AGRICULTURAL RESEARCH COUNCIL BUSINESS PLAN FOR 2009 TO 2010 Dr Shadrack Moephuli President & CEO

2 ARC TEAM Ms. Jean Davidson – Chairperson (farmer) Prof. Michael Kahn – Chair: R & D Committee Mr. Hamish McBain – Chair: F & I Committee MANAGEMENT Dr. Shadrack Moephuli – CEO Ms. Anati Canca – Exec. Director: Tech. Trans. Prof. Mohammed Jeenah – Exec. Director: Research Mr. Gabriel Maluleke – Chief Financial Officer Mr. Michael Netsianda – Exec. Director: HR & Corp.

3 MANDATE (OBJECTS) OF THE ARC AS PER ACT  To CONDUCT RESEARCH,  DEVELOPMENT, &,  TECHNOLOGY TRANSFER,  IN ORDER TO:  Promote agriculture & industry;  Contribute to better quality of life;  Facilitate/ensure natural resource conservation

4 Policy Considerations (March 2009) Government’s National Priority Agriculture Programme of Action Strategic Plan for South African Agriculture (Sector Plan) Land and Agriculture Reform Programme (LARP) National Research & Development Strategy Ten Year Plan for Science and Technology African Agenda (NEPAD) –Consolidated Science and Technology Plan of Action –Comprehensive African Agricultural Development Plan

5 COUNCIL STRATEGIC REVIEW Growth in agriculture – increased productivity Growth in exports – innovation (products & processes) Reduction in rural poverty – productivity improvements Mitigation of agricultural risks Business analysis – optimize performance & reduce duplication Synergy & collaboration Ratio of scientists – critical mass & optimum performance Improve efficiency Improve reporting controls

6 STRATEGIC CONSIDERATIONS –Increased Focus on Basic/Fundamental Research –Applied & adaptive Research –Human Capital Development –Technology Development & Dissemination – Organizational Performance

7 VISION & MISSION VISION: –“Excellence in Agricultural Research and Development” MISSION: –“The ARC is a premier science institution that conducts fundamental and applied research with partners to generate new knowledge, develop human capital and foster innovation in agriculture, through technology development and dissemination, and competitive commercialization of research results, in support of developing a prosperous agricultural sector”

8 New and improved agricultural technologies Transfer the ability to utilise the new and improved technologies Support for/ to resource- poor farmers Competitiveness of SA Agriculture Organisational sustainability and excellence (Internally and externally) 1. Generate, develop and apply new knowledge and technology XXXXXX XXXX 2. Sustainable use of natural resources XXX X 3. Enhance nutrition, food security and safety XXX X 4. Enhance the ability of the agricultural sector to manage and mitigate agricultural risk XXX X 5. Technology Transfer & commercialisation XXXXX XXXXX 6. Achieve organizational growth and sustainability XXXXX Strategic Thrusts Strategic Objectives

9 VALUES Batho Pele principlesBatho Pele principles Ons maak ‘n planOns maak ‘n plan TARGETTARGET –Truth –Accountability –Respect –Growth –Excellence –Trust

10 Technology Transfer & Commercialisation Generate, develop and apply new knowledge and technology Sustainable use and management of natural resources Enhance Nutrition, Food Security and Safety Enhance the ability of the agricultural sector to manage and mitigate agricultural risks Achieve organisational growth and sustainability Vision: Excellence in Agricultural Research and Development Mission Statement: The Agriculture Research Council is a premier science institution that conducts fundamental and applied research with partners to generate new knowledge, develop human capital and foster innovation in agriculture through technology development and dissemination, and competitive commercialisation of research results in support of developing a prosperous agricultural sector. ARC Mandate: To conduct research, development and technology transfer in order to: promote agriculture & industry; contribute to a better quality of life facilitate/ensure natural resource conservation

11 MINISTER COUNCIL (BOARD) CHIEF EXECUTIVE OFFICER COMPANY SECRETARY CHIEF RISK OFFICER CHIEF FINANCIAL OFFICER MR. MALULEKE EXEC. DIR HR & SUPPORT MR. NETSIANDA EXEC. DIR. R & D Dr. JEENAH EXEC. DIR. TECH. TRANSFER MS. CANCA

