LAND BANKPresentation to Parliament standing committee

9 November 1999

Content Outline

• Introduction

– Introduction of Members

– Purpose of the Presentation

– Development commitment

– Presentation outline

• Yesterday - background

– Strauss Commission

– Government Mandate

– Legal Framework

– Inheritance since 1997

– Ministerial Relationships

• Today

– Achievements

– Challenges

• Future

– National Strategic Intent

– Strategic Intent

– Principles

– Strategic Initiatives

• Discussion & Way Forward

• Conclusion

Introduction

Introduction

• Members of the team

• Purpose of the Presentation

• Development Commitment

• Presentation Outline

IntroductionMembers of the Team

• Ms. Sharon February Non Executive Director

• Mr. Ted Kekana Manager

• Mr. Masipula Mbongwa Non Executive Director

• Ms. Totsie Memela Executive Director

• Mr. Brendan Pearce Executive Assistant

• Mr. Adrian Toms Executive Director

IntroductionPurpose Of the Presentation

• To share the history of the Land Bank with the committee

• To develop a common understanding of the role of the bank between the Committee and us

• To understand what the committees goals are for Agriculture and the Land Bank

• To develop approaches and programmes for the mutual support of the Land Bank strategy

IntroductionDevelopment Commitment

Development Commitment

AgriculturalDevelopment

Bank

Sustainable People First

Competitiveness&

Inclusiveness

SociallyResponsible

Enhance Environment

IntroductionPresentation Outline

Yesterday

Tomorrow Today

Development Commitment

Yesterday

Yesterday - Background

• Strauss Commission

• Government Mandate

• Ministerial Relationships

• Legal Framework

• Inheritance From 1997

Yesterday - BackgroundStrauss Commission

• Appointed By President Mr. N R Mandela from January 1995 to September 1996

• The Brief Was:

“To investigate the provision of Rural Financial Services, within the context of the Rural Development objectives of the RDP, and make recommendations for policy, legislative and institutional measures to improve Financial Services for Rural Households, Farmers, and other entrepreneurs.”

Yesterday - BackgroundStrauss Commission Recommendations

•Maintain existing clients while providing support to new clients, especially previously disadvantaged

• Improve outreach

•Change financial mechanisms to create access

•Focus on core mandate

Yesterday - BackgroundGovernment Mandate

•Continue to provide support to commercial Farming

•Deliver appropriate services or products to new mandate clients

•Achieve efficiency and cost effectiveness of service delivery

•Benchmark with other similar institutions

Therefore

Fulfill a wider development mandate to stability, job creation and best practice

Yesterday - BackgroundMinisterial Relationships

Ministry of

Land

And

Agriculture

Land redistributionRestitutionTenure reformLand Development Support

Agricultural Financial Services

Facilitate Agricultural Marketing

Departmental Statutory Bodies

Department of Agriculture

PolicyFacilitatePromote

Department Of Land Affairs

Land Bank

National Agricultural Marketing Council

Agricultural Research Council

Provide research services

to Agriculture

Yesterday - BackgroundLegal Framework

•Governed By the Land Bank Act of 1944

•Act has become outdated, restrictive, and out of step with current and future realities

Adhoc Amendments

•Permit women in customary marriages to borrow in own right

•Lend to all legal persons, including– Companies– Common property associations– Co-operatives

