Land bank downgrade a blow to the agriculture industry

27 January 2020 – The downgrade of the Landbank to junk status by credit rating agency Moody’s Investors Services will deal a crippling blow to the already reeling agricultural industry, says commercial farmers’ organisation (TLU SA) President Louis Meintjes.

“Not only are our farmers struggling to keep their heads above water because of challenges like farm safety, unreasonable labour laws, stock diseases, drought and limited export opportunities because of the poor economic climate, but now they are plunged into even more debt by a downgrade of the Landbank which provides credit to most farmers.”
It has been in review since November 2019 and is now a notch lower at Ba1, placing it in junk status.
“It will become more expensive for the Landbank to do business because the bank depends on funds from somewhere else to provide credit to clients,” says Meintjes. “As a result of the downgrade, it will have to pay more for the funds which will lead to an increase in the interest rate of clients.”
Moody’s says it does not foresee the state having enough room to support state-owned entities (SOEs) – hence the downgrade which is expected to be the start of many.
Moody’s is the only agency that has not downgraded the state to junk status. Its next decision will be in March while Standard & Poor’s and Fitch Ratings will probably decide after the budget speech on 13 February. Source (F&T Weekly)