Presentation to the Portfolio Committee on Agriculture, Forestry and Fisheries 11 September 2013

Transcription

1 Presentation to the Portfolio Committee on Agriculture, Forestry and Fisheries 11 September 2013

2 2012/ / / / /17 Loan book growth 15% 15% 13% 13% 13% Total growth Market share 30% 31% 33% 35% 36% Cost to income 80.9% 72.7% 69.5% 66.6% 66.5% Net interest margin 3.5% 3.5% 3.8% 4.0% 4.1% Gross interest margin 34.4% 39.6% 39.8% 39.0% 36.9% Capital adequacy 34.0% 23.4% 20.6% 18.3% 16.6% NPLs 8.0% 6.3% 6.3% 6.3% 6.3% Growth in development

3 Key performance indicators 2012/13 Target 2012/13 Actual Loan book growth 15% 24.1% Market share 30% 30.27% Cost to income ratio 80.9% 67.7% Net interest margin 3.4% 3.2% Gross interest margin 31.3% 39.1% Capital adequacy 20% 24.4% Non-performing loans 8% 4.9% Development (R Million)

4 % % 16.2% 13.0% Gross performing loans increased to R26.5 billion (26%) Non-performing loans decreased by R52.4 million billion in 2012/ % FY08 R'bn FY09 R'bn FY10 R'bn Total impairments, decreased marginally by R9 million (1 per cent) to R875.6 million 10.2% % 6.5% 3.9% 3.1% FY08 FY09 FY10 FY11 FY12 FY13 R'bn R'bn Total Book (excl. LDFU) Impairments Impairments as % of Book Portfolio R'bnCommittee R'bn on Agriculture, R'bn Forestry R'bn and Fisher 1.7 FY11 R'bn % FY12 R'bn Performing loan book NPL NPL as % of Book % FY13 R'bn % 20% 15% 10% 5% 0% 20% 15% 10% 5% 0% 3

5 2010/ / / /13 TOTAL R Million Target Actual REM RCB B&CB Total Development is currently R1,8 billion against a target of R6bn New development needs to grow by an additional R4.5 billion from FY2016/17 to a total of R6bn / / / /17 9 REM RCB BCB Total increase 4

6 Rates and ROI (%) Percentage Interest rate (Cost of capital) Source: DAFF Implementation of turnaround strategy 7 5 Land Bank Agricultural cooperatives Commercial banks Average Return on Investment (ROI) of farmers ROI (NFI/Gross Capital Formation) Average interest rate Land Bank Rate

7 Land and Agricultural Bank Commercial banks Agricultural cooperatives Department of Agriculture Total farming debt (R'Bn) Source: DAFF % Land Bank Market Share Corporate Target: 35% 30% Market share (2011 data) Target 20% 10% 20.6% 24.9% June % 30.2% 31.7% 33.1% 35.2% 37.4% 0% / / / / / / / /17

8 In November 2010, Cabinet approved the following emerging farmers: Curatorship Model To assist distressed emerging farmers by transferring the right of control of the Land to DRDLR while allowing farmer access and use of the Land for farming purposes. Failure to achieve this the Bank will exercise its powers and rights. Pilot Value Chain Financing Model A comprehensive package of financial and technical support to render farms productive 7

9 Sustainability business model Implement Development as core to business needed a review of Land Bank s business model Sustainable Business Model was approved A Sustainable long-term business model has been adopted Land Bank Mandate & Government Priorities given priority Land Bank Government funding Multilateral funding Retail Emerging Markets Retail Commercial Banking and Business & Commercial Banking Land Bank Insurance Company % profit for development % profit for development 8

10 Executive Summary A. Background Land Bank faced challenges which contributed to not meeting its developmental mandate. REM division was created as a response to this challenge Some of the challenges to financing black emerging farmers included; Onerous collateral and security requirements High cost of funding based on risk resulting in high interest rates High rates of defaults resulting from little or no support to the farmers Little or no integration of the agricultural value chain for emerging farmers A lack of dedicated focus to emerging farmers B. The Solution The solution was the implementation of the REM model which includes the following unique value proposition Cash flow lending based approach Concessionary funding and interest rates Non financial support (end to end on farm support) Cashless disbursement Two approaches were identified to Market REM Wholesale Finance Facility Direct lending intermediaries to act as on lenders of the bank and provide on field support while maintaining stringent and selection criteria Through Bank s AFC network 9

11 REM MODEL PROCESS Government & donors Fund administration + participation Collateral Guarantee Fund Collateral (50% - 90% of loan value) Land Bank Funding flow Credit assessment LB to negotiate partnership Additional support {Off-take agreements SCF, ARC, NAMC, Univ, DAFF, Insurance} Lending through LB branches, municipalities & Ext offices LB to negotiate partnerships Eligible Borrowers (Farmers & agribusiness) Agric Cooperatives (+ intermediaries) Technical Support 10

