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AgriBEE Indaba Banking Association

AgriBEE Indaba Banking Association. Andrew Makenete 6 December 2005. AgriBEE Framework. Must recognise role of agriculture industry in SA Economy and the multi linkages Future market positioning & opportunities to be exploited

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AgriBEE Indaba Banking Association

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  1. AgriBEE IndabaBanking Association Andrew Makenete 6 December 2005

  2. 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

  3. 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

  4. 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

  5. View: Banking Association (Cont) • 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

  6. 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)

  7. Responsibility of the Banking Industry • 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

  8. 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

  9. Gaps To be Addressed (cont) • 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”

  10. Gaps To be Addressed (Cont) • 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

  11. Gaps To be Addressed (Cont) • 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.

  12. THANK YOU

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