Development Bank of Southern Africa and Land Bank 2011 strategic plans: Deputy Minister of Finance briefings

Meeting report

Introduction
The Chairperson welcomed the Hon Nthlanhla Nene, Deputy Minister of Finance and delegates from the Development Bank of Southern Africa and the Land Bank, saying that the two banks, together with some of South Africa’s state owned enterprises (SOEs), were the core drivers of the economy. These development finance institutions were of direct interest to the Standing Committee on Finance.

The Chairperson remarked that the recent local government elections had been a demonstration of democracy at work. The turnout of voters had increased. Now Members were returning to carry out what the electorate wanted them to do.

The Deputy Minister agreed.

Development Bank of Southern Africa (DBSA) briefing
Deputy Minister Nthlanhla Nene pointed out an error in the meeting’s agenda, as given in the Order Paper. The correct name of the “Development Bank of South Africa” was Development Bank of Southern Africa (DBSA). He said that the development needs of South Africa and the wider region were extensive, and, in many ways, structural in nature. Although considerable progress had been made over the past 16 years, the level of poverty still remained extremely high, with high backlogs in access to basic services and social services, and high unemployment and structural weaknesses in key areas of our economy. Our Government's development policies and plans highlighted its function in effective policy delivery of basic social and infrastructure services as a key measure in reducing policy and dealing with underdevelopment. Government had identified the five priority areas – education, health care, fighting crime, rural development, and job creation – as requiring targeted and urgent attention. Across virtually all these priority areas the stock and quality of our infrastructure was of highest significance. It was clear that the rate of investment in infrastructure had to be accelerated. Maintenance must be strengthened. Implementation and financing partnerships must be broadened and deepened in support of good social and economic development.

As one of our leading development finance institutions, the Development Bank of Southern Africa was well positioned to advance the strategic development thrusts and had aligned itself with the priority outcomes identified by Government in its new approach. It had begun an institutional shift to reposition the organisation as a major centre of excellence for infrastructure development, as would be seen in the presentation. The organisation had now embarked on a step-up change The Development Bank's new corporate plan involved not only accelerating infrastructure development, but also new initiatives to expand job creation in line with Government's developmental agenda, advancing the green economy, and help ensure the delivery of value for money in infrastructure.

In addition to the Development Bank's current development activities, which would continue as previously, a series of mandates had also been agreed and assigned to the DBSA to support the financial infrastructure in key priority areas such as health, education, energy, water, and sanitation. In the coming months, the implementation of these programmes would be launched. The Deputy Minister would have preferred that these be done earlier but they would be done “quite soon”. The roll-out of national programmes could also result in bank-wide infrastructure disbursement increasing from R15 billion to about R20 billion per annum – more than double that of the 2010/11 financial year (FY), and the asset base increasing from the current R50 billion to peak eventually between R250 and 400 billion in the long term.

Discussions were at an advanced stage between the National Treasury and the Development Bank on the resources that would be required to ensure that the necessary capacity would be in place.

At the same time efforts were under way to enforce the overall framework of delivery and to strengthen co-ordination between the various authorities and parties at local and provincial level.

The Deputy Minister pointed out that perhaps the time would come when the entity concerned would not make a presentation, because, having forwarded the corporate plan well in advance to the Members of the Committee, instead of the entity identifying which were pertinent and salient features of the corporate plan, the entity would be present primarily to answer questions. It would rather be for Members to identify those salient features. These PowerPoint™ presentations looked good and it might be tempting for Members to focus on the presentation instead of on the report itself.

Mr Paul Baloyi, DBSA Director and Chief Executive Officer (CEO), Development Bank of Southern Africa, discussed the Bank's corporate plan and elaborated further on its strategic initiatives.

It was important to note that this was a culmination not only of the DBSA's activity of putting the strategy together but that it had become an 18 month holistic approach from the DBSA engaging Government at the level of ministries and departments, and even at local level, on the objectives, and to try to produce a holistic framework that would enable Government not only to prioritise its approach to delivery but to work in a coordinated framework. In substance, the input that the DBSA had received across all the ministries with which the DBSA had engaged, and, in particular the National Treasury, had put the DBSA in a position in which it could confidently say that, having consulted all concerned, there was a positive outcome and the DBSA was now ready to begin to roll-out with the strategy.

