Land Bank must tighten up if it wants funds
THE Land Bank will have to make sweeping changes to the way its board makes decisions if it wants to receive funding from Futuregrowth Asset Management, which on Monday lifted its funding freeze on the development financier.
Currently, the Land Bank board and its credit risk committee needed only a simple majority of votes to decide on issues, such as granting loans to farmers, chief financial officer Bennie van Rooy said.
He told Business Day in an interview on Monday after Futuregrowth announced it had lifted its funding ban: “The recommendation was to strengthen the mandates to increase the approval requirements to somewhere between simple majority and unanimous decisions.”
The Land Bank is now in discussions with the asset manager regarding the amount the development financier can borrow, which Van Rooy indicated to Business Day would be granted only after Futuregrowth went through its own governance approvals, and both parties made changes to investor protection agreements.
“We don’t have a specific target for Futuregrowth only,” he said. “We need to raise net funding of R3bn-R4bn per [year], and rely on Futuregrowth as our development partner to support us.”
Half the Land Bank’s R33.1bn in funding — 47.4% of which is provided by institutional investors such as Futuregrowth — is due to mature in less than a year.
The Land Bank also has funding from the Industrial Development Corporation (IDC) and the Development Bank of Southern Africa (DBSA), which have been affected by Futuregrowth’s move. In August, Futuregrowth froze loans worth R1.8bn to six state-owned companies, including the Land Bank, IDC and DBSA.
This came after the Cabinet decided to establish a presidential co-ordinating council for these companies. Futuregrowth also raised concerns about contracts awarded to politically connected people at parastatals.
Andrew Canter, chief investment officer at Futuregrowth, said the asset manager “continues to constructively engage with other [state-owned companies] as part of its ongoing investment process”.
He declined to comment further beyond his company’s statement on the thawing of the Land Bank funding freeze.
Futuregrowth met the Land Bank’s executive management team and board as part of its review. It also assessed the bank’s policies and observed how conflicts of interest were managed and transactions approved, according to the statement.
“Futuregrowth’s due diligence extended further than a desktop review of policy documents by evaluating the practical application of these policies and mandates and requesting evidence of policies in action,” it said.
The Land Bank said the asset manager made recommendations on transparency and public disclosure of its governance structures, which Van Rooy said would be dealt with on the bank’s website.