The Land Bank may be forced to rely on its creditors for the monetary lifeline it needs to stay afloat, as National Treasury says there is no recapitalisation allocated in the current budget for the Bank.
While the Minister of Finance, Tito Mboweni, said last week government will "do whatever it takes" to help the Land Bank, Treasury said the only immediate support available for the Bank consists of guarantees that have already been issued, as well as the government's support as a shareholder.
No space in the 2020/21 budget
"The National Treasury has indicated in engagements with lenders at the invitation of the Land Bank that there is no recapitalisation allocated in the current budget for the Land Bank," said the public purse controller in response to Fin24's questions.
This means unless a special appropriation is brought to Parliament, there will be no money for the Land Bank for the current fiscal year, which ends on 31 March.
The Land Bank, which defaulted on some of its loans last month, triggering cross default on its other debt, approached Treasury for help and was given R5.7 billion in loan guarantees in February. But the Bank still did not have enough liquidity to service some of its R738 million debt, due to mature before the end of April.
Treasury said it can consider taking a special appropriation to Parliament or an application for recapitalisation of the Land Bank in the upcoming adjustments budget process. But with the coronavirus relief package at the top of Treasury's priorities right now, it remains to be seen if a special appropriation for Land Bank can be prioritised.
"The National Treasury does not consider a special appropriation or applications in the adjustment budget unilaterally, this process is finalised by an act of Parliament," said Treasury.
Creditors pitch in
On the other hand, the Land Bank creditors, including the state-owned Industrial Development Corporation's (IDC) indicated that they were willing to walk with the Land Bank through its liquidity challenges on condition that government also indicates how much support it is willing to give.
"Last time we heard, National Treasury's position expressed by Minister Mboweni was that they would 'do everything to save Land Bank'. I am not aware of their decision not to provide recapitalisation," said the IDC CEO, Tshokolo Nchocho.
He said the IDC, whose mandate also includes agriculture and agro-processing, can only consider a plan from the Land Bank if it is supported by Treasury.
"In the meantime, my thinking is that perhaps certain categories of Land Bank clients, the corporate segment, could be assisted directly by IDC. But we would have to do so on a collaborative basis with the Land Bank, so that it is not a 'predatory' action of picking and choosing best quality clients," he said.
Futuregrowth, one of the creditors who have publicly pledged to work with the Land Bank has also said that the Bank may require some form of recapitalization and possibly a refocusing of its areas of operations in the medium-term. Futuregrowth said it would work with the Land Bank insofar as this can be done while honouring the asset manager's fiduciary duty to its clients,
Tarryn Sankar, head of listed credit at Futuregrowth said that at this time, the key analytical focus is establishing whether the Land Bank's challenges are primarily a temporary liquidity issue or solvency problems that have built up over a longer-term.