Yesterday - BackgroundLegal Framework - Continued

•Permit wider range of lending

– Agriculture

– Agri-related business

•Alignment of the act with the other related legislation

– Constitution

– Governance act

– Human Resources legislation

Yesterday - BackgroundInheritance in 1997

•Bloated Bureaucracy

•Exclusively white male management

•None or little services to previously disadvantaged

•Inefficient and outdated banking management systems

•Over staffed by about 35%

•Low levels of productivity

•Rigid product range

Yesterday - BackgroundInheritance in 1997 - continued

•New and Transformed board of directors

•New governance structures

•New management

•A need to service new mandate clients

•Administration factory

•Non-aligned pricing

Today

TodayAchievements - Outline

• Transformation

• Product Portfolio

• Branch Redesign and outreach

• Systems Modernization

• Alignment

• Financial Performance

• Update the act

Today – AchievementsProduct Portfolio

Step Up

Bronze

Silver

Gold

Gold Platinum

Platinum

Poorly Resourced

Securely Resourced

Promote&

Demote

Today – AchievementsBranch Redesign

• Decentralization to improve turn around

• Unbundling to achieve

– Sustainability

– Access to clients

• Human resources development to improve skills

• Consultative forums

– Provincial Advisory Forums

• Outreach

– Appointment of agencies

Today - Achievements Systems Modernization

• Information Technology– Peoplesoft Integrated software to replace old system

– Real-time processing to improve customer service

– Automation of manual processes

• Human Resources

– Attract scarce skills from commercial market

– Preferred employer status

– Address salary anomalies

– Align Compensation with the market

– Staff Development

Today - Achievements Alignment

• Focus on value adding core business activities

• Customer service orientation

• Team processes

• Compensation alignment to market rates

• Interest rates to market rate and fluctuations

• Right sizing of head office – From 300 in 1997

– To 130 in 1999

• Credit policies

Today - Achievements Financial performance

• Retail Expense Ration– From 1997 105% to 1998 at 54%

• Retail performance – Containment of costs

– Branch Positive Contribution to surplus

– 1997 3 out of 25

– 1998 13 out 0f 25

• Growth

• Capital Adequacy

Today - Achievements Financial performance Growth

10000

10500

11000

11500

12000

12500

1996 1997 1998

Loans R m

Loan Book

Today - Achievements Financial performance Growth

NET Surplus

0

50

100

150

200

250

300

350

400

1996 1997 1998

Surplus Rm

Today - Achievements Financial performance Growth

Capital Adequacy Ratio

14.80%

15.00%

15.20%

15.40%

15.60%

15.80%

16.00%

16.20%

16.40%

16.60%

1996 1997 1998

Capital AdequacyRatio

TodayChallenges

• Sustainability

• The right Price

• Reaching Mazondo

• Visibility

• Impact Delivery

• Representative Employee Profile

• Market Confidence

• Promoting Subsistence Farmers to Commercial Status

• Efficient Service Delivery

• Relevance of Land Bank Act

Future

•National Strategic

•Strategic Direction

•Strategic Principles

•Strategic Initiatives

Future

• National Strategic

– Vision

– Goals

• Strategic Direction

– Vision

– Mission

– Values

– Services or Products

– Goals of Land Bank

• Strategic Principles

– Pricing

– Sustainability

– Intermediary Strategy

National Strategic IntentVision

BetterQualityof Life

Q.O.L.

S

A

F

E

T

Y

FOOD

SHELTER

INFRASTRUCT

HEALTH

EDUCATION

SOCIAL &ECONOMICACTIVITY

HOUSING

SMME

LOCAL

GOVM

RURAL

DEV1.

AGRIC

National Strategic IntentGoals

Good Governance Through• Stakeholder Consultation• Accountability• Ethical Behaviour• Transparency

Accelerated Service delivery that results in job

creation Deliver social Impact in the

following aspects• Groups - PDI, Gender, Youth,

etc.• Areas - Informal sector, Rural,

etc.

Transformation through• Equity in the workplace• Affirmative Procurement• Batho Pele • Human Resource

Development

Land Bank Strategic IntentVision

A provider of world-class, quality finance for sustainable agriculture and agribusiness through creative flair and compassion for

agricultural entrepreneurial development by wealth-creation for social upliftment in

South Africa

Land Bank Strategic IntentMission

To provide world-class, quality finance services for sustainable agriculture and agribusiness for all South Africans.

This will be achieved by Being transparent Act with integrity Being visible Recognizing performance Meeting Client Expectations Stakeholder involvement

This will be implemented with flair for entrepreneurial development by wealth-creation for social upliftment through competent people, intermediaries or partnerships using appropriate tools.

Land Bank Strategic IntentValues

• Transparency

• Integrity

• Visibility

• Recognize Performance

• Meet Client Expectations

Land Bank Strategic IntentServices or Products

• Agricultural and Agri-business Loans through

– Retail Network

– Wholesale

– Equity finance for BEE or Development projects

– Agri-business

• Insurance

– Short Term Through third Parties

– Long Term Through SAVVEM - a LB Subsidiary

• Capacity Building Through Third Parties

• Information

Land Bank Strategic IntentGoals

• To be a financially sustainability agricultural development bank

• To deliver services that result in social impact

• To achieve results through competent People

• To deliver services in an efficient manner

• To meet our client expectations

• To meet Stakeholder expectations

Future – Strategic PrinciplesPricing

• Sources of Funding– Land Bank raises money on Money & Capital Markets which

influence its Interest Rates

– Land Bank receives no government funding

– Own reserves

• Pricing

– Land Bank prime interest rates are consistently lower than that of The Commercial Banks.

– Land Bank category of Prime Gold clients is much broader than that of the Commercial Banks.

– Land Bank does not load clients with transaction charges

– Leverage pricing to support social impact

Future – Strategic Principles Sustainability and Leverage

Step Up

Bronze

Silver

Gold

Gold Premium

Platinum

Growth in Loan Book Value and Selective ClientsSustainable Profitable Business ObjectiveResource Generation

Profitable and Sustainable Loan Book Growth & Tax/ Dividend Benefit

SurplusOperational expenses and

financing of growth and efficiency initiatives

‘Resource Battery’

Produ

ct/ C

lient

Por

tfolio

Partial Agricultural Market Segments

Commercial Agricultural Segments

Resource Generation

Flow

Black Economic Empowerment Fund

Social Accountability Fund

Training & Capacity Building Fund

Organisational Capacity Fund

Facilitate a positive credit rating to

leverage borrowing of funds with lower cost of capital, e.g. tax/ dividend pool

Gold

Wholesaler

FinancialIntermediary

Beneficiary

Supply Intermediary

BENCHMARKPERFORMANCE

Sector focused

CapacityBuildingthrough

Intermediaries

Producer ofProducts

DIRECT

INDIRECTProduct 1

Product 1

Product 2

Product 2

Future – Strategic PrinciplesIntermediary

Land Bank Strategic IntentGoals

• To be a financially sustainability agricultural development bank

• To deliver services that result in social impact

• To achieve results through competent People

• To deliver services in an efficient manner

• To meet our client expectations

• To meet Stakeholder expectations

FutureStrategic Initiatives

• Implement Social accountability strategy and measurement

• Development of new products

• Review of The Land Bank Act

• Accelerate the implementation of Intermediary Strategy

• Implementation of Human Resource Legislation

• Leverage Technology to achieve efficiency & effectiveness

• Continue with Transformation

• Accelerate service delivery to new mandate clients & create jobs

• Human resources development

• Accelerate the implementation of development programmes Black Economic Empowerment

• Improve Stakeholder relations

Discussion & Way Forward

Conclusion

Yesterday

Tomorrow Today

Development Commitment

Conclusion

•National Strategic

•Strategic Direction

•Strategic Principles

•Strategic Initiatives