THE PORTFOLIO COMMITTEE ON AGRICULTURE, FORESTRY AND FISHERIES 07 AUGUST 2012

1. DEPARTMENT OF AGRICULTURE, FORESTRY AND FISHERIES MICRO AGRICULTURAL FINANCIAL INSTITUTIONS OF SOUTH AFRICA MAFISA THE PORTFOLIO COMMITTEE ON AGRICULTURE, FORESTRY AND FISHERIES 07 AUGUST 2012

2. Annexure • Annexure 1 Mafisa credit policy • Annexure 2 Khula proposal • Annexure 3 Accreditation criteria • Annexure 4 Standard agreement • Annexure 5 Reporting template

3. STRUCTURE OF THE PRESENTATION (1) Background Expected Mafisa outcomes Institutional arrangements Products and services Participating intermediaries Monitoring and evaluation Activities Intermediaries Impact of Mafisa

4. STRUCTURE OF THE PRESENTATION (2) Challenges Way forward Conclusion Enterprise break down

5. BACKGROUND Mafisa Government supported financial scheme; Provision of financial services to small holder farmers; growers and fishers; Only for small holder farmers, growers and fishers in agriculture, forestry and fisheries; First implemented as a pilot project in three provinces.

6. EXPECTED MAFISA OUTCOMES Efficient and effective developmental micro agricultural finance system; More accessible, relevant and responsive financial services; Increased productivity in farming and agribusiness operations; Equitable access to markets; Sustainable financial institutions with a greater outreach capacity; Sustainable food production; Greater ownership over local financing programmes.

7. INSTITUTIONAL ARRANGEMENT (1) Mafisa is accessed through a network of intermediaries; Intermediaries include public and private institutions; Each intermediary has been allocated funds; Amount allocated to an intermediary depends on capacity of that intermediary; Approval of government owned entities’ funding capped at R100 million and at R50 million for privately owned entities; No allocation per sub segments; Intermediaries must be registered with national credit regulator to participate;

8. INSTITUTIONAL ARRANGEMENTS (2) Applications for loans are considered by the accredited intermediaries; Intermediaries operate according to Mafisa credit policy framework (Annexure 1); Intermediaries charge 8% per annum for interest; Intermediaries keeps 7% as payment for their services.

9. PRODUCTS AND SERVICES Production loans; Saving mobilization - encourage self help groups and co-operatives to save collectively; Capacity building for member owned financial institutions; Portfolio indemnity scheme – established but did not take off (annexure2). Discussions have been held with commercial banks and one of them is interested in partnering with the department; Enterprise insurance – work in progress.

10. PARTICIPATING INTERMEDIARIES (1) • NERPO – National Emergent Red Meat Producers Organization; • MEGA (ex MADC) – Mpumalanga Economic Growth Agency; • GEP – Gauteng Enterprise Propeller; • ECRFC – Eastern Cape Rural Finance Corporation; • MGK – Magalies Graan Koperasie; • SASA – South African Sugar Association; • Kaap-Agri; • HFF – Hlanganani Farming Finance; • PLN – Peulwana Agricultural Financial Services.

11. PARTICIPATING INTERMEDIARIES (2)

12. MONITORING AND EVALUATION Intermediaries submit monthly reports; DAFF pays inspection visits to intermediaries and funded projects; Annual review workshops.

13. DEPARTMENTAL ACTIVITIES Working towards inclusion of forestry and fisheries; Developed a new data collection template (Annexure 3); Reviewing MAFISA credit policy (Annexure 1); Developing a development finance policy – discussion at departmental level; Developing a computerized reporting system; Working on Terms of Reference for impact study; Working on financial literacy training for clients; Farm together training provided.

14. EASTERN CAPE RURAL FINANCE CORPORATION (1) Started participating during the pilot phase; So far received R 80 million of the approved R 130 m; Funded mainly crop production, poultry and ostrich projects; Repayments for 2009/10 exceed disbursement because of collections of past years loans; Currently affected by the merger.