Mr Baloyi explained the DBSA's internal governance and organisational structure (Slide 4). The DBSA had five “client-facing” divisions. This had resulted from the DBSA's own analysis of how it engaged with its clients. The DBSA had recognised that, as much as its head office was importance, the DBSA had to broaden its interface with the client. The South African operations division dealt with funding, primarily local government. The investment division dealt with economic infrastructure. The international division dealt with the DBSA's work outside South Africa. The development fund dealt with all the institutional capacity building initiatives that the DBSA launched, including training, community development and facilitation, and rural development. The development planning division did research and advisory services and provided data and information to the Department of Cooperative Governance (DoCG), for instance, and other government departments, and also for the DBSA's own use as an organisation.

Mr Baloyi said that the strategy was not a literal complete shift from the left or to the right. It was a progressive movement building on what the DBSA was doing well in terms of service to the community. It was hoped that people would see the good work DBSA had done, historically, and this would be scaled up in future. As an institution the DBSA had clearly distinctive features that proudly separated it from many other development finance institutions (DFIs) inside and outside South Africa. A main challenge that the DBSA had recognised was that there were, in South Africa and the region, very few “bankable projects”. So the DBSA had expanded to the left in terms of its work to extend help to institutions to develop projects and take them to the market. This entailed identification and appraisal, and thereafter the DBSA would provide funding.

The DBSA also helped in the front end of the value chain (chart, Slide 5). The planning, execution and procurement of resources for implementation of the projects, in this particular instance DBSA's work with local government in South Africa, had with pride been demonstrated to be excellent. The DBSA also looked at construction management and project monitoring. After completion of a project, the DBSA reviewed and evaluated its own work, using external sources and internal resources to do so.

In that context, the DBSA had a holistic chain that put it in a position to look at an institution holistically in future.

The DBSA clustered its intermediaries or customers as those that were strong and those that were weaker, as given in further detail in the chart on Slide 6. Weaker customers were those that needed help not only with funding but with institutional development and capacity building.

Mr Baloyi said that the DBSA had in some instances done life saving work. When it was measured against South Africa's challenges, however, the DBSA fell short, since there was still poverty, and the DBSA sought 'a prosperous and integrated region progressively free of poverty and dependency' (Slide 3).

Mr Baloyi said that the DBSA had asked itself how it could take the resources that it had and achieve greater input with scalable projects that had greater reach countrywide. He gave the example of building schools and hospitals. While there were demonstrative achievements locally, there was not sufficient demonstrative achievement overall in the country.

As a centre of excellence for infrastructure delivery the DBSA supported Government in its efforts to deliver. Driving factors for the DBSA as a centre for excellence were listed together with their requirements. Driving factors were the National Priorities. The DBSA's new proactive and integrated approach gave rise to the Centre of Excellence for Infrastructure, whereby the provision of economic infrastructure and social infrastructure converged at the point of infrastructure service delivery (Slides 7-9).

Key projects and time frames for implementing health public private partnerships (PPPs) were listed under the headings of organisation and description (Slide 10).

An example of governance framework in the case of provision of school buildings was provided (Slide 11).

The current status of Development Fund (DF) implementation operations, under the headings of capacity development and deployment, rural development division, and community development and facilitation, was provided (Slide 13).

The Step-up change was indicated with reference to DF implementation programmes (Slide 14) and DF implementation enabling programmes (Slide 15).

The DBSA sought to expand support in the region. Key focus areas by sector and country categories, key themes, and sector-based engagement were indicated (Slide 17).

Mr Pieter Del la Rey, DBSA Chief Financial Officer and Executive Manager, Finance Cluster, described the financial effects: beneficiation – disbursements and municipal infrastructure grants (MIGs) (chart, Slide 19); projected growth in balance sheet (2007/2014) (graph, Slide 20); and grants - technical assistance and the development fund (financial year (FY) 2010/2014) (chart, 21).

Discussion
The Deputy Minister said that the DBSA would try to limit the engagement to the corporate plan and not confuse it with the annual report, on which the Standing Committee had been fully briefed previously. The focus of the discussion could be on whether the corporate plan represented the right direction for the DBSA in the view of the Standing Committee.

Mr Baloyi appreciated that the submission might seem complex, and that, ideally, further time would be required to analyse it fully.

Dr D George (DA) asked if the DBSA saw itself as a profit-motivated organisation.

