Linda Ensor
25 August 2008
Cape Town — The government would not use taxpayers' money to finance the losses of the Land Bank, Finance Minister Trevor Manuel has insisted.
He said in Parliament on Friday that the government's immediate priority was to stabilise the financial position of the bank through the provision last year of a R1,5bn guarantee which had allowed the bank to maintain its capital adequacy ratio in excess of 15%.
Last month, control of the bank was transferred from the agriculture and land affairs department to the treasury because of the bank's deteriorating financial position.
The institution has lost a reported R2bn in equity in five years through bad debt write-offs and about R2,6bn of its R17,3bn loan book was non-performing last year.
It has recorded an impairment of assets amounting to R300m, was unable to recover a loan of up to R640m and has suffered from a spate of top- level resignations. It is also alleged that payments totalling R80m were made to nonexistent companies.
"The R700m recapitalisation of the Land Bank (last year) was ring-fenced for loans to emerging farmers. Any further recapitalisation will be informed by the government's policy to refocus the mandate of the Land Bank in providing financial support to emerging farmers and land reform," Manuel said in a written reply to a parliamentary question by Democratic Alliance MP Manie van Dyk.
Manuel emphasised that the Land Bank was a solvent financial institution that had been mandated to review its internal policies, including the credit and risk management policy framework.
The minister agreed that the Land Bank's share of the total agricultural debt had declined to 41% at the end of last year from 57% in 2003, though on average the size of its loan book remained constant at R17bn. However, Manuel said it was never the government's intention for the bank to remain the dominant lender to the agricultural sector.
"This trend demonstrates that the financial sector has increasingly assumed its rightful role in the financing of agriculture," he said .
Replying to a question from Freedom Front Plus MP Pieter Groenewald, Manuel said the investigation by the Land Bank board into alleged irregularities was still under way. Legal proceedings would be instituted by the bank if this was deemed appropriate .
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