JOINT%20BUDGET%20COMMITTEE%20HEARING%20ON%20MTBPS%20Theme%203:%20Rural%20Development%20and%20Urban%20Renewal%20Masiphula%20M.%20Mbongwa%20DDG:%20DEPARTMENT%20OF%20AGRICULTURE%20%20Committee%20Room%20E249%20Parliament%2002%20November,%202004,

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JOINT BUDGET COMMITTEE HEARING ON MTBPSTheme 3
Rural Development and Urban RenewalMasiphula M.
Mbongwa DDG DEPARTMENT OF AGRICULTURECommitt
ee Room E249Parliament02 November, 2004,
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Sustainable Rural Livelihoods Framework

• OUTCOMES
• more income
• more jobs
• better well-being
• reduced vulnerability
• improved food security
• better sustainable use of NR-base

• ISRDP
• STRATEGIES
• LRAD
• CASP
• IFSNP
• ARM
• AgriBEE
• MAFISA
• Land Care
• Non-NR-based

TRANSFORMING STRUCTURES PROCESSES

• CAPITAL ASSETS
• Natural
• Social
• Physical
• Human
• Financial

• VULNERABILITY CONTEXT
• Trends
• Shocks
• Culture

STRUCTURES Government Private Sector
Laws Policies
Incentives Institutions PROCESSES
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Presidential Announcement

• Re-establish the agricultural credit scheme in
  the Department of Agriculture
• Provide capital to increase support to
  agricultural activities in the communal land
  areas as well as other smallscale agriculture.
• Leave the Land Bank to deal with the commercial
  sector
• Make R1 billion immediately available to start
  the scheme
• Work with the financial institutions to implement
  the provisions in the financial services charter
  relevant to the development of small-and
  medium-farming enterprises

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Why the Reversal ?
Commercial Banks
Land Bank
Agricultural Credit Board
Agricultural Coops
Agricultural Coops
Agricultural Coops
Enterprises
Farmers
Enterprises
Farmers
Farmers
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Why the Reversal ?
Commercial Banks
Land Bank
Agricultural Companies
Rural Micro-Finance Institutions
Rural Micro-Finance Institutions
Enterprises
Farmers
Farmers
Farmers
Enterprises
Farmers
Farmers
Farmers
Farmers
Farmers
Farmers
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Why the Reversal ?
Commercial Banks
Land Bank
MAFISA Micro-Agricultural Financial Scheme for
South Africa
Enterprises
Farmers
Farmers
Farmers
Enterprises
Farmers
Farmers
Farmers
Farmers
Farmers
Farmers
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Mission

• MAFISA is the state-owned entity that provides
  micro-agricultural financial services on a
  widest, accessible, cost-effective and
  sustainable basis in the rural areas.

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Strategy
Productive Assets and Technology   Improving
equitable access to productive natural resources
and technology
Human and Social Assets   Strengthening the
capacity of the rural poor and their organisations
Empowering the rural working poor and
enterpreneurs in their efforts to improve their
livelihoods
Financial Assets and Markets   Increasing access
to financial services and markets
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Principles

• Rural livelihoods strategies guide service
  delivery
• Collaborate, share and reinforce for service
  delivery
• Use or improve existing resources and efforts
• Offer and gain something of value to service
  delivery
• Specialise in something of value to service
  delivery
• Strive for service delivery within the 20km
  target
• Go for 10 million customers for scale, leverage
  and impact
• Optimise tax Rand value return to reduce poverty
  and hunger and
• Use rural financial services industry benchmark
  to improve service delivery.

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Farms and Agribusiness Structure
Large commercial farms agribusinesses
1st Economy
IV III II I
Small commercial farms agribusinesses
2nd Economy
Emerging farms and agribusinesses
Subsistence farms and agribusinesses
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Socio-Economic Analysis

• An estimate of 15 million rural poor people
• Women-headed households
• Women, youth and people with disabilities
• Some form of access to land
• Have some form of self-employment
• Earn between R600 R1 000 per month
• Farming share less than 10 to total HH income
• Move in and out of the 1st and 2nd economies in
  pursuit of household livelihood strategies
• Are not severely malnourished, hungry or
  destitute
• Use credit for high potential areas and high
  return activities

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Socio-Economic Analysis

• Use savings for subsistence farming and low
  return productive activities
• Rely on remittances, wages, disability, pension
  and child support grants for production and HH
  needs
• Live in remote and dispersed areas with poor
  infrastructure
• Participate in but do not benefit from the 1st
  economy
• May be creditworthy below and above the poverty
  datum line
• May engage into profitable self-employment
  investments
• Use extended families and social networks to
  manage production, price and market risks and
  disasters

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Business Case

• More savers than borrowers in a financial system
• Households save more than they borrow
• Enterprises borrow more than they save
• If 10 out of 15 million rural people are savers,
  then 5 million rural people should be borrowers
• If 10 million people save at least R200 per year,
  then there should be R2 billion in the rural
  financial market available for the 5 million
  rural borrowers.