Mr Baloyi replied that historically the DBSA was established as an institution whose sole mandate was to assist and beneficiate Government rather than to make profit. It was measured on its corporate scorecard by its developmental impact. The financial figures showed that the DBSA could have chosen to make a greater profit, which would have been very easy, since the DBSA thereby could have stopped all its other initiatives. However, the DBSA, rather than aim for profits, sought to remain sustainable. He referred to Slide 21, and to an earlier briefing to the Standing Committee.

Dr George asked how the DBSA defined poverty.

Mr Baloyi replied that for the DBSA poverty was what one saw day in and day out, when one visited communities that were without shelter, water or sanitation. It was not necessary to refer to the textbooks to define it. However, poverty was well-documented in the DBSA's research and publications.

Mr Admassu Tadesse, DBSA Group Executive and Head of Strategy, explained how the DBSA addressed poverty in an integrated fashion and considered the causality. The DBSA did not consider poverty only from the viewpoint of income, but considered services, morbidity, health, mortality, violence and discrimination. The DBSA took a multidisciplinary view, including the role of infrastructure in dealing with poverty. Therefore the holistic approach was essential.

The Deputy Minister added that one should guard against being too technical in defining poverty. It was something that many people faced every day. Because of the history of this country, many people were excluded from economic activity by their personal circumstances.

Dr George asked how the DBSA defined dependency.

Dr George observed that South Africa was underdeveloped itself. He asked if the DBSA was focusing in the regional development on governmental projects in the region or on privatisation or on both.

Mr Tadesse replied that addressing the sustainability and longer term viability of projects was one way of reducing dependency. It was necessary that these projects did not become a regular drain on development finance or public finance. The DBSA also looked at dependency from an international point of view to ensure that South Africa and the region could finance its own projects to the greatest possible extent rather than always looking to external sources which thereby reduced the ownership of the mandate of the region itself.

Mr D van Rooyen (ANC) asked what the DBSA's other challenges, besides financial challenges, were. He asked especially about inter-government relations and inter-department relations. It would be necessary at a later stage to dissect some of these 'softer challenges'.

Mr Baloyi replied that the reason for delivery not reaching the desired level was not purely because of access to finance. Institutions themselves were not well-structured or capacitated with suitable personnel. These were inherent challenges to the DBSA in its delivery.

Ms Z Dlamini-Dubazana (ANC) found it hard to accept the term 'holistic'.

Mr Baloyi replied that, the DBSA understood 'holistically' to represent the critical work that the DBSA had done with each of the Government ministries and departments. The DBSA dealt with policy issues in terms of giving advice. It also dealt with data analysis and providing them with information. Additionally, it dealt with strategy in terms of how they should approach that sector. It also provided people to sit with those ministries and departments and work with them as a team. In that context, its proposals to Government were not merely financing. The DBSA was responsible for providing the catalyst of the health road map, and had assisted the Government in conducting a competency analysis of all the hospitals to see if they had suitable personnel and ascertain what needed to be done. When DBSA considered 'holistic' it spoke of the totality of help, from bricks and mortar, though personnel and maintenance and operations to how the institution could continue to evolve and how it linked to related institutions. Funding had now become incidental to the DBSA's work.

Ms Dlamini-Dubazana appreciated the strategic plan but said that Members, as politicians, measured the DBSA's progress on the basis of Section 3 of the DBSA Act and the DBSA's five deliverables. However, 'the data base was not there'. She said that the strategic plan should follow those five deliverables.

Mr Baloyi replied that, in the DBSA's ability to report as an institution to show the value of what it was doing, the DBSA was still learning. It had consistently tried to find a medium of communication whereby it could demonstrate what it was doing. There was a lot of achievement that was not necessarily reflected in the financial figures alone. The DBSA did much in serving the community, and acknowledged a need for improving its reporting. He assured the Member that the information was there.

Ms Dlamini-Dubazana asked about work done by the DBSA outside the country.

Mr Baloyi replied that South Africa could not develop alone; there was a regional focus. Part of the DBSA’s work was to ensure that South Africa became globally competitive. That could not be done without reference to key infrastructure regionally. The DBSA leveraged international organisations for the work that it did outside South Africa, with good results. In Africa the DBSA was second only to the South African Development Bank in the effectiveness of its work. However, the DBSA did not report as vocally on this part of its work than it did on its contribution to South African service delivery.

Mr Admassu Tadesse added that in terms of magnitude the balance sheet of the DBSA was referred to being some R53 billion or so. Just short of R10 billion of that was outside South Africa. This was less than 20% of the balance sheet. It was important to note that regional projects benefited South Africa itself such as trans-border roads. The challenge of regional projects was to manage the complex inter-relations between the various parties involved.

