to know the Land Bank’s stance on what could happen should the government proceed with expropriation of land without compensation. He asked if it would have a further negative influence on the country’s financial gradings, and the extent this effect would have on the Land Bank. Secondly, he wanted to know what would happen to farmers owing loans to the Land Bank should that farm be repossessed without compensation. Would the Land Bank still hold that farmer accountable because of the surety signed on behalf of the farm, or the company that owned the farm? He wanted to gain clarity on that, because that was the crux of what many farmers wanted to know with regard to the loans, their houses etc. He said that although expropriation without compensation included all property, in this instance the focus would be on farms.

Mr Z Mkiva (ANC: Eastern Cape) expressed that it was a view that the bulk of the money that the Land Bank allocated in loans continued to go to one direction – towards white commercial farmers, and this would create a very bad picture insofar as transformation was concerned, as this was one of the Bank’s strategic objectives. He said that rural development was one of its strategic goals, and he wanted to check because where he came from in the Eastern Cape, there were more than three million cattle and more than six million sheep, but the Eastern Cape had continued to remain without infrastructure. For instance, there was not a single world-class structure that could assist the Eastern Cape to process meat and so forth. There were also no taxidermists in the former Ciskei and Transkei. Millions of hides and skins were also thrown away because there were no facilities to accommodate this.

He wanted to know if the Land Bank would not consider adopting a different approach to issues and become an activist people’s bank, because when the Bank was established during the apartheid era, the outlook of the bank had been activist insofar as servicing the white commercial farmers. He asked why it could not adopt the same kind of trajectory and begin to do the same for the majority of South Africans, because by doing this, it could really turn the corner in terms of transforming the landscape.

He commented that South Africa was a Republic of a special type, and that there were kingships. He suggested that the Land Bank interface with those kingships to ensure that it drew lessons from the ground in terms of how it could assist in its role. The role that it ought to play should not be restricted to that of giving loans, but should also motivate the people in one way or the other through its corporate social investment (CSI) programme to ensure that land that was lying fallow since the advent of democracy was turned around, because an active farming and agriculture community was required in those spaces. He expressed interest in creating an opportunity to interact with the Bank to ensure that beyond reading the policy as it was from its mandate, it would need to be creative as well.

He wanted to know if the Land Bank allocated grants, and to what extent it had made interventions during the drought period to communities that were non-commercial in terms of farming. He raised the issue of rural communities remaining in the old way of farming with livestock, and asked the Land Bank to intervene so that a balance could be established. It would be particularly useful, since livestock was also utilised for rituals, and a mixed-use kind of setup would be helpful in that regard. He also emphasised that it would be beneficial to possibly arrange a meeting between the Land Bank and the Congress of Traditional Leaders of South Africa (CONTRALESA), which was the only structure currently representing traditional leadership in the country. 

On a final note, he wanted to understand the structure of the board of Land Bank. He asked if it was a board that was constituted only by city people, because if it did not have representatives from rural communities, it would not have the capacity to advise the government properly. He also expressed excitement over the expected amendment of Section 25 of the Constitution. He wanted to check if the Land Bank had a strategy for that, and suggested that it move swiftly to understand its role in this regard.

Mr E Njandu (ANC: Western Cape) commented that there was a rumour that the Land Bank was disappearing, and he wanted to check whether that was a true reflection in instances where branches were being closed down. He asked how many branches there were presently in the country, and how these branches were dispersed across the rural and urban communities. He also wanted to know where communities could have walk-in access to the bank to get information.

He wanted to add to the perception regarding the Land Bank’s focus on developing white commercial farmers during the apartheid era. He expressed support for Mr Mkiva’s suggestion of a turnaround, and asked how this could be achieved at the Land Bank. Taking into consideration the rural development and job creation role of Department of Rural Development and Land Reform, he wanted to know if there was any connection between the Department’s mandate and that of the Land Bank’s, in ensuring that that aspect would be addressed properly.