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Customers

• Farm workers
• Small landholders
• Landless
• Food Emergency Beneficiaries
• Farm and labour tenants
• Land reform and agrarian beneficiaries
• Small farmers
• Household producers and
• Rural micro-entrepreneurs.

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Products and Services
Income Level Commercial Financial Services Commercial Financial Services Commercial Financial Services Commercial Financial Services Commercial Financial Services Poverty Alleviation Programmes
Low Standard Bank Services Micro-Savings Micro- Loans Micro- Insurance Trans-actions
Working Poor Micro-Savings Micro- Loans Micro- Insurance Trans-actions
Extremely Poor Food water, medicine and nutrition, employment generation, skills training relocation
Poverty Datum Line
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Functional Structure
Head office
District Branches
41
Local Branches
Local Branches
500
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(No Transcript)
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Service Delivery Consortia
Land Bank
Provincial DoAs
Local Municipalities
Post Office
SAVVEM
Provincial DFIs
IDC
Rural Financial System
MAFISA
Donors
Agri Cos
KHULA
APEX Fund
Banks
Agri-Coops
Rural MFIs
User-Owned
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Sources of Funding
Interest Income
MAFISA
Grants
Investments
Parliamentary Appropriation
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Phased Implementation Plan

• Phased over 10 years
• Launch quick win products in selected areas
• Increasing institutional sustainability
• Conducive policy and institutional environment
• Gradual expansion of the branch network
• Conduct staff training and deployment
• Building strong partnerships and alliances
• Developing new innovative products and services
• Monitoring and evaluating implementation and
• Assessing the impact on the lives of the rural
  working poor and entrepreneurs.

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Expected Outcome

• A more efficient and effective agricultural rural
  finance system
• Financial services which are more accessible,
  relevant and responsive to farmers and
  agribusinesses
• Greater productivity in farming and agribusiness
  operations
• More effective and participation by beneficiaries
  in input and output markets
• Sustainable institutions with a greater outreach
  capacity
• Greater and more reliable production of food
• Greater asset ownership and
• Increased wealth, growth and development.

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THANK YOU
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Sustainable Livelihoods Framework

• OUTCOMES
• more income
• more jobs
• better well-being
• reduced vulnerability
• improved food security
• better sustainable use of NR-base

• ISRDP
• STRATEGIES
• LRAD
• CASP
• IFSNP
• ARM
• AgriBEE
• MAFISA
• Land Care
• Non-NR-based

TRANSFORMING STRUCTURES PROCESSES

• CAPITAL ASSETS
• Natural
• Social
• Physical
• Human
• Financial

• VULNERABILITY CONTEXT
• Trends
• Shocks
• Culture

STRUCTURES Government Private Sector
Laws Policies
Incentives Institutions PROCESSES
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Sustainable Rural Financial System
Stakeholder participation
Non-Financial Services
Improved sustainable livelihoods
Financial Services
Rural Financial Infrastructure
Outreach
Conducive Policies
Regulation Supervision
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Financial and Enterprise Viability Cycle
Viable Financial Institutions
Vibrant rural and agricultural economy
Growth
Growth
Viable Rural Enterprises
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Savings and Credit Household Cycle
Savings Subsistence production and low return
ventures
Rural and Agricultural Economy
Growth
Growth
Credit High potential areas and high return
ventures
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Defining the Two Economies

• Short hand for socio-economic dualism
• First Economy at the cutting edge, globally
  integrated and with a capacity to export
  manufactured goods, services and primary
  commodities
• Second Economy exists at the edges, consists of
  large numbers of the unemployed and the
  unemployable, and does not benefit from
  progress in the First Economy
• The Second Economy denotes the condition lived by
  millions of people on the margins of the modern,
  industrial economy
• People without a steady income based on their own
  economic activity
• Households or individuals with no steady
  employment, and without an income-generating
  asset that can practically be realised as
  capital or collateral

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CASP model
Agricultural macro- system within consumer
economic environment
Farm Business level activity
Household food security Subsistence
The Hungry Vulnerable
Agriculture support
6 pillars
Technical advisory assistance
Marketing Business Development
Training Capacity building
Information Knowledge Management
On off farm infrastructure
Financial assistance