The Deputy Minister said that officials were being tempted to provide responses from the annual report.

The Chairperson responded that there was always a thin line between discussion of the annual report and discussion of the strategic plan, since discussion of the latter would inevitably refer back to the former.

The Chairperson appreciated the DBSA's expanded mandate in terms of capacity building; it was providing responsible lending.

The Chairperson asked if one should make the DBSA, on the strength of its balance sheet, the bearer of guarantees for SOEs such as Eskom. It was a difficult question to which he did not expect an immediate answer. Such a move might cushion the impact of Eskom's investment in new power stations on its consumers.

The Chairperson asked who the custodian of the corporate plans of entities that reported to National Treasury was.

The Deputy Minister replied that in this instance it was the Governor of the DBSA, who was the Minister of Finance.

The Chairperson was concerned that boards and their chairpersons tended not to take Parliament seriously enough.

The Deputy Minister pointed out that Prof Omar Latiff, DBSA Director, was representing the Chairperson of the Board, who was today engaged in his capacity as Chairperson of the South African Broadcasting Corporation (SABC).

The Deputy Minister appealed to the Chairperson, in the interest of economy, not to require the presence of entire boards at such meetings.

The Deputy Minister appealed to the Standing Committee to support the DBSA in achieving its objectives and supporting the developmental agenda of Government.

Land Bank briefing
Mr Joe Mthimunye, Board Director, Land Bank, represented the board chairperson. He said that management had stabilised the Land Bank, which was serious in finding solutions.

The Deputy Minister said that a number of positive developments had taken place. The Land Bank had been in intensive care and drastic measures had been called for to prevent its total collapse. While it had a dented reputation, it was now delivering on its mandate, which was developmental. Accelerating rural development was in line with the Government framework. As such, the Land Bank was using, in collaboration with the DBSA, a social accounting matrix (SAM) to measure its overall development impact. To grow its business was at the heart of the sustainability of the Land Bank, which had a Fitness for the Future (FFF) plan, according to which the Land Bank had newly defined its market segments.

Mr Phakamani Hadebe, Chief Executive Officer, Land Bank, referring to the presentation's Table of contents, indicated the presentation's scope: an overview of Land Bank; the turnaround strategy; sustainability (Fit for Future (FFF)) and development (Retail Emerging Markets (REM)); major corporate key performance indicators (KPIs); the way forward; and the appendices (Slide 2).

The Land Bank was wholly owned by the South African Government. It had been founded in 1912 and provided retail and wholesale financing. It sought to finance development and commercial farmers. The Land Bank's regulatory framework was the Land and Agriculture Development Act 2002 ('Land Bank Act'), the Public Finance Management Act 1999, and the National Credit Act 2005. According to the Fitch Rating Agency, its long term rating was (AA (zaf)) and its short term rating was (F1+ (zaf)). This rating was confirmed on 18 March 2011 (Slide 3).

The turnaround strategy had begun in September 2008 with a clean-up phase focusing on addressing adverse audit findings by improving existing systems and processes to achieve a cleaner audit report. It had progressed through a phase of stabilisation beginning in September 2009. This phase was designed to address the deterioration of the balance sheet, enhance human capacity and ensure effective systems. The culmination (March 2012) of the turnaround strategy would be the sustainability phase that would assume that the Bank's operations had been normalised and that the Bank had a strong business plan. (Slide 4).

As a result of the forensic investigation, arrests had been made. Private investigators had been used. The Land Bank was happy with the achievements made towards clean up.

Particular aspects of the clean-up phase included addressing audit qualifications, resolutions of the Standing Committee on Public Accounts (SCOPA), and Government guarantee conditions. Particular aspects of the stabilisation phase included improved staff capacity, information technology, the balance sheet, funding dynamics, and cost-to-income ratio. Particular aspects of the sustainability phase included building the loan book, the Fit for Future (FFF) appropriate operation and business models, and development (ring-fenced) (Slide 5).

The Land Bank now had a fully fledged executive committee (Exco) team. Information technology (IT) had been improved, and the Land Bank was now live on SAP.

An increasing loan book showed evidence of stabilisation (graph, Slide 6). Loan book movements from March 2010 to March 2011 were indicated (graph, Slide 7).

A balance sheet analysis, showing the impairment trend and capital adequacy, was provided (graph, Slide 8).

