Land Bank Annual Report: briefing

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Meeting report

AGRICULTURE AND LAND AFFAIRS PORTFOLIO COMMITTEE
16 September 2003
LAND BANK ANNUAL REPORT: BRIEFING



Chairperson:
Mr N H Masithela (ANC)

Documents handed out

Land Bank Annual Report 2003
Land Bank Annual Report Power Point Presentation

Website:
Land Bank:
www.landbank.co.za

SUMMARY
One of Land Bank's key objectives was expediting the disposal of loan applications. In this regard the bank had made considerable progress. Briefing the Committee on its Annual Report, the bank reported that it previously took about six months to process applications but that this period was currently down to one month. The bank assured members that the turn-around time would be considerably less in future transactions. Land Bank had made good strides in reaching out to rural farmers and the IDT had made more capital available to guarantee capacity. The bank admitted that although it had made significant in-roads in its rural programmes a huge chunk of the challenge still remained. The Committee had earlier expressed concern that there were no recommendations in the report to enable it to report to Parliament and asked the bank to address this deficit.

MINUTES
The Chair introduced the team from the Land Bank who consisted of the Chair of the Board Mr Jethro Mbau and the bank's CEO Mr Monwabisi Fandeso.

Land Bank
Mr Monwabisi Fandeso, CEO Land Bank informed the Committee that the Land Bank contributed to rural development by providing equitable access to finance for the agricultural community thereby assisting in the establishment, growth and prosperity of farmers and agribusiness. This focused service to the sector was the bank's main objective. Land Bank's loan portfolio represented about half the agricultural lending of the country noting that the bank services the full spectrum of agriculture. The bank's client base exceeded 50,000 including developing farmers, established commercial farmers and agribusiness. The bank had 90 outlets, which included branches, satellite and mobile branches the majority of which were located in the deep rural areas.

Discussion
Mr Nefolovhodwe (AP) enquired about the extent to which the rural finance program was expanding and whether the bank had encountered any problems that far.

Mr Fandeso reported that the bank had made good strides in reaching out to rural farmers and that in this very regard the IDT had made more capital available to guarantee capacity. However, although it had made significant in-roads in its rural programs a huge chunk of the challenge still remained to be tackled.

Mr Nefolovhodwe asked the Bank to confirm or reject the allegation that had been made by older people that they were being discriminated in loan disbursements.

Mr Fandeso explained that the reality of access to credit was that the bank had to consider the possibility of the borrower carrying through the project for which they borrow money. The bank's main objective was how to get the youth involved but that this was not done to the exclusion of senior citizens. In fact there were some elderly people who were given credit facilities on a short term basis and they excelled in their projects.

Mr Nefolovhodwe noted that the credit culture had not taken root among the black communities. What was the Bank doing to inculcate this virtue among the formerly disadvantaged groups?

The Chair noted Mr Nefolovhodwe's concern and pointed out that this was indeed within the vision of the bank and that therefore the question should not be treated in isolation.

Mr Fandeso pointed out that the bank was addressing the issue of educating the public on how to access credit through one of its publication known as Vukuzenzele. The publication dealt with issues relating to financing and gave tips on the basics of financial management.

Mr Farrow (DA) asked how the bank had managed to decree the arrears portfolio by that huge margin and within such a short space of time.

Mr Fandeso replied that the decrease in loan arrears was attributable mainly to the bank's aggressive campaign in collecting arrears that were at risk.

Mr Farrow asked if the bank had so far entered any joint venture with other stakeholders to actualise its mandate.

Mr Fandeso reported that the bank had so far not concluded any joint venture with stakeholders but that the bank was currently negotiating with some international organisations for a possible partnership. The first ever joint venture the bank attempted was the one on the sugar project in the Eastern Cape was halted.

Mr Farrow asked if the bank predicted growth in the number of insolvencies in the agricultural sector.

Mr Fandeso reported that the number of insolvencies had been dramatically reduced due to the banks efforts and its rethinking of its statutory mandate, which had witnessed appropriate interventions which had culminated in positive results.

Mr Farrow asked if there were any grey areas, which the bank was for whatever reason unable to address. He cited the example of situations where people required an outright grant in lieu of a loan for which they could not raise the requisite security.

Mr Fandeso argued that debt was not the key driver in the bank's mandate to achieve development noting that it was important that some areas like the establishment of infrastructure should not be financed by debt. An eventuality would severely disadvantage farmers who would had little resources left for productive purposes.

Mr Farrow acknowledged the role the bank was playing in developing formerly disadvantaged farmers but suggested that this crucial mandate should not be achieved at the expense of commercial farmers.

Mr Mudau (ANC) noted that one of the bank's mandate was to help farmers in urban centres to develop their small holdings but that most people were complaining that after they submitting their applications to the bank they were informed that there was no money. He asked the bank to state its position on this complaint.

Mr Fandeso explained the complaint arises from the sum of R50 million ALRD allocated for that purpose. He added that the bank merely acted as an agent for ALRD and even exceeded the allocated sum at the end of the stated period but that no further funds were made available thereafter. The Department of Land Affairs did not give out any more money for the project this current year.

Mr Mudau noted that there were several irrigation schemes that were running in the country and asked how the bank ensured that there was no duplication of functions.

Mr Fandeso replied that all irrigation schemes worked in the provinces noting that these were essentially major influences of development projects. He reported that there were about 40 such schemes that were operating under the Department of Water Affairs.

Mr Mudau asked about the criteria used by the bank to eliminate undeserving applicants noting that it was paramount to create more awareness on the necessary requirements for a loan facility from the bank.

Mr Fandeso noted that the key factor was the development of a coherent plan and that the bank had hired service providers to help people put together solid business plans.

Mr Mudau noted that there was a high level of illiteracy among the rural folks and wondered whether this was one of the handicaps the bank faced in its endeavour to eliminate some of the aspirants.

Mr Fandeso said that illiteracy was certainly not one of the bank's hurdles in fulfilling its mandate and noted that a number of its customers were not literate yet they ran successful projects that were funded by the bank.

Mr Van de Merwe asked how the bank was dealing with the demand for expediency in processing of loan applications and whether it was satisfied with the current rate of turnover.

Mr Fandeso pointed out that one of the bank's key objectives was the disposal of loan applications noting that the bank had so far made considerable progress in this regard but that the pace was not yet good enough. The bank used to take about six months to process applications but that this period had since been brought down to one month. He assured members that the turn-around time would considerably come down in future transactions.

The Chair noted that there were many burning issues on which members would like to seek clarity but that they were limited by time constraints. He sought views from members on how to carry the discussion forward in view of the limited time frame.

Mr Farrow suggested that in view of the gravity of the outstanding issues another date should be set for the bank to come back and interface with the Committee.

The Chair noted with concern that no recommendations had been made in the Annual Report and underscored the need for tangible results from the report for purposes of the Committee's report back to the House.

Ms Kasienyane (ANC) suggested that members with questions should forward them to the Chair who would pass them on to the bank for an appropriate reply.

Mr Farrow took strong objection to Ms Kasienyane's suggestion noting that it was important for the house to deal with all issues as a collective body noting that the system of individual questionnaires had not been helpful in the past.

Mr Kasienyane defended her position noting that members needed time to go through the report in order to make informed decisions before they could interrogate it.

The meeting was adjourned.









 

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