By Siyanda Sishuba, Farmer’s Weekly
The agriculture sector has reacted with concern to Moody’s Investors Service (Moody’s) downgrading the Land and Agricultural Development Bank (Land Bank) to sub-investment grade.
In a statement released on Tuesday, Moody’s said the downgrade came in light of South Africa’s ongoing fiscal challenges.
Moody’s assessment suggested that South Africa’s government needed to be more selective in dispersing financial support to state-owned enterprises (SOEs), including the Land Bank.
The downgrade also reflected rising solvency pressures due to elevated credit risks, including high environmental risks relating to sustained droughts and increased frequency of disease outbreaks; low earnings and a modest capital cushion to the minimum required lending covenants; and its historically stable funding profile, which remained dependent on market funding in an environment where debt and capital markets were volatile, said the statement.