risk sharing partnerships prepared for client name your name here date agriseta conference...
TRANSCRIPT
RISK SHARING PARTNERSHIPS
Prepared for Client NameYour name here
Date
AgriSETA ConferencePresentation by Diale Mokgojwa, Manager: AgriBEE 15th September 2011
Exposure to the possibility of loss; a chance or situation involving such a possibility.
Types of Agricultural Risks
External
•Natural (location, weather, etc.)
•Price (market/sales prices, inputs prices, discounts)
•Legislative (Policies, taxes, liabilities)
Internal
•Human resources (dependability, quality of work)
•Product
•Management
•Admin
RISK SHARING
Risk management method in which the cost of the consequence of RISK is distributed among several participants in an enterprise.
The Power of PARTNERSHIPS
INPUT SUPPLIERS
Quality seeds/ breedCapacity building
INSURANCE
Mitigates risk
BANK
Access to financeCredit applicationPay outFinancial servicesCapacity buildingMarketing
PRODUCTION MANAGEMENT
(50% of business)
Production risk managementFinancial management and adminCapacity building, skills dev & transfer- technical, businessMeasurable milestones
MARKETING MANAGEMENT (50% of business)
ProductOff-take contract (price risk management)/ hedging/ exportSupport
FARMER
Access to land3 year track recordWillingness to partakeFull disclosure of financial position
GOVERNMENT
Grant fundingInfrastructureMechanisation 1st loss guarantees
COMMODITY ORG
Gate keeperFacilitator
Partnership Opportunity
• Leverage the Bank’s balance sheet to lend across the value chain
• Amount of Risk Sharing facilities enable the Bank to leverage that amount 10 times the guarantee facility
• Private & Public sector entities with similar goals
• DE-RISK THE MARKET
Purpose of finance Kind of finance
Overdraft
Business Revolving Credit Plan (BRCP)
Business Term Loan
Medium Term Loan
Agricultural Production Loan
Vehicle and asset finance
Working Capital Yes Yes No No No No
Input costs, crops, livestock Yes Yes No No- Yes No
Implements, machinery and other capital equipment
No Yes Yes Yes No Yes
Office equipment No Yes Yes Yes No Yes
Vehicles No No No No No Yes
Property No No Yes Yes No No
FINANCING OVERVIEW
CREDIT EVALUATION
Factors affecting credit evaluation
Security
1. Pledge2. Secondary source of repayment;3. Mortgage bonds on property;4. Notarial bond over loose assets;5. Cession of crop income;6. Cession of insurance;7. Guarantees & suretyships.
Financial position
Own capital contribution;Capital & funding position and requirements;Solvency and liquidity ratios;Interest coverage ratio.
Repayment ABILITY
•Historic income & cost:- Income statement;
Projected income & cost:- Cash flow;Income:- Price & yield assumptions;Loan value v/s repayment ability.
Risk Management
Nature of business;Key risks (product, production, price, people, cash flow and capital);Management expertise;Risk mitigation (hedging, insurance, etc.).
• Business is unsound, risk is too high, bank cannot determine risk – business is
not sustainable
• Insufficient security or lack of collateral
• Lack of owners commitment, often indicated by his/her contribution to the
business
• Business plan does not provide adequate information
• Purpose of the finance required is not justified
• Character or suitability of owner
• Passive investment – owners not involved in the business
• Adverse behaviour on existing credit facilities
Reasons loans are declined
Business Plans – see www.standardbank.co.za Business >> Starting a business >> Getting started >> Starting a business >> How to draw up a business plan
Wisdom
“If you are looking for a helping hand you will find it at the end of your arm”. Chinese Proverb
“After all is said and done, usually more is said than done”. Unknown
KE A LEBOGA
CONTACT:
Diale Mokgojwa011 636 8713
www.standardbank.co.za
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