15. EASTERN CAPE RURAL FINANCE CORPORATION (2)

16. GAUTENG ENTERPRISE PROPELLER (1) Operates in Gauteng; Received R10 m of the approved R30 m; Initially had capacity challenges; Disbursed just over R 2 million; No repayments because loans are fairly new.

17. GAUTENG ENTERPRISE PROPELLER (2)

18. HLANGANANI FARMING FINANCE (1) Operated in Limpopo; Funded vegetable and poultry projects; Received all approved R20 million; Struggling to recover funds disbursed (repayments); Farmers not paying; Handed the responsibility to recover funds to lawyers; Jobs created mostly on vegetable projects; 2011/12 no job creation because no new loans; Disbursed more than allocated because it also disbursed from repayments; Submitted a letter to withdraw its participation. Discussions will be held with intermediary and the Provincial department to find a way of resolving this problem.

19. HLANGANANI FARMING FINANCE (2)

20. KAAP-AGRI (1) Operates in the Western Cape and Northern Cape; Funded mainly livestock in the Northern Cape and Grapes in the Western Cape; Lower repayments because livestock requires longer time; Contract expired 1 Jan 2012; Negotiations are ongoing to renew the contract; Bank balance as at 7 March 2012 = R 17 m.

21. KAAP-AGRI (2)

22. MAGALIES GRAAN KOPERASIE (1) Operates mainly in North West; Funds grain production; Provides comprehensive support package; Contract expired 30 November 2011; Negotiations are ongoing to renew the contract; Bank balance as on 30 November 2011 R 37.7 m; Jobs created mainly for weeding, harvesting.

23. MAGALIES GRAAN KOPERASIE (2)

24. MPUMALANGA ECONOMIC GROWTH AGENCY (1) Operates in Mpumalanga; Received R50 m of the R100 m approved; Funds various agricultural enterprises – livestock, flowers, vegetables, grains; Activities affected by the merger taking longer than expected; Have funded a fish project in Delmas; Repayments lower because most projects are livestock projects.

25. MPUMALANGA ECONOMIC GROWTH AGENCY (2)

26. NATIONAL EMERGENT RED MEAT PRODUCERS ORGANIZATION (1) Operates in all provinces; Grant loans to livestock related enterprises; Repayments lower in the first two years because livestock terms are longer; Maximum loan term is 5 years; Disbursed more than received because of recycling of loan repayments.

27. NATIONAL EMERGENT RED MEAT PRODUCERS ORGANIZATION (2)

28. SOUTH AFRICAN SUGAR ASSOCIATION (1) The last intermediary to be accredited (2010) ; Operates in KZN and Mpumalanga; e.g. Akwanze Loan repayments only starting with first harvest period in March/April 2012; Jobs created are mainly for weeding and harvesting.

29. SOUTH AFRICAN SUGAR ASSOCIATION (2)

30. PEULWANA AGRICULTURAL FINANCIAL SERVICES (1) Operates in Gauteng, KZN, and North West; Funds mainly cane growers, poultry and vegetables; Disbursed more than allocated due to recycling of loan repayments; Repayments slow for now as most loans are for sugar cane which requires around 18 -24 months to mature.

31. PEULWANA AGRICULTURAL FINANCIAL SERVICES (2)

32. SUCCESS OF PROJECTS • For projects to be regarded as successful the following are considered • Turnover; • Increase in business size; • Increased in productivity; • Consistent sales to markets; • Consistent production; • Loan repayments; • Employment creation.

33. SUCCESSFUL PROJECTS(1) SASA; Peulwana; MGK; Kaap-Agri; Hlanganani; GEP; NERPO; MEGA; ECRFC.

34. SASA Mill – Gledhow; Mansomini sugar cane project; Located in Stanger KZN; Area in hectares – 165 ha; Loan amount – R3. 5 m; Total beneficiaries – 186; Enterprise type – sugar cane; Employment created – 257; Permanent positions – 57.

35. PEULWANA • Zivuseni co-operative – PEULWANA • Location = Gauteng, Sedibeng – Lesedi; • Area size – 186 ha; • Loan amount R316 283 • Total beneficiaries – 6; • Type of business – Maize and Dairy; • Employment created = 16 with 6 of this permanent; • Repaid their loans on time for two successive seasons; • Increased in business size - cows from 18 – 40; • Increased cultivated land from 18ha – 100ha; • Bought tractor and some equipments.

