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The Land and Agricultural Development Bank

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Title: The Land and Agricultural Development Bank


1
The Land and Agricultural Development Bank
  • Annual Financial Results Presentation
  • 2002-2003

2
Agenda
1 Overview of the year Jethro Mbau (Chairperson of the Board)
2 Operational overview Monwabisi Fandeso (CEO)
3 Financial results Kgosi Tshikare (GM Finance)
4 Prospects Monwabisi Fandeso (CEO)
3
1. Overview of the year
  • Jethro Mbau
  • Chairperson of the Board

4
Overview
  • Windfall year for sector
  • Volatile rand and producer price increases
  • Inflation and input costs
  • Deregulation (international domestic)
  • Strategic plan adopted for sector
  • Legislative changes
  • Strauss implementation progress and shareholder
    support
  • Business improvement initiatives
  • Financial results summary

5
2. Operational Overview
  • Monwabisi Fandeso
  • CEO

6
  • LAND BANK MISSION
  • Agricultural development finance institution that
    supports economic growth through the provision
    of retail, wholesale, project and
    micro-financial services to agriculture and
    related rural services
  • LAND BANK VISION
  • To be the leading provider of world-class
    agricultural financial services to agriculture
    and related rural sectors in South Africa

7
  • The State is the only shareholder represented by
    the Minister for Agriculture and Land Affairs
  • Currently governed by the Land and Agricultural
    Development Bank Act, 2002 (Act no. 15 of 2002)
    and guidelines provided by the Public Finance
    Management Act (Act no. 29 of 1999)
  • Exempt from the payment of income tax and
    currently not paying dividends to the State

8
Benchmarking our progress
  • New legislation provides the benchmark against
    which we measure progress
  • Land and Agricultural Development Bank Act
    outlines 11 key objectives for bank
  • This section of presentation reports back on
    progress against those objectives

9
1. Equitable ownership
  • Objective Equitable ownership of agricultural
    land, in particular the increase of ownership of
    agricultural land by historically disadvantaged
    persons
  • Achievements
  • Agency agreement with DLA on LRAD
  • Over R100 million disbursed in grants
  • Over R300 million disbursed in production loans
    to beneficiaries
  • Special mortgage loans _at_ 10 advanced
  • Preferential access to bought-in properties
  • Partnership with National Youth Commission

10
2. Promotion of reform
  • Objective Promotion, facilitation and support of
    agrarian reform, land redistribution or
    development programmes aimed at HDIs for the
    development of farming enterprises and
    agricultural purposes
  • Achievements
  • Agency agreement on LRAD
  • Tripartite agreement with NDA, CRLR LB re
    restitution programme
  • Valuations carried out by Land Bank for Land
    reform purposes
  • Preferential access to BIPs
  • Training, skills development under CSI

11
3. Access to land
  • Objective Promotion, facilitation and support of
    land access for agricultural purposes
  • Achievements
  • Special mortgage loans
  • Preferential access to BIPs (91 farms sold 57k
    ha, to PDIs)
  • Agency agreement with DLA on LRAD
  • Tripartite agreement with NDA, CRLR LB re
    restitution programme
  • Youth farm projects with NYC

12
4. Entrepreneurship
  • Objective Promotion, facilitation and support of
    agricultural entrepreneurship
  • Achievements
  • Training and skills development (R5.3-m)
  • Developing grain producer of the year award
    (sponsorship) (R60k)
  • Sponsorships to organised agriculture for
    leadership development, international relations,
    specific projects etc NAFU, NERPO, Grain SA
  • Land Bank Agricultural Chairs at six
    universities (R1.7-m)
  • Bursaries to PDI students at tertiary level (R
    1.3-m)
  • Linkages with CDI, Agri-link project
  • Sponsored female farmers on study tours to
    Spain, Kenya