12 Current Exposure REM Name of Client amount Approved Term of Loan Year Granted Expiry Date Amount Disbursed NPL's Akwandze R100m 8 yrs R R 0.00 Akwandze R50m 5 yrs R R 0.00 Afgri R125m 3 yrs R 0.00 R 0.00 Humansdorp R60m 5 yrs R R 0.00 Humansdorp R40m 5 yrs R 0.00 R 0.00 Nerpo R75m 5 yrs R R 0.00 Lona R100m 5 yrs R R 0.00 Senwes R50m 5 yrs R 0.00 R 0.00 Direct Landing Clients R33m 1 yr R R Total R633m R % 11

13 Impact of the REM Model Farmers financed 280 Permanent employees Seasonal/temporary employees Beneficiaries impacted Hectares farmed (owned) Leased/communal hectares farmed Farmers receiving mentorship 219 Farmers attended training programs 730 Value of assets increased by R42m Turnover of the farms increased by R12m 12

14 CAPITAL REQUIRED BY REM Anticipated Applications WFF Name of Client Facility Limit Industry Province EXISTING CLIENTS Akwandze R150m Sugar Cane Mpumalanga Afgri R125m Grain National Humasndorp R100m Citrus, Grain, Dairy Eastern Cape & KZN Lona Citrus R68m Citrus KZN, Eastern Cape, Limpopo, Western Cape Nerpo R75m Livestock & Cash Crops National Senwes R50m Grain North West & Free State Sub Total R568 m PIPELINE Tongaat Hullet R150m Sugar cane Kwa Zulu Natal Yield R25m Fruit and Vegetable Western Cape, Free State, Limpopo, Mpumalanga, KZN VKB R50m Grain Free State FTB R20m Sugar cane Kwa Zulu Natal- Umfolozi BKB R30m Wool & Livestock Eastern Cape Bono R50m Fruit and Vegetable Western Cape, Limpopo and Eastern Cape GWK R100m Grain Northern Cape Omnia R25m Grain and other crops Throughout SA Cotfin R25m Cotton Limpopo FreshWorld R50m Cash Crops Western Cape TWK R25m Grain & Livestock Northern Cape NWGA R15m Livestock National Unlimited Group R50m Cash crops Free State & Limpopo Bosveld Citrus R30m Fruit Limpopo Sub-Total R645m TOTAL CAPITAL R1.213b Interest 8% of total capital equals to R per annum Current Balance in ring-fenced account is R less approx. funds to be disbursed in next two months of R results an a balance of R The total amount to be subsidised amounts to R for the next years 13

15 Distressed Farms - Background What we did A strategy was put in place for this purpose in collaboration with DAFF, DRDLR and National Treasury Cabinet then approached with Emerging Farmers Support Facility (EFSF) proposal 2010 December Cabinet approval was granted to Pilot the EFSF, backed by a Guarantee Fund of R233m DAFF provided R24 million for NPLs on production loans MOU s and Rabobank commissioning followed March 2012 embarked on a restructuring Model design with Rabobank Farms categorised and those no longer viable identified for DRDLR s purchase consideration Close cooperation with DRDLR is bearing fruit. 14

16 Distressed Farms - Process Process Challenges to Implementation MOU s had to be put in place with stakeholders - DAFF DRDLR and National Treasury Legal considerations related to NCA Customers in Grouped-loans pose serious difficulties Groups are disintegrated and no longer operate together Farms having been abandoned Tracing of owners is time consuming Farms being vandalised loss of value Indebtedness of most farmers too high Some farmers are unco-operative due to wrong information circulated about Government assistance Land Claims that are still not finalised. 15

17 Distressed Farms - Process How we have assisted the farmers Meet on the farms - this results in several meetings Discuss farmers plans, if any Recommend assistance - from DAFF/ARC and other Strategic Partners Use of Value Chain Model for optimum support Engage other Partners, e.g Commodity groups (Sugar, Companies, Co-ops, Seed suppliers, etc. Collaborate with DRDLR for possible Recapitalizations Restructuring loans to enable resuscitation and viability Monitoring via Strategic Partners to mitigate risks. 16

18 Distressed Farms- Progress Despite the challenges the following has been achieved Number of farms Current status Loan Balance R million 283 Declared distressed at 30 June Offered To DRDLR to consider Deceased estates Accounts 89 Regularised/Restructured 46 Loans settled Still needing attention 47 17

19 Distressed Farms - Future Going Forward Intensify the process Continue engagement with DRDLR on the Recapitalization Model Participate in their Recapitalization applications evaluation committee meetings Participate in the National Land Acquisition Recapitalization Participate in DAFF Schemes on Food Security Engage closer the Strategic Partners to do more 18