This statement was made by Kulani Siweya, an agricultural economist at Agri SA. Siweya added that Moody’s decision can have a negative effect on the country’s food security as farmers may not be able to borrow money from the Land Bank. Irrigation systems, amongst other electricity-depended production equipment, may be affected by unsecure power supply. OFM News’ Elsabé Richard spoke to him about this…

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The reason why Moody’s downgraded the Land Bank, according to Agri SA is because the rating agency is of the opinion that this downgrade “is as a result of ongoing delays in implementing the Land Bank’s restructuring plan and related liability and equity solutions”. As a result of these delays, a risk that may arise is that a liability solution between government and the bank will not be agreed upon. This will then lead to monetary losses for lenders such as emerging and established farmers.

Siweya adds that currently, the Land Bank is only able to recycle loan payments from its clients towards financing requirements for its existing clients. He explains that this results in less than 50% of its existing clients being met. Furthermore, given that the country has entered the summer crop season, Siweya says the decline in production loans available to the industry is concerning. He explains that the Land Bank finances 29% of the agricultural debt which makes it a critical contributor to food security in South Africa. He adds that the bank also plays an important developmental role as a financing vehicle – particularly to new entrants to the agricultural sector.

When considering what the downgrade means for Eskom, Siweya says secure power supply is one of the most important aspects for production. He adds that agriculture is heavily reliant on irrigation systems and cold storage facilities, amongst others. The constant power outages or unsecured power supply has an impact on the above-mentioned means of production – especially if windows of opportunities to either irrigate or store crops in optimal conditions are missed – which can lead to crop damage. “It is on this premise that we also advocate for continuous support for Eskom to ensure that it becomes a sustainable and operationally sound power utility,” explains Siweya.

He alludes that Agri SA calls on government to step in by assisting and capacitating the bank as well as Eskom in a bid to secure food security in the country. “With regards to the Land Bank, unfortunately, cash alone will not be enough. Stabilisation interventions at the Land Bank come in two forms, with the most urgent being the cure to current default and to prevent further defaults. So, this means that the institution will need an injection from Treasury immediately,” he adds. Furthermore, the bank needs to be set on a sustainable trajectory by making it the custodian of South African agricultural developments. Siweya says this may result in the bank taking ownership of state land so that it has an asset base and guide various government efforts in a unified fashion.

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