13
5. Redress
  • Objective Promotion, facilitation and support of
    the removal of the legacy of racial and gender
    and discrimination in the agricultural sector
  • Achievements
  • Batho Pele adopted and internalised as policy
  • Land Bank brochures radio shows in different
    languages
  • Step up (over 70 are women)
  • Female farmer of the year, Women in Agriculture
    Conference and international study trips
    sponsored
  • Client base
  • Employment equity plan advanced
  • 60 of top 45 managers are PDI
  • 25 of top 40 managers are Women
  • 60 of bursaries targeted at females

14
6. Productivity and innovation
  • Objective Promotion, facilitation and support
    for the enhancement of productivity,
    profitability investment innovation in the
    agricultural and rural financial systems
  • Achievements
  • Improvement of financial service delivery reach
    mobile banking, satellite offices. Outlets
    increased from 27 to 80
  • Intermediary financing R60-m to provincial DFI
  • Africare guarantee scheme (R 7m)
  • Financing appropriate technology for developing
    farmers
  • Publication of Vukuzenzele comprehensive guide
    to farming for small scale farmers
  • Publication of Animal Health guide for emerging
    farmers.

15
7. Stimulating growth
  • Objective Promotion, facilitation and support of
    programmes to stimulate the growth of the
    agricultural sector and better use of land
  • Achievements
  • 70 growth of the Development book
  • Outgrew the shrinking sector in the year
  • Microfinance expansion mainly through growth of
    existing clients.
  • Participate in the revival of schemes e.g Ncora,
    Qamata

16
8. Promoting sustainability
  • Objective Promotion, facilitation and support of
    programmes to promote and develop the
    environmental sustainability of land and related
    natural resources
  • Achievements
  • Alliance with ARC on Agricultural GIS
  • Flood relief programme in partnership with NDA
    IDC
  • Assisted NDA with assessment of damage caused by
    veld fires drought.
  • Financing of livestock done on the basis of
    carrying capacity
  • Participation in the WSSD

17
9. Rural development and job creation
  • Objective Promotion, facilitation and support of
    programmes that contribute to agricultural
    aspects of rural development and job creation
  • Achievements
  • Social accounting introduced to track impact of
    Banks lending activities
  • Social investments e.g Qamata school in
    Elliotdale
  • Special focus on financing projects in the
    presidential nodal points in conjunction with IDT
  • Compulsory in-service training and internship
    for bursars

18
10. Commercial agriculture
  • Objective Promotion, facilitation and support of
    commercial agriculture
  • Achievements
  • Maintained 50 share of commercial agriculture
  • Financing of agricultural companies/co-ops for
    on-lending purposes - (R7-bn)
  • Financing of agribusinesses
  • Sponsorship to AGRISA, ABC

19
11. Food security
  • Objective Promotion, facilitation and support of
    food security
  • Achievements
  • MoU concluded with NDA to distribute security
    Veggie Packs
  • Promotion of vegetable gardens
  • Grain financing options advanced

20
The Development Imperative
  • The holistic approach to development finance
  • Access to Skills and Capacity Building
  • Access to Technology and Information
  • Access to Markets
  • Access to Land
  • Access to Finance
  • Success will be determined by the
  • Partners and Alliances we can mobilise
  • Resources that can be mobilised into the sector
  • Enabling environment to play our role
  • Efficient and effective Bank operations to
    enhance the institutions ability as a delivery
    vehicle

21
Achieving our Purpose
  • In order to achieve our vision, mission and
    mandate we required
  • Legislative change
  • Business process improvements to enhance
    performance
  • Enhance competitive advantage as a specialist
    provider of agricultural financial services

The solution BPR (Project Gateway)
22
Objectives of BPR
  • Clarify procedures and ensure compliance leading
    to better management of the risk profile of loan
    book
  • Accelerate arrear recovery performance and
    improve insolvency collection rates
  • Identify opportunities for profitable loan book
    growth, including product offering and customer
    service enhancement
  • Improved reporting and control systems
  • Elimination of non value adding activities
    (process refinement)
  • Promote active management and supervisory style

Deliver quantifiable and measurable performance
improvement R200 million within the year
23
Areas of focus
  • Customer service and sales orientation
  • Structure productivity improvements
  • Process improvements, including loan book analysis

