Land Bank tries to move away from loss-making
The bank’s chief executive officer, Alan Mukoki, told the committee that most of the clients who received loans from the institution would likely have been turned down by mainstream banks. “Close to 15 percent of all the loans granted by Land Bank become bad debts, and of these, 55 percent are subsequently written off as bad debt,” he said. He said one of the main reasons behind this lending was to do with the fact that some of the staff at the bank lacked risk-management and lending skills. To rectify the situation, Mr Mukoki told the committee, the bank had embarked on a turnaround strategy, and had brought in competent people in the area of risk management. The bank’s bad debts were at one stage thought to be close to R2 billion. However, Mr Mukoki said independent auditors who were brought in to audit the bank’s books said the figure was much lower than that. “An audit by independent auditors revealed that this figure was actually R600 million.” “Having said that, I must emphasise that the loan book quality of the bank is still poor, even after substantial write offs,” he said. He also attributed the bank’s financial problems to a general decline in the agricultural sector. “The agricultural sector is going down in terms of profitability; as a result, one of the objectives of our turnaround strategy is to diversify our business,” he said. He said instead of only focusing on agricultural land, the bank would now extend its activities to commercial as well as residential land. One of the Land Bank’s mandates is to develop the agricultural sector in the country by, among other things, offering financial support to emerging farmers. However, Mr Mukoki said that given the current situation in which the bank found itself, there was no way that mandate could be fulfilled at present. “The overall objective of the turnaround strategy that we are implementing is to ensure that the bank becomes a profit-making entity capable of carrying out its stated mandate,” he said. He said the bank had presented its turnaround strategy to the departments of Agriculture and Land Affairs and Finance, as part of its application for more funding. ‘ BuaNews.