The Chairperson wanted clarity on the Land Bank’s point regarding an unclear pathway to growth and scale. He expressed interest in what was essentially happening on the ground, as opposed to the slides of the presentation. Much clarity would still need to be provided on the issues in the Land Bank area, and in the rural areas in particular. He commented that there was no correlation between the quality of Land Bank’s presentation and what was happening on the ground.

On the point of Land Bank’s strategy going forward, the elements were evident, but he asked if there was anything else the bank would want to add that could be accounted for. He suggested that the Land Bank should return within the next six months, or maybe even sooner. He would certainly welcome Land Bank’s annual report, and wanted to know when it would be completed.


Mr Arthur Moloto, Chairperson of the Board: Land Bank, said that all the questions had been noted, and he would ask the team to deal with them. He would respond to the question on expropriation without compensation; Ms Dudu Hlatshwayo, Deputy Chairperson, would deal with the question about the structure of the board; and all other questions would be allocated to Mr Sydney Soundy, Executive Manager: Strategy and Communication.

Mr Moloto said he was interested in embarking on an engagement with the Chairperson, because the finance plan had not been spoken about in detail. He mentioned that there was work that had been done with the Jobs Fund, and it had allocated a significant amount of money to the Land Bank to proceed with developing black commercial farmers, as well as to ensure that there was transformation in the sector. Mr Soundy would also be tasked to brief the committee on the Land Bank’s relationship with the Department of Agriculture. A memorandum of understanding (MoU) had been signed between the Land Bank and various departments to ensure clarity on what needed to be done.

Expropriation without compensation

Mr Moloto responded to the issue of expropriation without compensation. He said that the position of the Bank had been very clear: that any land reform programme, in whatever shape or form it would take, would have the potential to unleash the agricultural potential in any country. This was a more general statement. If expropriation was done appropriately, it could spark huge potential in the country. However, the fact of the matter was that the Land Bank would need to be able to state the facts to the decision-makers, which would be about the risks of expropriation if it were not carried out correctly.

He emphasised that the rights of the Land Bank as a lender needed to be respected. If those rights were not respected, there would be other unintended consequences. A huge portion of the Bank’s funding was sourced from the capital markets, so if the rights were not respected in this regard, it would trigger many reactions from its funders. Because the funders were being exposed, this would motivate the need to call in the loans. If the Land Bank was unable to honour these loans, then there would be defaults. He explained if there were defaults in one part, then it would trigger other cost defaults, and the loan book would be the region of R47 billion to R49 billion. That would be the extent of Land Bank’s exposure to the capital market.

Mr Du Toit appreciated the answer given, but said that Mr Moloto had not answered the question. He wanted to know what would happen if expropriation without compensation took place, and how this would affect the loans due to the Land Bank. He asked where the Land Bank would get these funds and if the farmers would be held accountable for the payments of their loans, despite the fact that the land had been expropriated. He emphasised that the farmers would not be able to generate an income, and in effect would be unable to honour those payments.

Mr Moloto responded that the Land Bank would take the land as security for the money that had been advanced to the farmer. Once that security disappeared, it would then trigger all the other unintended consequences mentioned earlier. The farmer would remain indebted to the Land Bank and the Land Bank would remain indebted to the institutional investors. By understanding that, the complications would then be clearly identified. The Land Bank would have to identify its security and whether it was able to ensure that it was secure, and that it possessed the proceeds from that security. If there were no security identified, then other challenges would begin to ensue.

Mr Du Toit said he did not intend opening up a debate, but clarity was needed in this regard. From Mr Moloto’s response, it was understood that the Land Bank would keep the land as security. However, once the government expropriated the land without compensation, this would essentially mean that the government would assume the title deed of the land. By default, the government would then have to assume the responsibility for paying the loan to the Land Bank, because the government was assuming the custodianship of that security.