12 ARC AREAS OF PRIORITY Cross- Cutting Issues  New & improved technologies  Technology Transfer  Support LARP  Competitiveness of SA Agric.  Organizational Sustainability Industries that deliver growth now and/or are positioned for further growth: collaborate & de- bottleneck Industries that are important for desired outcomes but are not yet competitive: lead the way Start with  Fix the basics: scientific solutions  Research & Development  Human Capital Development  Knowledge Infrastructure  Mitigate agricultural risks  Enablers for Innovation Primary Agricultura l activity Processing Packaging / Additional Value add GRAINS Primary Agricultura l activity Processing Packaging / Additional Value add LIVESTOCK Primary Agricultura l activity Processing Packaging / Additional Value add VEGETABLES Pri ma ry Agr icul tur e Pri ma ry Agr icul tur e Processi ng Packagin g / Additiona l Value add HORTICULTURE Primary Agriculture Primary Agriculture Processi ng Packaging / Value add Packaging / Value add the Foundation Product Portfolio Total Value Chain AGRO -- PROCESSING

13 LARP Goals, Strategies & Objectives Job Creation Economic Growth Poverty Eradication Sustainable Agricultural Resource Use Profitability & Competitiveness Access & Participation Good Governance ARC Interventions Govt. Policies Govt. Policies Goals Agribusiness Services & Infrastructure Production Land Reform Exports

14 Strategic Objective 1 Generate, Develop and Apply new Knowledge and Technology RATIONALE: Critical component of a knowledge based economy and people; Underpins generation of new (novel) products/processes/ technologies; Contributes towards excellence and scientific knowledge; Enables ARC to use best science to address agricultural problems unique to RSA & Africa; Generates intellectual property essential for economic development

15 EXAMPLES FOR STRATEGIC OBJECTIVE 1 Generate, Develop and Apply New Knowledge and Technology KRAPROGRAMMESUB- PROGRAMME INDICATOR Accurate Prediction of Risks Research & application of earth observation & remote sensing for risk prediction Risk models & systems to ensure growth in a changing environment Publications Model (e.g. DEWS) Information dissemination Increased Agricultural Productivity Bio – prospectingBio – activity based product innovation (medicinal plants, insecticides etc) Publications Insecticides Pest risk analyses Information dissemination

16 Strategic Objective 2 Sustainable use and management of natural resources RATIONALE: Improve efficient use of agricultural natural resources for food production; Ensure sustainable use and management; Reduce poverty and increase wealth; Competitiveness of industries dependent on natural resource – based agriculture

17 EXAMPLES FOR STRATEGIC OBJECTIVE 2 Sustainable use and management of natural resources KRAPROGRAMMESUB- PROGRAMME INDICATOR Characterization of natural resources and ecological systems Characterization and quantification Rainwater harvesting Land degradation Water use efficiency Publications Information dissemination Services rendered Products Maintenance and use of national assets Maintenance of national assets (e.g databases, collections, genebanks etc) Utilization of national collections Publications Pest risk analyses Collections Information dissemination

18 Strategic Objective 3 Enhance Nutrition Food security and Safety RATIONALE: Increase access and availability of nutritious food; Broadening the food base to enhance food security and nutrition; Improving the inherent nutritional quality of food at source; Broadening participation in the value chain and reducing waste; Integrated approaches to optimize impact and adoption of new technologies.

19 EXAMPLES FOR STRATEGIC OBJECTIVE 3 Enhance Nutrition Food Security and Safety KRAPROGRAMMESUB- PROGRAMME INDICATOR Increased access and availability of quality and safe nutritious food Crop ImprovementCultivars, lines hybrids Production practices/systems Bio – fortification Publications Methods Products Germplasm collections Animal Improvement New breeds Disease control Alternative feed Services rendered Information dissemination Improved Pre- harvest, harvesting and post harvest technologies Agriculture value chain improvement Shelf – life Nutritive value of food/feed Publications Products Methods Information dissemination