36. MGK M J Mahuma, CJ Ramatlhape and Masongwa; Operate on 103ha, 49ha and 212 ha; Operate in Bethaine and Maumong areas around Brits/ Rustenburg; They are individual beneficiaries; Sunflower production; Ramatlhape acquired machinery and equipments.

37. KAAP-AGRI SiyaZama; Located in Winelands – Western Cape; Operate 24 ha; Loan of R4 m in two cycles; Has 7 beneficiaries; Produce table grapes; Created 80 jobs; Operated on leased land.

38. HLANGANANI (1) Thivhonali Margaret Mukwevho Located in Limpopo Nwanedi – Musina municipality; Operate 15ha; Loan amount R505,939.3 1 beneficiary; Vegetable production; 15 jobs created; Increased business size.

39. HLANGANANI (1) Sasekisani coop Located in Limpopo Thulamela district – mahonisi; Operate on 5ha; Loan amount R444, 784.7 9 beneficiaries; Egg production; 30 jobs created; Increased business and market.

40. GEP (1) Mamochecheri farming coop Located Gauteng Metsweding; Operate on a 24ha farm; Loan amount R 563 000; Have 5 beneficiaries; Egg production; Created 5 jobs.

41. GEP (2) Korema cc Located Gauteng Tshwane; Operate on 10ha; Loan amount R 242 000; 2 beneficiaries; Vegetable production; Created 4 jobs.

42. NERPO (1) Bravosat cc project Located in Mpumalanga; 6 beneficiaries; Cattle farming; 4 jobs created.

43. NERPO (2) Barui farming cc Located in North West; 7 beneficiaries; Cattle farming; 4 jobs created.

44. MEGA (1) • Crystal water Fish • Located in Sundra –Delmas –Mpumalanga; • Land size 2ha; • Loan amount R 405 153; • 1 beneficiary – female; • Tilapia fish production; • Jobs created - 4 permanent and 6 seasonal; • Owner won best small holder female entrepreneur award; • Sells about 4500 fish per month to local supermarkets.

45. MEGA (2) • BJS Roses • Located in Moloto – Mpumalanga; • Operate on 15ha; • Loan amount R 150 000; • 2 beneficiaries; • Produces roses and indigenous plants; • Jobs created 8 permanent and 12 seasonal; • Sells average of 4000 plants per month; • Has market in Gauteng and Mpumalanga; • Cannot meet demand.

46. ECRFC • Paballong maize • Located in Matatatiele – Paballong township; • Maize production; • 20 beneficiaries; • 20 Jobs created; • Operate on 10 ha; • Project was also support by the massive food programme; • Repaying the loan; • Good working relation with provincial department of agriculture; • Municipality promised to assist with fencing.

47. UNSUCCESSFUL PROJECTS(1) Peulwana; MGK; Kaap-Agri; Hlanganani; GEP; NERPO; MEGA; ECRFC.

48. PEULWANA Mr. Vilakazi farm Farm in Gauteng Sedibeng district; Planted 150 ha of the 900ha; Loan amount R 241 840; 4 beneficiaries; Produced maize on leased land; Employment created 6 with 2 of these permanent; Failure due to drought, low maize price and lack of equipments.

49. MGK Molusi, Mogoshane and Maluleke Operate in Maumong, Robega and Bethaine; Operate on 70ha, 32ha and 16ha; They are individual operators; Sunflower production; Failure due to drought, wild life and poor management.

50. KAAP-AGRI Kingdom products R1.27 m, Pieterse R 500 000 and Wynman cc R100 000 Located in Helderberg, Langeberg and Swartland; First two are vegetable projects and last pig and cattle project; Operate 11ha, 10.8ha and 3.5 ha; Beneficiaries are 32, 2 and 2; Jobs created are 52, 10 and 2; Permanent are 32, 2 and 2; Reasons for failure – lack of experience, market price low, pests.