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Absa AgriBusiness in Africa Presentation to the Southern Africa Trade Hub Delegation

Absa AgriBusiness in Africa Presentation to the Southern Africa Trade Hub Delegation. May 2011. Contents. Footprint Background Agricultural Risks Typical Agricultural Supply Chain Typical Agricultural Value Chain as basis for Financial Solutions Products and Initiatives. Footprint.

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Absa AgriBusiness in Africa Presentation to the Southern Africa Trade Hub Delegation

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  1. Absa AgriBusiness in Africa Presentation to the Southern Africa Trade Hub Delegation May 2011

  2. Contents • Footprint • Background • Agricultural Risks • Typical Agricultural Supply Chain • Typical Agricultural Value Chain as basis for Financial Solutions • Products and Initiatives

  3. Footprint Absa Africa operates conventional banking in 2 countries: • Mozambique - Barclays Bank Mozambique • Tanzania - National Bank of Commerce (NBC) • Namibia - Representative Office Barclays Bank operates in the following countries: 1. Botswana 2. Seychelles 3. Egypt 4. Tanzania 5. Ghana 6. Uganda 7. Nigeria (Rep. Office) 8. Zambia 9. Kenya 10. Zimbabwe 11. Mauritius

  4. Background • Farmers exposed to market risks (Quantity and Price). • Limited development of the agro-processing sector (prolonging shelf life, value added outside region of production). • Inelastic demand and supply. • Price volatility – prices at the bottom soon after harvest. • Poor effective demand (Poverty in the local communities). • Poor Profitability • Reduced production and no incentive to increase productivity. • Less adoption of quality seed. • Less/no attention to soil quality and thus fertiliser usage. • In the large-scale commercial environment, farmers will increase scale or reduce costs to remain profitable. • No incentive to protect environment.

  5. Agricultural Risks • Market Risk (Price, Storage, Third party risk) • African farmers face prices greatly influenced by the international markets. • Have very little control over pricing levels and tend to be price takers with prices varying between import and export parity. • Factors influencing prices over which they have no control include international production trends, subsidies, exchange rates, import and export tariffs. • Production risk • Production risk due to climatic changes (drought, hail, etc.) • Poor management and planning. • Risks can be managed through insurance and technology improvements.

  6. Typical Supply Chain in Southern Africa

  7. Finance Cycle Input Supply Credit Contract Farming Warehouse Receipts Transport Manufacture Manufacture Store Plant Produce Harvest Store Transport Process Consumer Input Supplies Growing Crop Harvested Produce Food & Energy Typical Agricultural Value Chain as basis for Financial Solutions Start on Right of Value Chain One up one down strategy

  8. Products and Initiatives • Products • Vanilla type of products (Term loans, ODs, Asset finance). • Input Cost/Production cost type of finance. • Import and export Finance. • Inventory Finance. • Initiatives/Collaboration • Discussions with stakeholders to increase finance. • Guarantee funds. • Non-Governmental Organisations. • Private Equity Funds. • Equity investments

  9. Thank you Hans Balyamujura Tel +27 11 350 6160 Emailhans.balyamujura@absa.co.za

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