The Chairperson commented that it was very correct for Mr Du Toit to raise the issue, as this issue was in the public debate. However, to some extent it was unfair for him to ask a development bank to answer all aspects of the question, because it was essentially a matter that the government needed to address. It was a matter that the Minister of Finance and the Minister of Agriculture and Rural Development needed to address. It was also a question that Parliament needed to address currently, given the process of this vote. The Land Bank could not be expected to answer a full set of issues around this, and it was a matter that would be addressed in the months ahead.

Mr Du Toit responded that this was not a political question. He wanted to know about the loans and the funds that were needed to pay off these loans once the land was expropriated without compensation. Who would be held responsible for the payments of loans if and when the land was to be expropriated without compensation? He wanted to know the Land Bank’s position on this, and how it would particularly impact the business interaction between South Africans and the bank.

Mr Njandu commented that Mr Du Toit was delaying the process of the meeting. He argued that the technical questions needed the amendment of the bill dealing with expropriation without compensation. He added that the position of the Land Bank would be imperative to clarify things going forward regarding the expropriation of land issue, as well as to determine how interactions with the bank would be affected.

Mr Aucamp said that the questions that Mr Du Toit had raised were related to the initial question he had wanted to ask. It was understood that there was a lot of politics involved, but the question was a very simple one. The first question dealt with asking what impact the downgrades or possible downgrades would have on the future of the Land Bank. In other words, it was known that the Land Bank had already been downgraded, so what would be the possible effect of land expropriation without compensation on further downgrades? He wanted to know the relationship between the downgrades and land expropriation without compensation. His second question also dealt with the issue regarding the farmer and the loans payable to the Land Bank. He asked whether the person on the ground would be held responsible for repaying the loan on a farm that was no longer in the farmer’s possession as a result of expropriation.

Mr Moloto responded by commenting that it was a highly political situation being dealt with here, and it would put the Land Bank in a very difficult position because it was in the domain of Parliament to stipulate the expectations from the Expropriation Act. The Land Bank was just acting as the implementers of the law, and it would be up to the government to specify as to what the regulations regarding the expropriation of land policy would be.

The Chairperson asked why the Land Bank had been asked questions that the government and Parliament had not addressed. As legitimate as these questions were, it was not up to any state entity to address these kinds of questions. It was wrong to expect the Land Bank to address things that were beyond their terrain. Parliament had failed to process this legislation fast enough. As Chairperson of this Committee, he ruled that the Land Bank would not address policies. The Committee was free to go to the Speaker’s Office to challenge the ruling if it believed that the Chairperson had ruled wrongly. No state entity, no matter how independent it was, had the power to make policies. The Chairperson said that this issue could be taken up with the necessary Parliamentary structures. He emphasised that the meeting had to move on to answering the next set of questions, since there was limited time.

Communal Farming

Ms Hlatshwayo first addressed the question on engaging with CONTRALESA and interfacing directly with kingships. It was understood that the Land Bank needed to become activists in the rural environment in ensuring that the issues of agriculture were embedded and implemented.

Regarding the composition of the board, she said the people sitting on the board were also expected to drive this activism. A National Treasury appointed the board of the Land Bank after making recommendations to the Cabinet. She emphasised that the Board made recommendations in terms of the skills that were required on the Board. Once the National Treasury selected the board members, it was ensured that the appointed staff were capable of delivering on the skills required. She explained that the board was made up of highly regarded professionals with a variety of skills in human resources, risk management and agriculture. Those appointed had to have extensive experience and track records in the aforementioned areas. The Land Bank had introduced a mechanism that if there was a specialised issue, it created an advisory board. The Board would also draw on certain skills from the market directly so that it could be assisted in addressing particular skills that were lacking within the organisation.

Unclear pathway to growth and scale

Mr Soundy said that part of the problem statement was an unclear pathway to growth and scale, and that this particular question should be read together with the one regarding what the Land Bank was and whether it regarded itself as a hybrid. He said a bank was a bank because of its funding, so the reason for pointing out this unclear pathway to growth and scale was to try and clarify whether the Land Bank was a commercial bank or whether it was a developmental bank, and if these two could coexist alongside each other. That was why it said it had an unclear path to growth in the form of economic and financial sustainability, and where the scale of development was concerned.

