Land Bank, the biggest lender to the farming sector in SA, on Tuesday announced the departure of its CEO, Ayanda Kanana, after almost two years in the job, as it seeks to accelerate its turnaround and move from its default.
The government-owned development bank said another one of its executive managers, Litha Magingxa, is also leaving.
Kanana joined the company in March 2020 and oversaw repayment of R11.4bn to creditors in 2021, resulting in a 28% reduction of debt. His notice period will run to end-April.
The lender, whose full name is the Land and Agricultural Development Bank of SA, went into default in April 2020, missing an interest payment on notes that were issued as part of a R50bn bond issuance.
Its woes have been seen as an indication of the dangers posed to SA’s economy and fiscal position by state-owned enterprises (SOEs) riddled with unsustainable debt accumulated during the period of state capture. The treatment by the government could also be a sign of how it will deal with financial problems at other SOEs such as Denel, which last week missed debt payments and had the listing of its bonds suspended by the JSE after it failed to submit financial statements.
Finance minister Enoch Godongwana appointed a new board for the bank in December with agri-economist Thabi Nkosi as chair, giving it a mandate to accelerate the entity’s turnaround efforts. The board was specifically instructed to “clean house and to aggressively deal with the challenges that the bank has been dealing with for the last five years”, Nkosi said.
Kanana joined the bank at a difficult time, when it was in the middle of a default, Nkosi told Business Day on Tuesday.
“The stress of having dealt with this situation for two years had already taken its toll and the pressure was exacerbated with the appointment of the new board and the vigorous approach we are taking to deal with the problems at the bank.”
The board is “working expeditiously to resolve” the bank’s financial issues and is “excited about the future of Land Bank as it navigates this final lap towards the full resumption of operations”, Nkosi said in a statement.
One of its first tasks was to bring the bank’s financial reporting up to date. “When we joined, the audit of the previous financial year’s statements had not been completed yet so the first thing we did was to finalise those statements.
“We have also revived discussions with the bank’s lenders and we have started looking at the efficiency of the bank’s internal controls systems and financial processes.”
Nkosi said it has been “helpful” to have a new minister of finance, who “looked at the problems facing the bank from a different perspective”.
In 2020, Land Bank received a R3bn bailout from the Treasury to help with its recapitalisation and it later received another R7bn to be disbursed over the medium term to support its restructuring. The first payment of R5bn was to be made during the current financial year.
According to Nkosi, this payment has not yet been received as there are still outstanding conditions. She expects it to be paid towards the end of the financial year in March.
“While we work to take the bank out of its current default position we must also start to look at how we will implement its mandate on redress. Our emerging-farmer loan book is still small compared to our commercial loan book, but we are mindful of wanting to grow our development business.”
Land Bank has a responsibility to provide the financing needs of emerging farmers, because that is a role commercial banks cannot fulfil, she said.
“Currently we can only support existing clients to a limited extent, which is why we need to get the liability challenge out of the way so that we can really start helping emerging role players.” SA’s total agricultural debt stands at about R190bn, and Land Bank holds 28% of this.
The bank reported in August that it disbursed R5bn in loans in 2021, compared with R21bn in 2020 and R29bn in 2019.
One of the challenges was nonperforming loans, which doubled from 16.8% in 2020 to 27.8% in 2021.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.