It is financing products that is sinking Landbank

Landbank proclaims that it is not its development clients that have landed it in trouble due to non-payment, but that it has already had to take legal action against more than a quarter of its commercial farming clients to collect its debts. The farmers get all the blame for the mess that Landbank cannot get out of without a substantial bailout from the state treasury. But like most of his submissions to organised agriculture, this statement is a distortion of the truth.

Landbank has never disclosed the performing percentage of its development book. It does not act against non-performers on that book, because a growing development book is a condition of further bailouts, without which the bank’s survival is in jeopardy. Now it only blames its commercial farmers. When more than 26% of all your customers’ files lie with your legal department, any bank must also look for the fault within itself.

When Landbank unexpectedly took its book away from intermediaries, such as the agricultural businesses, two years ago, it was a healthy book. Bad debt with its largest contractor was less than 1%. No one saw the end of the intermediary system coming, so no one was prepared for it – especially not Landbank. This plunged the agricultural businesses that acted as intermediaries into a crisis, it left the farmers in a difficult position and it resulted in Landbank’s collapse.

Intermediary businesses didn’t see it coming because they know exactly what it takes to manage that book successfully – they’ve been doing it for decades and are structured and set up for it. They also knew that Landbank was not, and that Landbank could not possibly create the capacity and systems overnight to manage its own book. They knew that without the expertise, systems, existing footprint in the marketplace and skills, Landbank would simply collapse, but Landbank itself did not know this. Then it happened.

Landbank is a state enterprise, trapped in all ideological and political arrangements that have failed all other state enterprises such as Eskom, Denel and the SABC, and most state functions such as defense, public health, schools and policing. People are appointed for party political servitude and not because they are experienced or excellent agricultural bankers.

When Landbank suspended its arrangement with the cooperatives and agricultural input suppliers, those intermediaries managed the Landbank Book very efficiently. They know each farmer, know where and with what he farms, come to his farm and supply him with seed, fertiliser, sprays, diesel and animal medicine. Landbank does not have the faintest knowledge of it and didn’t even know where or how to send statements. It is now another huge challenge to get correct and timely statements from Landbank.

The intermediary businesses provided that financing mostly as revolving credit to farmers. Farmers used their co-operative accounts like an overdraft facility; if they received money, they paid it comfortably to the input supplier and again got fertilizer, diesel or animal feed against it up to a contracted limit. This arrangement was renewed annually. Until the day Landbank unexpectedly decided to manage its book itself.

But Landbank did not have the people, capacity, experience, expertise or systems in place to manage its own book. At the very least Landbank could not even administer its loans to farmers as revolving credit, and basically insisted that every farmer must pay off his facility as a production loan in full and then apply for a new loan. Getting a loan approved at Landbank takes months – if you’re lucky. Landbank’s criteria excludes most farmers in any case, even if Landbank had the money to lend.

It is easy to understand the farmers’ various reactions:

  • I don’t get statements from Landbank and if I get them, they are calculated incorrectly.
  • I only get threats, attorney’s letters or subpoenas.
  • I see and experience how all functionality withers at Landbank.
  • I understand and experience from other farmers’ experience that there is no chance that my loan will be renewed in time for the next season, if at all.
  • If I pay my Landbank installment, it is the end of my cash flow and I can no longer farm.

So, most farmers instead use their installment to continue farming.

Landbank liquidates them in the most brutal way imaginable, with officials and executioner-type agents cursing, humiliating, insulting and destroying estates until there is literally nothing left of many. Don’t complain about it, share your story at the church or farmer’s association or tell it on social media, because even sick old people are arrested for it and summarily locked in a police cell.

Therefore farmers are now fighting back against Landbank.