The Auditor-General’s (AG) 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”, said Christo van der Rheede who is the Executive Director of Agri SA.
“The adverse audit opinion cannot be ignored, heads must roll at management and governance level! This also applies to the Treasury, which is responsible for the oversight of this bank. It is unlikely that they were unaware of what was coming because the financial crisis at the Land Bank did not occur overnight.”
“In the 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 the 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 present-ed 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 a basis for an audit opinion. In the report, the AG refers to insufficient internal control over and management of instruments and models for monitoring expected credit losses.
“In terms of procurement and contract management, some goods, works, or services were not procured in accordance with a fair, transparent, and competitive process. In certain cases where contracts had expired, appropriate processes were not followed to appoint new service providers and no approval was granted in this regard.”
“Management failed to check and monitor compliance with the relevant laws and regulations and also did not follow the Treasury instruction in terms of the renewal and extension of contracts with service providers who manage the indirect loan book on behalf of the bank.”
“It is thus no wonder the Land Bank’s cash reserves or funds held for short-term and emergency financing purposes had declined by almost 80% to R700 million compared to the R3,2 billion in the previous year.”
“This level of incompetence cannot be over-looked. Heads must roll. This situation cannot be allowed to continue.”