Land Bank says expropriation could trigger default

JOHANNESBURG - Land Bank said on Monday a plan to allow the state to seize land without compensation could trigger defaults that could cost the government R41-billion if the bank's rights as a creditor are not protected.

President Cyril Ramaphosa announced on 1 August that the ANC is forging ahead with plans to change the constitution to allow the expropriation of land without compensation.

Land Bank Chairman Arthur Moloto said in the company's 2018 annual report that the bank has approximately R9-billion of debt, which includes a standard market clause on "expropriation" as an event of default.

Moloto said if expropriation without compensation were to materialise without protection of the bank's rights as a creditor, it would be required to repay R9-billion immediately.

READ: Land expropriation uncertainty worrying investors: Nedbank

"A cross-default clause would be triggered should we fail to pay when these debts fall due because of inadequate liquidity or lack of alternative sources of funding," Moloto said.

"This would make our entire R41-billion funding portfolio due and payable immediately, which we would not be able to settle. Consequently, government intervention would be required to settle our lenders."

Moloto said the bank was generally funded by the local debt and capital markets, and more recently international multilateral institutions such as the African Development Bank and World Bank.

"A poorly executed expropriation without compensation could result in the main sources of funding drying up as investors might not be willing to continue funding Land Bank in particular, or agriculture in general," he said.