20 Strategic Objective 4 Manage and mitigate agricultural risk RATIONALE: Reduce vulnerability to climate change; Solutions and management of pests, diseases, weeds and alien invasives; Management of natural disasters in agriculture; Manage risks to increased agricultural productivity and trade

21 EXAMPLES FOR STRATEGIC OBJECTIVE 4 Enhance the ability to Manage & Mitigate Agric. Risks KRAPROGRAMMESUB-PROGRAMMEINDICATOR Reduced vulnerability of agricultural sector to climate change Natural resources information and decision support systems AGIS Remote sensing models for agriculture Publications Methods Products Information dissemination Natural resource monitoring, auditing and impact assessment Rangeland condition assessment and monitoring Publications Services rendered Information dissemination Solutions to predict & manage pests, diseases, weeds & alien invasives Agriculture value chain improvement Shelf – life Nutritive value of food/feed Publications Products Methods Information dissemination

22 Technology Transfer RATIONALE: Creation of value through Agricultural R&D Transfer ability to utilize new & improved technologies Contribute to growth in agricultural sector through Tech Transfer and adoption programmes Contribute to increase in exports through the dissemination of technological innovations Contribute to the reduction of rural poverty through formulation and execution of programmes to address access and improved quality of life

23 EXAMPLES FOR STRATEGIC OBJECTIVE 5 Technology Transfer and Commercialization KRAPROGRAMMESUB- PROGRAMME INDICATOR

24 Human Resources ARC’s Intellectual Asset The HR division’s mandate is:  Develop, review, update and implement comprehensive and dynamic HR policies, procedures and protocols aligned to the core business of the ARC.  Attraction & retention of critical and scarce skills  Human Capital Development.  Implementation of a robust Performance Management System  Maintain sound labour relations with organised labour (OL).  Strive to ensure that ARC is legally compliant with relevant labour laws.  Change Management & Transformation

25 Strategic Objective 6 Achieve Organisational Growth and Sustainability 1.Human Capital Utilisation  Effective talent management framework implementation 2.Organizational Development & Design  Fully implemented Organizational structure  All new posts established, profiled, graded and budgeted. 3.Aligned and improved organisational performance  Implementation of Performance Management System  All employees have quality performance agreements and development plans  Establish performance moderation framework and process  Performance reviews 4.Attracting, developing and retaining Human Capital  Develop and implement a retention strategy and an incentive scheme  Development and implementation of a succession planning model  Implementation of remuneration policy and recruitment strategy

26 Strategic Objective 6 Achieve Organisational Growth and Sustainability (cont.) 5.Human Capital Development  Development and conducting training needs analysis  Develop 100% of personal development plans for staff  Conduct skills audit 6.Occupational Health & Safety  Conducting Health & Safety audits 7.Management of transformation & Diversity  Diversity and change management training 8.Employment Equity program  Develop Institute EE Plan with Targets  Training of EE Committees

27 SCIENTIFIC CAPACITY PER RACE 30/06/2009

28 DISTRIBUTION OF SALARY BILL 30/06/2009

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30 Finance overview Analysis of ExpenditureAnalysis of Expenditure Analysis of IncomeAnalysis of Income Budget AssumptionsBudget Assumptions Budget ScenariosBudget Scenarios Recommended BudgetRecommended Budget Medium Term ActionsMedium Term Actions Risks in the BudgetRisks in the Budget

31 ANALYSIS OF EXTERNAL INCOME

32 ANALYSIS OF EXPENDITURE

Baseline Allocation (excl capex and ringfenced projects) vs Personnel Costs

34 1.PG increase 2% 2.External Income Neutral 0% (Risk) 3.Personnel Cost Increase 7 % (Risk) a)Vacancies & salary adjustments b)Cost of living adjustment (inflation) 4.Roll over capital (FMD facility) R44m 5.Forecasted deficit 08/09 (R23m) Budget Assumptions For 2009/10

