Subscribe
to our newsletter

and select which news you want to receive

Heads must roll at the Land Bank

Screen Shot 2021-01-12 at 10.25.53 AM

Source: Media release Agri SA 8 January 2020, photo credit: Harvest SA

The Auditor-General’s damning report on the status of the Land Bank’s financial sustainability necessitates an urgent intervention. Whoever was responsible for the financial loss of R2,8 billion must be held accountable. This and many other challenges have compelled the AG to express serious doubt as to the ability of the Land Bank to continue operating as a going concern.

The adverse audit opinion cannot be ignored – heads must roll at management and governance level. This also applies to Treasury, which is responsible for oversight. It is unlikely that they were unaware of what was coming because the financial crisis at the Land Bank did not occur overnight.

In her report, the AG attributes the problems at the Land Bank to an exodus of competent managers, a lack of oversight by the National Treasury (which represents the South African government as sole shareholder of the bank), the downgrading of the bank’s credit rating by Moody’s, and drought conditions, which had made it difficult for farmers to repay their loans. This, however, is merely the tip of the iceberg.

The AG’s report also refers to a lack of internal control measures implemented by management to effectively offset credit losses or a decline in the value of extended loans or the collateral offered when loans are applied for.

The AG also mentions that the financial statements submitted for auditing were not presented in accordance with the prescribed financial reporting framework and were not supported by complete and proper records as required by law.

According to the AG, there was also a lack of sufficient, appropriate audit evidence to serve as basis for an audit opinion. Whoever was responsible for compiling the statements should be held accountable.

This means that the leadership did not exercise adequate oversight with regard to financial reporting, compliance and related internal control measures. Material misstatements were identified in the financial statements that were submitted. Effective control measures were not implemented in relation to monthly processing and reconciliation of transactions of external service providers used to manage the indirect loan book.

In her report the AG refers to insufficient internal control over and management of instruments and models for monitoring expected credit losses. These were not regularly calibrated and updated with reliable credit input data, which meant that the AG was unable to confirm the assessment of expected credit losses by alternative means or whether adjustments were required to net loans and advances.

Management, therefore, did not adequately oversee the development, implementation and monitoring of action plans to address shortcomings in terms of internal control relating to the security required for loans, as prescribed by international financial reporting standards.

Share on facebook
Share on twitter
Share on linkedin