Johannesburg - The state-owned Land Bank is geared up to spend about R1bn on emerging farmers in the next two years, Finance Minister Pravin Gordhan said on Thursday.
"Greater resources need to be directed to development, and government will provide the support necessary to achieve this goal," Gordhan said in the Land Bank's 2010/11 annual report.
He said the Land Bank was using a social accounting matrix methodology to assess the impact of its funding.
"The methodology takes into account key economic variables such as gross domestic product (GDP), job creation, capital utilisation and income accrued to households," Gordhan said.
Job creation was a priority for South Africa, and the agricultural sector had good potential to create jobs, he said.
South Africa's major development finance institutions (DFIs) - the Development Bank of Southern Africa, the Industrial Development Corporation, the National Empowerment Fund, the National Housing Finance Corporation and the Land Bank - were all important to the country's economic development.
"For some time, government has been grappling with how to position the country's DFIs to enhance their ability effectively and efficiently to deliver significant and tangible developmental outcomes benefiting all South Africans, particularly the poor and marginalised," the minister said.
"As government has decreed job creation a priority, the role of DFIs is even more vital. New initiatives must be devised to recharge the economy and move it towards becoming globally competitive."
He said government had set up the Development Finance Institutions Council to ensure alignment between the DFIs' programmes and government's development agenda.
"The impact that DFIs have on the lives of ordinary South Africans must be evidenced in sustained improvements in incomes and standards of living as a result of access to DFI funding, projects, facilities and infrastructure investments."
Gordhan acknowledged that DFIs still faced serious difficulties in reducing poverty and creating sustainable economic growth, and thus needed consistent state support.
In the case of the Land Bank, government had to ensure it was adequately capitalised.
"In 2009, the National Treasury raised the guarantee to the bank from R1.5bn to R3.5bn, with the aim of putting it in good standing with existing and potential creditors," he said.
"On the strength of the guarantee, the bank's balance sheet has improved and greatly boosted investor confidence.
"We expect that this injection will place the Land Bank on a sound footing for the future, and that it will operate within a prudent financial framework while adhering to good governance, appropriate risk-management policies and legislative compliance."
Gordhan said the stabilised Land Bank had been able to successfully launch the domestic medium-term note programme, through which it secured additional loan capital of R1.2bn.
"This was raised in bonds that were over-subscribed by private investors – a considerable achievement."
Gordhan said the annual report marked a significant milestone for the Land Bank.
"The turnaround programme has been completed successfully, resulting in improved performance."
The Land Bank, which had in the past been plagued by corruption and incompetence, operates as a commercial bank focusing on funding development in the land and agriculture sectors.
Corruption investigations are continuing and former Land Bank chief executive Philemon Mohlahlane and two others will plead in November to charges relating to the embezzlement of R19m from the AgriBEE scheme.