Land Bank push for more billions raises doubt about MTBPS commitments, including public wage chill

A slip of a ministerial tongue during Thursday’s briefing on the Economic Reconstruction and Recovery Plan got the ball rolling.

“The additional investment announced by the minister of finance on the Land Bank is welcomed… This additional investment means we are not missing this planting season,” said Agriculture and Land Reform Minister Thoko Didiza.

But presenting the Medium-Term Budget Policy Statement (MTBPS) on Wednesday afternoon, Finance Minister Tito Mboweni made no such announcement. What he did say was perhaps an indication of the as yet unresolved funding contestation.

“R3-billion was allocated to the Land Bank in June. The bank will require an additional R7-billion over the medium term to support its restructuring,” is what Mboweni told MPs before segueing to the R10.5-billion bailout for SAA, styled by the government as funding for the airline’s business rescue.

The MTBPS itself is also clear on the fiscal framework over the next three years: “n0 further recapitalisation of state-owned companies is assumed over the medium term…”

When asked about further Land Bank bailout billions, Didiza put her comments down to enthusiasm that Mboweni had mentioned the Land Bank.

“This is the happiness from me and the farming community that government is considering the repositioning of the bank,” she added after stating, “In the national Budget the (finance) minister will indicate how that will be addressed.”

This is a signal that conversations at the highest level of government will continue in a push to secure billions on the argument such a bailout – recapitalisation is government’s preferred jargon – was crucial for the Land Bank to continue its role. In the Economic Reconstruction and Recovery Plan, land reform projects and emerging farmer support are important measures.

In January 2020, Moody’s downgraded the Land Bank, largely because of its debtor’s book. By April 2020 the bank began defaulting on its debt obligations. According to the MTBPS, the R3-billion allocated in June’s emergency Covid-19 Budget allowed the Land Bank to begin repaying overdue interest from August 2020. It is also restructuring its assets and liabilities.

“This process depends on further shareholder recapitalisation and the reduction of its loan assets to retire some of its debt. The Land Bank has approached government for additional financial support,” said the MTBPS.

Hence the push for further billions to restructure the bank and its functions. It was not immediately clear if the R7-billion would be over and above the R3-billion of June 2020, or whether in addition to the R3-billion another R4-billion is sought.

Mboweni can expect robust engagement from his Cabinet colleague responsible for agriculture and land. 

But if the Land Bank gets further money then so should Denel, which says it needs another R3-billion for its restructuring, the SABC, the South African Post Office – and Eskom, which with its R488-billion debt remains the greatest risk to South Africa’s economy.

As the SAA R10.5-billion allocation has shown, the government’s talk about drawing the line under further support for state-owned entities (SOEs) is a moving target.

It’s no giant leap to argue, similarly, that another moving target is the public wage bill chill announced in the MTBPS to underscore commitment to debt containment. But depending on the level of political contestation, also within Cabinet, such wage restraint may well be ditched.

The effective freeze of salaries for South Africa’s 1.3 million public servants has already been roundly rejected by affiliates to Cosatu, the governing ANC’s alliance partner.

The South African Municipal Workers’ Union (Samwu) did a bit better, clinching 6.6% salary increases backdated to 1 July 2020 alongside more leave days and a 10% housing subsidy increase for its members at South Africa’s various water boards.