Despite having earlier been identified as a core objective of the Department of Rural Development and Land Reform’s strategic land reform plan, there is now no intention by government to pursue the goal of redistributing at least 30% of the country’s productive white-owned land by 2014.

“I keep saying that we are not chasing this 30% target for 2014. What we are chasing is 100% productivity on land that has already been redistributed,” Rural Development and Land Reform Minister Gugile Nkwinti said at development finance institution (DFI), the Land Bank’s, annual financial results presentation on Monday.

Government’s land reform programme had earlier targeted 30% of agricultural land in black hands by 2014, which would have amounted to some 24.6-million hectares of land.

But Nkwinti commented that the department had shifted its focus from ensuring continued momentum of the redistribution of land – particularly that used for agricultural purposes – to ensuring that land that had already been returned or allocated was being efficiently used.

“We are fast moving towards a “use it or lose it” principle. If someone is not using the land properly, we will take it back,” he said.

Nkwinti added that government was pursuing a “qualitative” rather than “quantitative” approach to land reform, which encouraged partnerships between previous and existing landowners – most notably on agriculturally productive land.

“We can’t just keep on giving land, and we expect a relationship between the old owners and the new owners, as I know that farmers help each other all the time,” he said.

Land Bank Results

Commenting on the Land Bank’s financial results, the Minister believed the institution had, over the 2012/13 financial year, continued to make “solid” progress amid a negative macroeconomic environment.

“The performance of the bank is particularly important, as its sustainability is inexorably linked to the sustainability of the agricultural sector as a whole,” Nkwinti averred.

The DFI, which is tasked with providing loans to emerging farmers and supporting established farmers during periods of financial difficulty, reported a 26.2% jump in its performing loan book during the year ended March 2013 to R26.5-billion, from R21-billion in the prior financial year.

Net profit grew by 88.7% for the period, from R161.4-million in 2012 to R304.6-million in 2013, while the group’s investment income, buoyed by stock market performance, increased by R97.2-million to R188.1-million.

“Cost-containment initiatives, a sustainable loan-book strategy and a well managed borrowing plan all contributed to this performance,” outgoing CEO Phakamani Hadebe said on Monday, adding that the bank’s performance in the year was further strengthened by a 3.7% drop in nonperforming loans.

Over the 2013 financial year, loans amounting to R1.2-billion were approved and disbursed by the bank, driving a gross domestic product contribution by the institution of around R38.4-million.

The business and corporate banking division, which provides wholesale funding to agribusinesses and cooperatives, reported a 45.5% increase in net operating income to R239.9-million on the back of a R4.7-billion increase in the segment’s loan book.

In the retail commercial banking division, net operating income plunged by in excess of 100% to incur a loss of R76.8-million, having been adversely affected by impairment provisions necessitated by several distressed clients. Impairment charges for the division totalled R50.9-million for the year.

Management said it would closely monitor this division in light of its losses.

In contrast, the bank’s retail emerging markets segment grew its loan book from R101.7-million in 2012 to R247.5-million for 2013 and, to mitigate the risk associated with this market segment, launched a wholesale financing facility.

“This facility, which is run in collaboration with the Department of Agriculture, Forestry and Fisheries, allows farmers to access funding at an interest rate capped at 4%,” Hadebe commented.

Macro Conditions

Hadebe noted that the bank’s results came on the back of a “difficult” year, characterised by slowed economic growth and tightening margins in the agricultural sector, as exchange rates weakened and labour disputes resulted in further financial constraints.

In particular, South Africa’s agricultural export market struggled in 2013, as its primary regional trading partner, Europe, underwent recessionary conditions and trimmed consumption.

Hadebe added that the Land Bank’s ability to act as a buffer between such macroeconomic volatility and local agricultural businesses was critical to protecting South Africa’s agricultural sector.

“The bank has a direct impact on food prices, as it can assist farmers with the funding of their largest expenses, which is usually intermediary products and services, such as petrol and electricity. Our ability to do so would be further bolstered by us securing a larger market share,” he said.

The Land Bank grew its market share from 28% in 2012 to 30% in 2013 and aims to secure 35% of the agriculture sector-related financial services market by 2016.