Futuregrowth meets Brown, replies to bank
PUBLIC Enterprises Minister Lynne Brown has met Futuregrowth, while the Land Bank has responded to the asset manager’s letter clarifying why it cut off debtfinancing to six state-owned entities including the development finance institution.
Land Bank CEO TP Nchocho revealed the correspondence with Futuregrowth at the institute’s annual report presentation.
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, making developments with the fund manager especially important.
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.
Nchocho told Business Day in an interview after the launch of the bank’s 2016 annual report on Tuesday that it had asked for a letter clarifying Futuregrowth’s position. This was delivered a week ago.
“We sent them the information they requested, as well as the documents,” he said. “They are now applying their minds.”
The Land Bank expected a response next week.
In addition, Land Bank chairman Arthur Moloto said the board had bolstered its governance by approving a policy on lending to politically exposed persons — a concern Futuregrowth chief investment officer Andrew Canter raised in an interview with the Financial Mail.
Futuregrowth was due to meet Brown on Tuesday over its decision to suspend new loans and rollovers of existing debt to the Land Bank, IDC, Eskom, Transnet, the South African National Roads Agency and DBSA. It stopped negotiations on funding deals worth R1.8bn.
Brown is the political principal and shareholder representative for the state at Eskom and Transnet.
Colin Cruywagen, Brown’s spokesman, confirmed that the meeting took place, but declined to comment on a closed meeting.
Canter had previously referred questions to Brown.
Old Mutual did not respond to questions on Tuesday.
Futuregrowth, which handles R170bn in assets, has a R10bn exposure to Eskom and Transnet, according to Brown.
Nchocho indicated that the Futuregrowth decision did not affect funding facilities already in place, such as a concessionary loan scheme concluded with the IDC to assist distressed farmers during the drought. “This particular facility was already signed off as far back as April,” he said. “The money is already available now.”
Thus far, farmers had accessed about 60% of the facility, which offers interest rates of prime minus 3%, or 7.5%.
“Many of the farmers will now, in September and October, start replanting. The [facility] will be used up completely. After it’s used up, we are going to be continuing to provide support, but at higher interest rates.”
The R400m concessionary loan scheme comprised a small part of the bank’s gross loan book, which grew R1.3bn to R36.3bn during the year to June. Nchocho indicated during the presentation that the Land Bank had assisted in other ways. “We have given farmers the opportunity to sell off their livestock, deposit the proceeds in the Land Bank and then, when conditions improve, they can access these savings to restock,” he said.
The bank had received R485m in revenue as a result of these livestock sales. The drought did not have much of an effect on its loan book, with underperforming or nonperforming loans comprising 21.9% of the book.