The funding structure of the organisation also needed to be addressed, particularly insofar as the capitalisation of the bank was concerned, so that it could ensure its capacity to carry out all programmes mentioned in the presentation. He explained that the bank was funded 100% from the capital markets and institutional investors with particular expectations. This had made the cost of doing business, including the cost of doing developments, very expensive. The cost of funding was also very high. In fact, because it did not take deposits as an organisation, this meant that it depended on increasing capital funding solely from lenders and investors. This motivated the bank to expect a particular return.

Mr Soundy said that within the organisation, it needed to make reference to development work so that the cost of running those programmes would be appropriately identified and the nature of the support and funding could then be directed there. This could ensure that the capability of the organization, in terms of its commercial operation, would continue to generate enough sustainability, while having the opportunity to grow the developmental impact simultaneously. Addressing the funding structure would ensure that the bank carried out its work more meaningfully.

Annual report submission

He said the annual report would be submitted in August, and suggested that the Committee engage with the report thereafter so that the team would also be able to address the issues more effectively.

Effect of the downgrades

Mr Soundy said that the Land Bank depended on funders to carry out its business. Once there was a downgrade, it meant that the funders would want to review the returns, as well as the foreseeable risks in their investment, and more generally, the cost of the funds that were procured from the markets. This had placed increased pressure on the organisation and because of this, the lending to Land Bank customers would have to happen at an increased cost. This would be the effect of a downgrading on the organisation. He said that with the extent to which it did commercial business, more could be done to increase transformation and the developmental state.


The Land Bank had nine provincial offices, so there was one in every province. It also had 16 satellite points of presence. If Committee Members required a list of where these offices were located, the Land Bank would provide it. He said the Land Bank was not a transactional institution, so it did not offer cheque accounts, credit cards, etc. In terms of presence, it needed a face-to-face type of presence, but due to its size it would be impossible for it to be placed all over, and the cost it would take for it to increase its presence beyond the 25 points of presence would also be an important factor to consider. He added that the Bank would not be closing any of the established 25 points.

Drought and Support

Mr Soundy said that drought support was meant for the entire sector. When the Land Bank created this facility along with the Industrial Development Corporation (IDC), it was meant to address the challenges that Land Bank customers were facing in respect of the drought. It was not meant for people who were not customers of the bank. The Department, in terms of its allocations to support programmes, generally supported all other interventions that were provided for drought and other related interventions in agriculture. 

Jobs Fund

The Land Bank had particular programmes that had been agreed upon between the organisation and the Department of Agriculture and Rural Development. In this partnership, some of the allocation of funds to particular programmes were utilised in order to deal with the blending of loans and grants. This was to ensure that the affordability of loans could be addressed on the basis of grant funding that was received from the Department.

He said the Black Producers Support Programme had been put on hold once the Department had established particular qualifications and requirements. It had been agreed that it was not reaching the objectives it had previously set out to achieve. The Land Bank had been informed that the programme was now undergoing processes of appropriate review, and that it would soon be reopened.

The Jobs Fund, which was part of the National Treasury, had also started to make some arrangements with the Department, where the Bank would act as a mere implementing agent. Since the Department was never a credit service provider, it made sense for the Bank to step in as an implementing agent in this particular programme. This programme had already announced the availability of funding opportunities through the Department to all of the provinces. These were the kinds of programmes that had been put into place to ensure the bank carried out its developmental work.

Coniglio Rabbit Farming

In as far as the Land Bank was concerned -- and this could be validated with its records -- it was not exposed to funding into Coniglio. There would be no impact on the Bank relating to transactions that involved Coniglio.

Closing remarks

The Chairperson suggested that the Bank return soon to address further issues that had been raised in the meeting. There had been many issues raised by the Committee. He thanked the Land Bank for its presentation and the Members for their participation. He suggested that any further questions be submitted in writing.

The meeting was adjourned.



























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