Land Bank out of "ICU" - Gordhan

Monday, August 17, 2009

Midrand - The Land Bank is now out of the "ICU", Finance Minister Pravin Gordhan said on Monday.

The institution was taken under the management of the Treasury last year, after claims its former chief executive and other bosses were mismanaging the bank's funds.

Four forensic audits have since been commissioned, and these reports have been submitted to the Serious Economic Offences Unit of the South African Police Service and the Hawks.

"I understand the Bank is now out of 'ICU' but they will still have to convince all of us that they will get out of hospital as soon as possible.

"I am confident that the new management team, under the direction of the Board, will charter the Bank safely through the challenges that lie ahead," the minister said, at the launch of the bank's annual results.

He said he was keeping a close eye on the investigation into what went wrong at the Land Bank.

"We will leave no stone unturned in order to uncover the complexity of the web and the financial machinations that went into developing these fraudulent schemes."

Speaking at the once embattled bank, which has been engulfed by allegations of mismanagement and fraud, the minister said it was performing better.

"What is encouraging is that the Bank this year received an unqualified audit. The balance sheet of the Bank is in a healthier state and the organisation is on its way to realising its mandate," the minister said.

However, he said, many challenges remain and continue to put pressure on the liquidity of the Bank. "There have been moratoriums and I will not deal with those in detail. The policy of the Bank has to ensure its own sustainability," he said.

He said farmers, who did not repay money owed to the bank, impacted negatively on it, making it suffer liquidity problems.

"When the Bank's clients do not pay, the Bank in turn suffers liquidity problems which means it must also go out and borrow in a difficult climate. If this trend continues, government will be forced to resuscitate the Bank through more bailouts," he explained.

He added that he had approved the recapitalisation of the Land Bank through an increased guarantee of R3.5 billion.

"These steps will ensure that the Land Bank is financially sustainable, and will be a viable conduit to promote effective economic development in rural areas."

Commenting on South Africa's response to the global economic recovery, he said this would happen at a slower pace than in other countries.

Minister Gordhan said that though there has been talk of green shoots in the international economy and in South Africa itself, "the recovery will be a slow one".

"Just as the impact of the recession on South Africa lagged somewhat behind the rest of the world's, it seems our recovery will lag too," said the minister.