The FFF strategy was described whereby the Land Bank would establish a business unit focused on emerging farmers; optimise branch back office activities through technological means and process efficiency; optimise the Land Bank’s delivery channel; stabilise and enhance the service capacity and capability of the Business and Corporate Banking unit; and establish a high performance, people oriented culture (Slide 10).

The Land Bank's organisational structure comprised the office of the CEO under which were the Retail Emerging Markets (REM), Retail Commercial Bank (RCB) and Business and Corporate Banking (BCB) divisions (Slide 11).

The REM business aimed, in the face of market failure, to assist black emerging farmers to become established retail farmers through the provision of tailored financing solutions (Slides 12-13).

A sustainable business model (long-term) for development funding with inputs from Government and multilateral funding was described. In this model, REM, BCB and RCB, and the Land Bank Insurance Company (LBIC) were represented as subsidiaries to the Land Bank (Slide 14).

Regarding Development Impact Measurements, new tools were developed. There was an assessment of applications on Development Impact Parameters Framework (DIPS). The DIPS was used to provide a social discount to development clients and clients with strong contributions to development. The Land Bank in collaboration with DBSA was using a Social Accounting Matrix (SAM) to measure its overall development impact (Slide 15).

Development non-performing loans (NPLs) were indicated (graph, Slide 16). These represented 58% of the total Development Loan book.

The lending structure of the Land Bank, with reference to the retail book and the corporate finance book FY2007-FY2011 were indicated (graph and chart, Slide 17).

Major Corporate KPIs as projected for March 2012, March 2013, and March 2014, were indicated per
Key Performance Area (KPA): development, growing the loan book, cost-to-income ratio, capital adequacy ratio, diversifying income streams (year-on-year), reducing non-performing loans, and liquidity (Slide 18).

The way forward was seen in terms of development and continuing to grow the loan book but concentrating on its quality, while seeking improved efficiencies and enhanced client relations management. The Land Bank sought also to diversify its income stream, mitigate development risk with value chain finance, implement Fit for Future (FFF), and revise business and operational models. The Land Bank wanted recurrent business with achievable targets (Slide 19).

The Emerging Farmers Support Facility (EFSF) was a unit with focus on emerging farmers. The Land Bank was a Government entity and supported the Government in creating jobs. Abandoned farms had to be given to new people. If the Land Bank was successful in this pilot project, there would be funding from the National Treasury. (Appendices - charts, Slides 21-22).

Mr Hadebe said that the Land Bank had mitigated the development risk, but it was a challenge to remain sustainable as the Land Bank moved forward. The Land Bank was revising the business and operational models as it moved forward.

Discussion
The Chairperson commended the Land Bank for highlighting its journey, a story that was good to hear.

The Deputy Minister hoped that Members would appreciate that it had not been easy for Mr Hadebe to condense the presentation to fit the Standing Committee's programme.

Dr George was pleased at the Land Bank's progress after its unfortunate history. He asked about the legacy interest claims. It seemed that these were not yet finished, although the Deputy Minister had indicated that the turnaround strategy was complete. He asked if these claims should be included in the objectives set for the bank.

Mr Wolf Meyer, Land Bank Chief Financial Officer (CFO), replied that the debate on interest claims hinged on four issues. In the year 2000 the Land Bank had changed its banking model to accommodate the Year 2000 (Y2K) computer issues. He explained the differences in the effective interest rates between the Land Bank and its competitors. With the new model, the Land Bank calculated interest on an NACM basis (interest calculated on a daily basis but accumulated on a monthly basis – the banking industry norm) rather than NACA basis (interest calculated on a daily basis but only accumulated annually). A notification was sent to clients explaining the difference in the method of calculation which, however, meant that there was no difference in the interest calculated. However, there were some clever financial advisors, who convinced the farmers that the Bank had made an error. These financial advisors recalculated the accounts but did not convert the NACM rate that was used back to an NACA rate. They then convinced the farmers that there was an error in their accounts and the Land Bank received claims on that specific issue. The Land Bank contested these claims, and this would go to court soon.

Mr Meyer said the next issue was the changing of the Bank Act in 2002 to allow for penalty administration fees on accounts that were in default. However, the Land Bank started imposing these administrative penalties on all accounts, while the loan agreements up to that time did not allow for the levying of these fees. So that was an error. The Land Bank conceded its error, and committed itself in public to rectify the matter. Now it was in the process of rectifying the matter and had an interest recalculation team, which was working through all accounts – both open and closed to identify the mistakes.

