- The Land Bank has faced significant operational, financial and stability challenges in recent years.
- Uncertainty about its future as a going concern added urgency to the new board's plans to get the entity back on a firm financial footing.
- But the Land Bank's liability solution is a key opportunity for the institution to recover and remain a going concern, Auditor-General Tsakani Maluleke has said.
The embattled Land Bank's liability solution - the offer it will make to institutions that still hold its listed bonds - is a key opportunity for the institution to recover and remain a going concern, Auditor-General (AG) Tsakani Maluleke has said.
But as things stand, its fate still hangs in the balance.
In the audit report that formed part of the Land Bank's 2021 annual report, the AG added that while the Land Bank's audit outcomes had improved from a disclaimer audit opinion to a qualified audit, the sheer magnitude of audit findings in the previous year had made it more difficult for the entity to show an improved audit outcome quickly.
The Land Bank has faced significant operational, financial and stability challenges in recent years. Uncertainty about its future as a going concern added urgency to the new board's plans to get the entity back on a firm financial footing.
Earlier this month, the board of the Land Bank briefed Parliament's Select Committee on Finance that it managed to reduce its debt to lenders by 42% or R14 billion since the introduction of its liability solution.
The government is determined to save the Land Bank and put it to use as a financial institution to advance the support of black-, woman- and youth-owned farms.
In the audit report, Maluleke said loans and advances were a significant portion of the Land Bank's total assets and the associated impairment provisions. Maluleke said the Land Bank experienced a liquidity shortfall, which resulted in the entity defaulting on some of its obligations.
'Material uncertainty'
"This triggered a cross default and resulted in de facto standstill on capital and interest payments to its funders. At the date of this report, the liability solution to cure the default was still in progress and is dependent on the signing of the commitment agreements with lenders.
"These events or conditions indicate that a material uncertainty exists that may cast significant doubt on the entity's ability to continue as a going concern," Maluleke said.
Land Bank company secretary Mashumi Mzaidume said as a result of the disclaimer of opinion audit outcome, the Land Bank's audit and finance committee had to adjust its audit plan to include oversight and monitoring of the board-approved remediation plan.
"This has been one of the key focus areas for the committee with regular meetings held with management to track and assess progress on implementation of the remediation plan to ensure adequate resolution of the risks arising from the matters that led to the disclaimed audit opinion and to ensure a favourable outcome for the 2021 financial year, and to ensure embedding of processes of internal controls to avoid a recurrence in future," said Mzaidume.
During the Land Bank's meeting with Parliament, acting Land Bank CEO Khensani Mukhari said a newly formed board had to "hit the ground running" to provide stability. Mukhari said the institution had had a high staff turnover owing to the bank's instability.
She said by the end of September this year, the bank's debts will either have been paid back or restructured for sustainable repayment to creditors.
Get the biggest business stories emailed to you every weekday.
Go to the Fin24 front page.