department: agriculture republic of south africa joint budget committee hearing on mtbps theme 3:...

DEPARTMENT: AGRICULTUREREPUBLIC OF SOUTH AFRICA

JOINT BUDGET COMMITTEE HEARING ON MTBPS

Theme 3: Rural Development and Urban Renewal

Masiphula M. Mbongwa DDG: DEPARTMENT OF AGRICULTURE

Committee Room E249Parliament

02 November, 2004,

2


Sustainable Rural Livelihoods Framework

VULNERABILITY CONTEXT

•Trends

•Shocks

•Culture

CAPITAL ASSETS

•Natural

•Social

•Physical

•Human

•Financial

Laws Policies Incentives

Institutions

PROCESSES

TRANSFORMING STRUCTURES & PROCESSES

STRUCTURESGovernmentPrivate Sector

ISRDP

STRATEGIES

• LRAD

• CASP

• IFSNP

• ARM

• AgriBEE

• MAFISA

• Land Care

• Non-NR-based

OUTCOMES

•more income

•more jobs

•better well-being

•reduced vulnerability

• improved food security

•better sustainable use of NR-base

3


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 small–scale 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

4


Why the Reversal ?

Enterprises Farmers Enterprises Farmers Farmers

Land BankCommercial Banks

Agricultural Coops

Agricultural Coops

Agricultural Coops

Agricultural Credit Board

5


Why the Reversal ?

Enterprises Farmers EnterprisesFarmersFarmers


Agricultural Companies

Farmers Farmers Farmers Farmers Farmers Farmers

Rural Micro-Finance Institutions

Rural Micro-Finance Institutions

6


Why the Reversal ?

Enterprises Farmers EnterprisesFarmersFarmers


MAFISA: Micro-Agricultural Financial Scheme for South Africa

Farmers Farmers Farmers Farmers Farmers Farmers

7


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.

8


Strategy

Productive Assets and Technology

Improving equitable access to productive natural resources and technology

Productive Assets and Technology

Improving equitable access to productive natural resources and technology

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

Financial Assets and Markets

Increasing access to financial services and markets

Human and Social Assets

Strengthening the capacity of the rural poor and their organisations

Human and Social Assets

Strengthening the capacity of the rural poor and their organisations

9


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.

10


Farms and Agribusiness StructureFarms and Agribusiness Structure

IV

III

II

I

Large commercial farms & agribusinesses

Small commercial farms & agribusinesses

Emerging farms and Emerging farms and agribusinessesagribusinesses

Subsistence farms Subsistence farms andand agribusinessesagribusinesses

1st E

cono

my

2nd

Eco

nom

y

11


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

12


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

13


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.

14


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.

15


Products and Services

Income Level Commercial Financial Services

Poverty Alleviation

Programmes

Low

Standard Bank Services

Micro-Savings

Micro- Loans

Micro- Insurance

Trans-actions

Working Poor

Extremely Poor

Food & water, medicine and nutrition, employment generation, skills training & relocation

Poverty Datum Line

16


Functional Structure

Head officeHead office

District BranchesDistrict Branches

Local BranchesLocal Branches Local BranchesLocal Branches

41

500

17


18


Service Delivery Consortia

Land BankLand Bank

Post OfficePost Office

MAFISAMAFISA

APEX FundAPEX Fund

DonorsDonors

BanksBanks

User-OwnedUser-Owned

SAVVEMSAVVEM

KHULAKHULA

Provincial DoAsProvincial DoAs

Provincial DFIsProvincial DFIs

Agri CosAgri Cos

Agri-CoopsAgri-Coops

IDCIDC

Rural MFIsRural MFIs

Local MunicipalitiesLocal Municipalities

Rural

Financial

System

Rural

Financial

System

19


Sources of Funding

MAFISAMAFISA

Interest Income

Investments Grants

Parliamentary Appropriation

20


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.

21


Expected OutcomeExpected 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.

22


THANK YOUTHANK YOU

23


Sustainable Livelihoods Framework

VULNERABILITY CONTEXT

•Trends

•Shocks

•Culture

CAPITAL ASSETS

•Natural

•Social

•Physical

•Human

•Financial

Laws Policies Incentives

Institutions

PROCESSES

TRANSFORMING STRUCTURES & PROCESSES

STRUCTURESGovernmentPrivate Sector

ISRDP

STRATEGIES

• LRAD

• CASP

• IFSNP

• ARM

• AgriBEE

• MAFISA

• Land Care

• Non-NR-based

OUTCOMES

•more income

•more jobs

•better well-being

•reduced vulnerability

• improved food security

•better sustainable use of NR-base

24


Sustainable Rural Financial System

Financial

Services

Stakeholder

participation

Rural Financial

InfrastructureOutreach

Conducive

Policies

Non-Financial

Services

Regulation &

Supervision

Improved

sustainable

livelihoods

25


Financial and Enterprise Viability Cycle

Viable Financial Institutions

Viable Rural Enterprises

Vibrant rural and agricultural economy

Growth

Growth

26


Savings and Credit Household Cycle

Credit: High potential areas and high return ventures

Savings: Subsistence production and low return ventures

Rural and Agricultural

EconomyGrowth

Growth

27


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

Defining the Two EconomiesDefining the Two Economies

CASP model

The Hungry &

Vulnerable

Household food

security &

Subsistence

Farm & Business

level activity

Agricultural macro-

system within

consumer economic

environment

Agriculture supportAgriculture support

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6 pillars6 pillars

department: agriculture republic of south africa joint budget committee hearing on mtbps theme 3:...

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