FAST FACTS
- Interest on credit cards is generally very expensive, and farmers are advised against using them a means to fund production on farms.
- When giving out a production loan, banks normally require a farmer to take out insurance to cover production risks, as the loan is usually offset against the harvest.
- A farmer’s credit rating, any defaults on loans, the financial history of the business, collateral, and the likelihood of the investment paying off are all taken into consideration when negotiating the terms of a loan.
Where the Land Bank used to account for about 28% of South Africa’s agricultural debt, its financial woes have prevented it from accepting new clients and left it unable to meet 50% of its existing clients’ financial needs. This was according to Ayanda Kanana, CEO of the Land Bank, who reported to the Standing Committee on Appropriation in August.
He said the bank had disbursed only R5 billion to support the sector in 2021, in comparison with R21 billion in 2020, R29 billion in 2019, R32 billion in 2018 and R38 billion in 2017.
The situation was also compromising the bank’s transformation agenda, with its Development and Transformation division loan book shrinking. In addition, it affected the loans from agribusinesses that were secondary lenders of Land Bank funds.
Kanana admitted that the status quo was unlikely to improve in the near future, as the bank was heading for a third consecutive year of loss, estimated at R1,06 billion for the 2021 financial year, in comparison with R1,28 billion in 2020 and R2,27 billion in 2019.
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