The third issue was that in 2006 there was no link between the clients' loan agreements to the prime interest rate. This was another issue that the financial advisors picked up. The interest rates the Land Bank charged were based on the credit profile of the client, the funding cost to the Land Bank, and the financial position of the Land Bank. With all these legacy issues, the financial viability of the Land Bank was poor, and sometimes the Land Bank felt that it had to increase its rates higher than the movements in prime, but at all times these rates were lower than the market rates from the commercial banks.

The last issue was a special form of interest in which the interest charged exceeded the original capital amount that was lent out to the client. The Land Bank conceded that this was an error, because its systems could not cater to blocking the interest when it exceeded the original capital amount. However, the Land Bank never gained financially from this error, because this special kind of interest would only be found on accounts that were in default, and obviously those accounts were being provided for in any event. There were a very few cases where such an account was actually regularised. In such cases the Land Bank would repay the overcharged amounts to the clients. There were pending court cases and the Land Bank was confident that it would win these cases.

Dr George observed that there was mention of the emerging farmer support facility, which he thought was a very good idea. This mention, it seemed, focused on the finances. However, as previously mentioned, many of these farms had fallen over completely. Possibly the reason was lack of management skills. Was the support purely financial or was there some other kind of support?

Mr Van Rooyen asked what went into the after care model. At some stage the use of intermediaries was cited. The issue of cooperatives was also mentioned. How effective was this model?

Mr Hadebe replied that there were three challenges – access to finance, access to market, and skills. The challenge, as Mr Van Rooyen had asked, was whether the Land Bank could provide this service of after- care management. 'In all fairness, we can't'. It might mean that the Land Bank would have to employ more and more people, and the cost of this would not be sustainable. So therefore the Land Bank sought people who could provide that service and paid them to provide it. Agricultural cooperatives and intermediaries gave support. It was the Land Bank’s responsibility to get those skills and pay for that service. The interaction that the Land Bank had with agricultural cooperatives was done in a manner that ensured that they also benefited by, for example, reducing the interest rate on loans. The whole system was designed to provide the technical and management support of the farmers as well.
 
Mr Vincent Potloane, Chief Treasurer, Land Bank, replied that the Land Bank acknowledged the need to apply appropriate farming techniques and ensure the effectiveness of after care effectiveness. For example, farmers should be asked what fertilisers they needed.

Dr George observed a number of human capital key performance areas (KPAs), including a retention strategy, and observed that the CFO was leaving. Why?

Mr Hadebe replied that turnover had dropped from 27% per annum to about 4.5%. Previously everyone wanted to move out, and it was a bad place in which to be as regards a career. Now the Land Bank was a good place to work in terms of enhancing one's curriculum vitae (CV). The CFO had been offered a better deal that the Land Bank could not match. He had done well in the past two years, and the Land Bank had tried to convince him to stay.

Dr George said that there was mention of developing a print publication for the stakeholders. Would this be value for money?

Mr Hadebe replied that the Land Bank had not been selling its story well. So it had created this print publication and which it thought was a move in the right direction.

Mr Van Rooyen asked about non-performing loans. There seemed to be no targeting of this particular trend appropriately. This was something that should be discouraged, unless there are quite pressing reasons why the Land Bank could not reduce it to lower than 9.5% and 9.2% respectively. He emphasised that this was something to be discouraged at all costs.

Mr Hadebe replied that the Land Bank had claimed everything that it could get from the non-performing loans. As a DFI the Land Bank should be sustainable. However, non-performing loans should be at a level, not for a commercial bank, but at a level acceptable to Government and this Standing Committee. As a DFI, the Land Bank should have just sufficient income to be sustainable. However, it was of crucial importance to meet the Government's targets.

Mr Hadebe added that as the Land Bank grew its development book it was going to have challenges. He referred to the corporate plan, page 3, third paragraph.

Mr Van Rooyen asked about diversifying the income stream and conversion into equity as one approach to be considered. What was the risk in this approach, and were there any risk mitigation measures at the disposal of the Land Bank?

Mr Hadebe replied that the Land Bank was not charging initiation fees. Because it was not doing so, it had opened itself to the fluctuations of the market. It saw the need for diversifying its income, and had steadily begun to introduce the policy to introduce such initiation fees.

