1. DEPARTMENT: AGRICULTURE REPUBLIC 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 E249 Parliament 02 November, 2004,

2. DEPARTMENT: AGRICULTURE REPUBLIC OF SOUTH AFRICA 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 STRUCTURES Government Private 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. DEPARTMENT: AGRICULTURE REPUBLIC OF SOUTH AFRICA 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. DEPARTMENT: AGRICULTURE REPUBLIC OF SOUTH AFRICA 4 Why the Reversal ? EnterprisesFarmersEnterprisesFarmers Land Bank Commercial Banks Agricultural Coops Agricultural Credit Board

5. DEPARTMENT: AGRICULTURE REPUBLIC OF SOUTH AFRICA 5 Why the Reversal ? EnterprisesFarmers Enterprises Farmers Land Bank Commercial Banks Agricultural Companies Farmers Rural Micro-Finance Institutions

6. DEPARTMENT: AGRICULTURE REPUBLIC OF SOUTH AFRICA 6 Why the Reversal ? EnterprisesFarmers Enterprises Farmers Land Bank Commercial Banks MAFISA: Micro-Agricultural Financial Scheme for South Africa Farmers

7. DEPARTMENT: AGRICULTURE REPUBLIC OF SOUTH AFRICA 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. DEPARTMENT: AGRICULTURE REPUBLIC OF SOUTH AFRICA 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. DEPARTMENT: AGRICULTURE REPUBLIC OF SOUTH AFRICA 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. DEPARTMENT: AGRICULTURE REPUBLIC OF SOUTH AFRICA 10 Farms and Agribusiness Structure IV III II I Large commercial farms & agribusinesses Small commercial farms & agribusinesses Emerging farms and agribusinesses Subsistence farms and agribusinesses 1 st Economy 2nd Economy

11. DEPARTMENT: AGRICULTURE REPUBLIC OF SOUTH AFRICA 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 1 st and 2 nd 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. DEPARTMENT: AGRICULTURE REPUBLIC OF SOUTH AFRICA 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. DEPARTMENT: AGRICULTURE REPUBLIC OF SOUTH AFRICA 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. DEPARTMENT: AGRICULTURE REPUBLIC OF SOUTH AFRICA 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. DEPARTMENT: AGRICULTURE REPUBLIC OF SOUTH AFRICA 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. DEPARTMENT: AGRICULTURE REPUBLIC OF SOUTH AFRICA 16 Functional Structure Head office District Branches Local Branches 41 500

17. DEPARTMENT: AGRICULTURE REPUBLIC OF SOUTH AFRICA 17

18. DEPARTMENT: AGRICULTURE REPUBLIC OF SOUTH AFRICA 18 Service Delivery Consortia Land Bank Post Office MAFISA APEX Fund Donors Banks User-Owned SAVVEM KHULA Provincial DoAs Provincial DFIs Agri Cos Agri-Coops IDC Rural MFIs Local Municipalities Rural Financial System

19. DEPARTMENT: AGRICULTURE REPUBLIC OF SOUTH AFRICA 19 Sources of Funding MAFISA Interest Income Investments Grants Parliamentary Appropriation

20. DEPARTMENT: AGRICULTURE REPUBLIC OF SOUTH AFRICA 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. DEPARTMENT: AGRICULTURE REPUBLIC OF SOUTH AFRICA 21 Expected 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. DEPARTMENT: AGRICULTURE REPUBLIC OF SOUTH AFRICA 22 THANK YOU

23. DEPARTMENT: AGRICULTURE REPUBLIC OF SOUTH AFRICA 23 Sustainable Livelihoods Framework VULNERABILITY CONTEXT Trends Shocks Culture CAPITAL ASSETS Natural Social Physical Human Financial Laws Policies Incentives Institutions PROCESSES TRANSFORMING STRUCTURES & PROCESSES STRUCTURES Government Private 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. DEPARTMENT: AGRICULTURE REPUBLIC OF SOUTH AFRICA 24 Sustainable Rural Financial System Financial Services Stakeholder participation Rural Financial Infrastructure Outreach Conducive Policies Non-Financial Services Regulation & Supervision Improved sustainable livelihoods

25. DEPARTMENT: AGRICULTURE REPUBLIC OF SOUTH AFRICA 25 Financial and Enterprise Viability Cycle Viable Financial Institutions Viable Rural Enterprises Vibrant rural and agricultural economy Growth

26. DEPARTMENT: AGRICULTURE REPUBLIC OF SOUTH AFRICA 26 Savings and Credit Household Cycle Credit: High potential areas and high return ventures Savings: Subsistence production and low return ventures Rural and Agricultural Economy Growth

27. DEPARTMENT: AGRICULTURE REPUBLIC OF SOUTH AFRICA 27 Short hand for socio-economic dualism: u First Economy at the cutting edge, globally integrated and with a capacity to export manufactured goods, services and primary commodities u 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: u People without a steady income based on their own economic activity u 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 Economies

28. CASP model The Hungry & Vulnerable Household food security & Subsistence Farm & Business level activity Agricultural macro- system within consumer economic environment Agriculture support Information & Knowledge Management Technical & advisory assistance Technical & advisory assistance Financial assistance Financial assistance Training & Capacity building Training & Capacity building Marketing & Business Development Marketing & Business Development On & off farm infrastructure On & off farm infrastructure 6 pillars