Bosses said the government’s new decree on land reform could trigger defaults that would cost the economy £2.2bn if the bank’s rights as a creditor are not protected.
Land Bank is an agricultural bank guided by a government mandate to provide financial services to the commercial farming sector and agri-business.
South African President Cyril Ramaphosa announced this month his government will enforce a change in the constitution to allow the expropriation of land without compensation.
A record number of white South African farmers have put their land up for sale amid fears the ruling party is considering confiscating properties bigger than 25,000 acres.
According to the ruling Africa National Congress party (ANC), the white minority in the country still own most of the land more than two decades after the end of apartheid.
The ANC wants to redistribute the land confiscated from white farmers to the black citizens of the country.
Land Bank chairman Arthur Moloto said expropriation without compensation would immediately cost the bank £480m.
He said: “A cross default clause would be triggered should we fail to pay when these debts fall due because of inadequate liquidity or lack of alternative sources of funding.
“This would make our entire funding portfolio due and payable immediately, which we would not be able to settle.
“Consequently, government intervention would be required to settle our lenders.”
Mr Moloto said a badly-run land reform program would hurt his bank’s capital.
He said: “A poorly executed expropriation without compensation could result in the main sources of funding drying up as investors might not be willing to continue funding Land Bank in particular, or agriculture in general.”
Since the end of apartheid in 1994, the ANC has followed a “willing-seller, willing-buyer” model.
Under the plan, the government buys land from white landowners and redistributes it among black citizens of the country.
But critics say the land reform programme has not brought the results the ANC wants.
Tensions among South Africa’s white farming community has been escalating since the election of Cyril Ramaphosa as President earlier the year, who committed his African National Congress (ANC) to land expropriation.
Last week, ANC chairman Gwede Mantashe sparked panic among the farming community when he said: “You shouldn’t own more than 25,000 acres of land.
“Therefore if you own more it should be taken without compensation.
“People who are privileged never give away privilege as a matter of a gift.
“And that is why we say, to give you the tools, revisit the constitution so that you have a legal tool to do it.”
Economists and farmers’ unions have warned land grabs in South Africa could lead to a Zimbabwe-style collapse of the the agricultural industry from which the economy will struggle to recover.