Ms Dlamini-Dubazana offered the Land Bank her thanks and congratulations for moving up from step one to step 15. It had not been an easy job. However, with regard to the Land Bank's three concepts in the turnaround strategy, she did not understand the model for the Fit for the Future (FFF). What programmes contained that model? She asked the Land Bank to share them with Members so that they would know how these programmes would be monitored.

Mr Hadebe replied that the Land Bank needed a strong business plan that ensured sustainability. The turnaround times were taking too long. In the branches you needed people to sell. So the Land Bank consolidated its regional offices. The branches gathered business, but there was duplication. There was an issue of development. The FFF was a business plan to ensure sustainability. The Land Bank would make it available.

Ms Dlamini-Dubazana asked how the National Treasury monitored the Land Bank and what instrument it used. She noted that the Land Bank shared with the DBSA the importance of sustainability and rural development. She asked how the National Treasury monitored the duplication thereof.

Ms P Adams (ANC) thanked the Land Bank for its presentation and noted that the Land Bank was administered by National Treasury, but its clients were those of another state department.

The Deputy Minister referred to the partnership between government departments. There was partnership in particular between the National Treasury, the Department of Agriculture, Forestry and Fisheries, and the Department of Rural Development and Land Reform. The Land Bank was under the National Treasury, but the services that it provides were with other departments. The National Treasury was responsible for the DFIs. There was need to ensure complementarities and synergies with proper coordination.

Mr Higgo du Toit, Chief Director: Guarantee and Financial Monitoring, National Treasury, added that National Treasury had a coordinating committee between the Land Bank 'and the other two departments' to ensure synergy. The budgetary side of National Treasury also sat in that committee.

Ms Adams asked about its championing of employment equity and how much equity of gender equity was achieved in this employment equity.

Mr Hadebe replied that overall the Land Bank had done well. At the level of the 12 member board, there were four women members. At the level of the executive committee (exco), of which there were nine members, there was, however, only one woman. The Land Bank had previously three women exco members, one of whom had been on a contract to perform information technology (IT) services. She had left, because her contract had expired. A second woman exco member had been contracted to perform management duties, but her contract had also expired. However, she remained with the Land Bank, but not as a manager. She now was doing internal audit. One woman manager remained. The Chief Executive promised that the Land Bank would work on gender representation.

The Deputy Minister agreed that the Land Bank should address the issue of gender equity. However, to a considerable extent, gender equity was outside the control of the Land Bank. It would be ideal if the Land Bank could obtain a female CFO, to replace Mr Meyer, who was leaving. He admitted that it was an area that needed attention, but it was not easy to address unless female applicants for vacant positions were forthcoming.

Ms Adams asked if the Land Bank had any special programme to support upcoming female farmers.

The Deputy Minister said that unless women entered farming and applied for loans from the Land Bank [they would not be reflected in the figures.]. Perhaps the Land Bank should offer an analysis in terms of the gender of applicants for loans.

Mr Hadebe promised to provide such an analysis and send it to the Standing Committee.

The Chairperson was pleased with the presentation. Most of the issues were work in progress. Critical elements had been identified for unlocking important sectors of the economy. One was not just talking about the Land Bank but about one of the key five priorities of Government, which lay at the heart of food security. The Land Bank was profit-making, although this was not one of its major objectives. However, it was of key importance to sustain one of the developmental aspects of Government. Secondly, the interaction between the Land Bank and the Department of Agriculture, Forestry and Fisheries on market access was important. Lastly job security and job creation was of importance. From the strategic plan, it was clear that the Land Bank was beginning to ensure that these objectives were sustained. The issue of women activists in the agricultural sector was not to be underestimated. In actual fact, most small scale farmers in South Africa were women. Therefore the area of cooperatives and skills should be a targeted sector in collaboration between the Land Bank and the Department of Agriculture, Forestry and Fisheries to ensure the improvement of livelihoods of our people. The Standing Committee would refer back to this strategic plan when reviewing future annual reports of the Land Bank. The Chairperson wished Mr Meyer well. He had done a good job.

The Deputy Minister thanked the Chairperson and Members. It had been a long an arduous road and he hoped that the Land Bank could maintain its progress with the Standing Committee's support.

The Chairperson thanked the Deputy Minister.

The meeting was adjourned.

Apologies
Apologies were received from Dr Z Luyenge (ANC), Ms N Sibhidla (ANC), Mr M Swart (DA), and Mr N Koornhof (COPE).