L e t ’ s g e t d o w n t o b u s i n e s s . Yours .

BBS: AgriBusiness

AgriBEE Indaba

Banking Association

Andrew Makenete6 December 2005

L e t ’ s g e t d o w n t o b u s i n e s s . Yours .

BBS: AgriBusiness

AgriBEE Framework Must recognise role of agriculture industry in SA Economy

and the multi linkages

Future market positioning & opportunities to be exploited

Important that it is well received by stakeholders, farmers, industry, consumers, labour, public, media, financial service providers etc. international bodies

Must be a shift from “Business as Usual” to “Usual business” i.e. BEE in Agriculture becomes the norms

High Expectations converted to real expectations

Exploit the true potential for Growth in agribusiness

L e t ’ s g e t d o w n t o b u s i n e s s . Yours .

BBS: AgriBusiness

View: Banking Association

• Draft charter Consultative process has been very important

Informed by the Strategic Plan for Agriculture – Well accepted document

Informed by the Code’s of good practice

• Key Challenge Areas Land Reform will be key :

• Reaching the 30% target by 2014 is non-negotiable;

• Acceleration of settlement of land claims, resettlement, redistribution;

• Coordinated/Integrated Ministerial Support

L e t ’ s g e t d o w n t o b u s i n e s s . Yours .

BBS: AgriBusiness

View: Banking Association (Cont)

• Key Challenge Areas” Recognition of role of property in global wealth creation – in this

respect land as an asset is a key value source for creating sustainable value - therefore the principles of “ Willing buyer – Willing seller” are important in locking in value. Does not preclude fact that massive state intervention required in the market, nor underscore failure of “pricing forming mechanisms in certain markets”.

Cost of doing business (agriculture):

• Extreme pressure on profit margins in the sector throughout the value chain reduces the ability to the sector to draw in new participants;

• Significant investments required in the sector particularly in infrastructure, support services, research and extension. This will lower threshold of doing business and reduce risk

L e t ’ s g e t d o w n t o b u s i n e s s . Yours .

BBS: AgriBusiness

New and targeted incentives to grow agriculture

Syndication of Risk in an manner that will draw in further investment – to some extent government needs to share in the risk enterprise.

Public Private Partnership [PPP]• Financial Institutions to administer government

programmes [MAFISA, LRAD, CASP, etc}

• Banks can enhance Governments ability to deliver

• Banks can assist with financial Assessment & monitoring of LRAD beneficiaries

View: Banking Association (Cont)

L e t ’ s g e t d o w n t o b u s i n e s s . Yours .

BBS: AgriBusiness

Responsibility of the Banking Industry

• Banks drew up own charter much earlier than the publishing

of Codes of Good Practice and the framework for the AgriBEE

charter – committed R1,5 bn over next 5 years (2004 – 2008).

We accept that financing is key to fast-tracking

empowerment and transformation

R1,5 bn of the total financing package is low, but this was

a minimum threshold in the absence of clear Agri-sector

targets (we envisage and accept that they should be

further negotiations and collaboration)

L e t ’ s g e t d o w n t o b u s i n e s s . Yours .

BBS: AgriBusiness

Support to institutions, building up the institutional

arrangements and leveraging these e.g. DoLA (LRAD),

DoA (CASP, MAFISA)

Direct support, facilitation, shared information, and

resource allocation to Agri-industry, farmer and agri

enterprises, and agro-industrial bodies

Promoting champions and industry leaders

Responsibility of the Banking Industry

L e t ’ s g e t d o w n t o b u s i n e s s . Yours .

BBS: AgriBusiness

Gaps To be Addressed

• Acquisition of land and assets Massive upscale required in funding beyond LRAD grants

Legislative and regulatory framework to allow for land rental

markets (security of tenure, terms etc to encourage

investment)

• Equity Gap Establishment of a Agriculture specific fund for emerging

farmers, enterprises and entrepreneurs

Broadening MAFISA's mandate / funding to lower cost of

funding across value chain

L e t ’ s g e t d o w n t o b u s i n e s s . Yours .

BBS: AgriBusiness

• Risk reduction Finalize land claims process

Develop new collateralized / securitized vehicles and or

institutional /enterprise arrangements (off take

arrangements, contracting, purchase agreements)

Endorse property rights and market promoting

mechanisms “Willing buyer – willing seller”

Gaps To be Addressed (cont)

L e t ’ s g e t d o w n t o b u s i n e s s . Yours .

BBS: AgriBusiness

Government define its role with respect in promoting access to new participants in the various markets and overall in promoting “brand SA Inc” in the international trade environment

• Skills Gap

Agribusiness and Gov [Extension Services] needs to develop a “Skills/Expertise Transfer Strategy”

• Mentorship Programmes

• Commercial Farmer to BEE Farmer support

• Empower Extension Officer - Up-skill, well resourced, and reward & Performance culture

Gaps To be Addressed (Cont)

L e t ’ s g e t d o w n t o b u s i n e s s . Yours .

BBS: AgriBusiness

• Skills Gap (cont)

Defined period of Skill development

Recognition for Service Providers [Sector & Individuals]

Formalize link between Agri-Seta and all Skills Dev related

initiatives.

Gaps To be Addressed (Cont)

L e t ’ s g e t d o w n t o b u s i n e s s . Yours .

BBS: AgriBusiness

THANK YOU