24
Results customer service sales
  • Non interest income products implemented
  • New management control system implemented for
    sales function
  • New loan products designed
  • Branch remodeling for enhanced client service
  • Days in pipeline reduced
  • Database of prospective clients developed

25
Results structure productivity
  • Branch structure analysed and new branch model
    piloted
  • Core business activities restructured to focus on
    sales, account management and recoveries
  • Management control systems installed to increase
    accountability
  • Increased supervisory positions planned to
    increase level of control

26
Results process improvements
  • New process flows designed
  • Loan application approval
  • Loan processing
  • Account management
  • Recoveries arrears management

27
Understanding our loan book
  • Specialised techniques employed
  • Discovery of a more acute level of arrears and
    insolvencies than was previously identified and
    classified as a result of .
  • Uncertainty around Constitututional Court
    judgement
  • Weak and bureaucratic recovery mechanisms due to
    constraints of old Act compounded by
  • Deregulation of sector, and past natural
    disasters
  • Result Significant bad debt provision charge

28
Arrears management
  • New mechanisms put in place in December 2002
  • Arrears of R350-million already recovered
  • Ongoing attention being paid to enhancing quality
    of loan book
  • Loans at risk reduced from R5-bn in September
    2002 to R2.8-bn in March 2003
  • Specialist collection agencies being appointed
    to maximise recovery
  • Current provision for doubtful debt is adequately
    provided for

29
3. Financial results
  • Kgosi Tshikare
  • General Manager Finance

30
Outline
  • Income statement highlights
  • Balance sheet salient features

31
Income statement highlights
  • Net interest income 18.6
  • Non interest income 73.9
  • Net operating profit before provisions 18.4
  • Efficiency ratio within target 38.7
  • Net interest income margin 4.3
  • Provision impact on profitability R1 429 million

32
Net Interest Income up 18.6 to R882 m
33
Non interest income up 74 to R38.9-m
34
Operating income up by 19.9
35
Efficiency ratio of 37.8 compares favourably
with desired target of below 40
36
Operating profit before provisions of R 574-m
(2001 R485-m)
37
Provisions for non performing loans Impact on
profitability
  • Acute arrears resulted in bad debts provision
    charge of R1776-m
  • Resulting in reported loss of R1 429-m

38
Balance Sheet Salient features
  • Development loan book increased by 71
  • Loan portfolio down 3.8 to R16 260-m against 8
    decline in agricultural debt
  • Loan approval up by 4 to R8 722-m
  • Arrears reduced by 36 to 9.6
  • Provision for doubtful debt up from R729-m to R1
    530-m
  • Capital adequacy of 14.6 is above the benchmark
    of 11

39
Provision as a of loan book
40
4. Prospects
  • Jethro Mbau Chairperson
  • Monwabisi Fandeso CEO

41
Shareholder support
  • Commendable progress has been made not only in
    implementing the recommendations of the Strauss
    Commission but also in transforming the bank into
    an institution that all South Africans can be
    proud of.
  • While further challenges still lie ahead for the
    Bank there is no doubt that tremendous progress
    has been made, and that the Bank continues to
    move in the right direction.

42
Shareholder support
  • On this basis I would like to express my
    continued support for the Board and Management of
    the Bank and to endorse their activities in the
    field of development finance.
  • The Strauss commission recommended direct
    grants to enable the Bank to meet its development
    mandate. This recommendation has been taken to
    heart by government and has resulted in a
    directive from the Ministry to expedite the
    transfer of funds from the former ACB to Land
    Bank in accordance with the provisions of the
    Agricultural Debt Management Act.

43
The year ahead
  • Development Holistic approach will be greatly
    enhanced by the transfer of funds to the Bank
  • Margin Interest rate cycle and inflation could
    put pressure on margin
  • Continued growth growth of 5.3 on the average
    gross loan book
  • Efficiencies ratio set at 35
  • Increased sales and customer orientation new
    branch model to be implemented to enhance sales
    and account management function
  • Risk management planned redesign of credit
    assessment and risk management evaluation
    methodology will enhance quality of loan book

44
Thank you
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