35 ARC 2009/10 Budget Scenario 1 Revenue PG:R503m External:R338m Other: R23m Revenue PG:R503m External:R338m Other: R23m Total R864m Expenditure Personnel: (R522m) Operating:(R328m) Depr: (R28m) Expenditure Personnel: (R522m) Operating:(R328m) Depr: (R28m) Total (R879m) (Deficit) (R15m) ADD Depreciation: R28m WC Movement: R3m ADD Depreciation: R28m WC Movement: R3m Total R31m Cash Ex Ops R16m Cash Ex Ops R16m Net Cash for Year (R85m) Net Cash for Year (R85m) Cash end of Year (R78m) Cash end of Year (R78m) Cash at Beginning Of Year Cash at Beginning Of Year R9m Capex FMD: (R44m) Other: (R57m) Capex FMD: (R44m) Other: (R57m) Total (R101m)

Action Items 2009/10 Potential Saving (R’000) Clear long outstanding debtors Offer salary increases average of 7% 4.00 Delay filling of vacancies Saving in operating cost as a result of delay in vacancies 4.50 Discontinue the Animal Improvement Scheme Potential saving during 2009/

37 ARC 2009/10 Budget Scenario 2 Revenue PG:R503m External:R338m Other: R23m Revenue PG:R503m External:R338m Other: R23m Total R864m Expenditure Personnel: (R487m) Oper:(R317m) Depr: (R28m) Expenditure Personnel: (R487m) Oper:(R317m) Depr: (R28m) Total (R832m) Surplus R32m ADD Depreciation: R28m WC Movement: R13m ADD Depreciation: R28m WC Movement: R13m Total R41m Cash Ex Ops R73m Cash Ex Ops R73m Net Cash for Year (R28m) Net Cash for Year (R28m) Cash end of Year (R19m) Cash end of Year (R19m) Cash at Beginning Of Year Cash at Beginning Of Year R9m Capex FMD: (R44m) Other: (R57m) Capex FMD: (R44m) Other: (R57m) Total (R101m)

38 ARC 2009/10 Budget Scenario 4 Approved Revenue PG:R503m External:R294m Other: R16m Revenue PG:R503m External:R294m Other: R16m Total R813m Expenditure Personnel: (R500m) Admin:(R281m) Depr: (R21m) Expenditure Personnel: (R500m) Admin:(R281m) Depr: (R21m) Total (R802m) Surplus R11m ADD Depreciation: R21m WC Movement:R17m ADD Depreciation: R21m WC Movement:R17m Total R38m Cash Ex Ops R49m Cash Ex Ops R49m Net Cash for Year R7m Net Cash for Year R7m Cash end of Year R16m Cash end of Year R16m Cash at Beginning Of Year Cash at Beginning Of Year R9m Capex FMD: (R22m) Other: (R20m) Capex FMD: (R22m) Other: (R20m) Total (R42m)

39 BUDGET PER STRATEGIC OBJECTIVE STRATEGIC OBJECTIVEPERCENTR’000 Generate, develop and apply new knowledge and technology 14.4 %124,880 Sustainable use and management of natural resources 20 %174,831 Enhance Nutrition, Food Security and Safety19.2 %166,506 Enhance the ability of the agricultural sector to manage and mitigate agricultural risks 20 %174,832 Technology Transfer and Commercialization13 %112,601 Achieve Organizational growth and sustainability 13 %114,082

Medium Term Management Actions (3- 5 YRS) 1.Rent out unused facilities 2.Establish a unit to focus on sale of ARC products (e.g. milk, eggs, fruits, etc) 3.Review all non-value adding Projects 4.Negotiate Prepayments & Progress payments on contracts 5.Closure of non- required facilities

Risks in the 2009/10 budget RisksAction item 1 There is a cash shortfall of about R100m to date Reduce costs & waste New business unit product sales 2 The target of R56m or 20% more external income may not be reached Engage stakeholders, look for new business & prepayments Review target along economy Efficient management of resources 3 The funding of R24m for Animal Improvement Schemes may not be resolved on time. Engage Minister, DoA and Treasury on urgency of funding Increase fees for participants 4 Additional funding of R190m for the FMD facility may not be resolved on time Engage Minister, DoA, DST & Treasury on strategic nature of facility – review costs of project 5 Failure to fill vacancies may hamper delivery on contracts and mandate Fill critical replacements on priority basis Contract linked posts to continue

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