by Ntokozo Ndlovu

A century later

A historical look at the Land Bank and its role in SA

The Land Bank has turned around in the last century
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The Land Bank was founded in 1912, followed by a series of laws imposed by the then government to formalise the exclusion of Africans from land ownership, including the most prominent of all, the Native Land Act of 1913, which gave birth to a series of similar laws which sought to make sure there was land available for white farmers, and that blacks were left disenfranchised.

From that time, all kinds of laws were promulgated to support white farmers, and to make sure the Land Bank was lending cheaply.

The Land Bank’s agenda was politically driven to support the laws and Land Acts of the time. All systems implemented by the bank worked to support the political agenda of the government of the time, and to ensure growth of agricultural activity among white farmers.

The Agriculture Credit Board (ACB), for example, was structured to make sure that farmers received cheaper funding to assist them in accessing finance, and also make sure that the Land Bank gave farmers access to affordable funding, providing cheaper loans to ensure reinstatement instead of repossessions.

This went on until the early 1980s – by then government began to adopt open market operations, where the forces of the market were allowed to have an influence on the agricultural sector and continued past the new political dispensation and into the late 90s. Then, all of a sudden open markets began to determine price efficiency in agriculture.

The unfortunate part of it all is that this continued even when new players entered the market, when the new government took over and during a time when emerging farmers and rural development was being prioritised. So, when the new players, who were the emerging black farmers came into the picture, they were already excluded from this system.

This meant these black farmers struggled, because they couldn’t consolidate and couldn’t be part of the new ‘old’ team.

Emerging farmers had the Land Bank on the one hand, which had been reliant on government, but all of a sudden did not have the backing of government and, therefore, had to obtain loans at market-related rates. This made it even more difficult to grow the emerging market space. Five years into the new democracy, in 1999, the managing director of the Land and Agricultural Development Bank of South Africa at the time, Helena Dolny, was removed from her role to allow for the mechanisms of transformation to take place. The idea was to open opportunities for new leadership, who would drive transformation within the sector, to devise and implement strategies aimed at grooming and growing agriculture led by black farmers.

Resulting from theft in some instances, wasteful expenditure in other instances and misappropriation of funds on expenses unrelated to the bank’s rural development plan, not much progress was made to help groom and grow black emerging farmers.

Government spent more than R4 billion trying to keep the Land Bank afloat – and still there was no turnaround.

In 2008, then Minister of Finance, Trevor Manuel, appointed Phakamani Hadebe from Treasury, to stabilise and improve the conditions of the Land Bank.

“Our vision is to play an active part in determining the price of food and ensuring food security in South Africa and Africa,” Hadebe told Harvest SA on the eve of the Land Bank’s Centenary commemoration.

Rebuilding Land Bank

When Hadebe took over as CEO, the bank’s strategic focus shifted. Its mandate remained focused on growing emerging farmers and providing support for rural development, through the provision of financial assistance to farmers, and its focus moved to a more structured approach to stabilise and rebuild the Land Bank to regain its values and vision.

“Fit For Future (FFF) is where we started, and all our goals have been driven by this strategy which we are using as a vehicle for the bank to achieve its sustainability goals.

“The implementation of the FFF model, initially focused on the review of the Bank’s business and operating model. To re-instate the Land Bank’s function, focus was placed on establishing a unit, dedicated to emerging farmers and to stabilise and establish a high performance, people-oriented culture, introduce standardised processes and increase sales focus to improve turnaround times.

“At the time (in 2008), when we started with the new strategy and implementation of the new growth plan, investors wanted nothing to do with the Land Bank, given their
previous experiences with it,” says Hadebe.

“Since the Bank is not government funded and is dependent on money from the money markets, we had to work extra hard to regain investor confidence and build new relationships. We reassured investors through our control systems, credit and risk policies and developed from there.

“We recovered non-performing loans, which were 26% of its loan book, cut those down to 11% of the now R19-billion loan book, then we could start really talking to investors.

“We are seeing improvements in the performance of black farmers,” says Hadebe.

Between 1998 and 2005, the failure rate of black farmers stood at 56% and between 2007 and 2012, it dropped substantially to about 10%.

In the 2009/2010 financial year, the Land Bank recorded a profit to the tune of R354-million, a remarkable breakthrough under the circumstances.

 

 

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