Land Bank Strategic Plan and Budget: briefing

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Meeting Summary

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Meeting report

28 May 2004

Chair: Mr N Masithela (ANC)

As part of the process of consultation with stakeholders regarding the Budget Vote of the Departments of Agriculture and Land. Affairs, the Land Bank presented its strategic plan and budget.

The Land Bank was led by the Chairperson of the Board, Mr Mbau; the outgoing CEO, Mr Fandeso; the Acting CEO Mr Oricho and the General Manager: Finance, Mr Tshikare.

The Chairperson extended a word of appreciation to the Deputy Minister of Land Affairs, Advocate Du Toit for coming to the meeting.

Mr Mbau introduced his delegation and went through the presentation

Strauss Commission
What did it direct Land Bank to do?
What has been achieved?
What still needs to be done?

Land Bank Act
Objectives of the bank
Background information on the bank

Adopted in 1997
Made several recommendations pertaining to access to rural financial service
Made recommendation specific to Land Bank

Maintain capacity while changing focus
Transform to serve broader clientele
Continue to provide wholesale and retail finance
Rationalize branches
Establish relations with key Provincial Development Corporations
Provide Development funding with good practice ethic
Targeted wholesaling
Capacity building
State grants - transfer ACB funds
Name Change
Enabling legislative framework

Maintain capacity while changing focus
Continued to grow both development and commercial book year on year
Products targeting development clients introduced

Transform to serve broader clientele
Management / Staff by race addressed
New products for development client base

Continue to provide wholesale and retail finance
Both maintained
Retail & wholesale book growing

Rationalize branches
Completed - 28 branches
Satellite branches established to ensure accessibility

Establish relations with key Provincial Development Corporations
Wholesale funding to Uvimba, Ithala etc.

Provide Development funding with good practice ethic
Guidelines for financing development clients implemented
Lending criteria revised to enhance accessibility

Targeting Wholesaling
Wholesale finance to provincial DFI's
Wholesale finance through commodity groups

Capacity building
Agricultural chairs for varsities
Bursaries for PDI students of agriculture
Corporate social investment funding
Social Discount product

State grants - transfer ACB funds
Not achieved, now overtaken by events

Name Change
Land & Agricultural Development Bank of SA

Enabling legislative framework
New, enabling Land Bank Act enacted

Questions, Comments and Answers
Mr Abram (ANC) raised that he was pleased that the Chairperson of the Board had taken note of the State of the Nation Address. He wanted to know what the Land Bank would have wanted to see when the decision to have Agricultural Credit Scheme under the Department of Agriculture was made.

The Chairperson of the Board responded that he could not pre-empt what the Department of Agriculture would do. " We would transfer costs of funding if the ACS were to remain with us. We would lend that fund to loan book. Most of our money comes from the financial sector. You need to look at the norms" he said.

Mr Abram wanted to know the clientele which the Land Bank indicated it cannot cater for.

The Chairperson, Mr Masithela suggested suspending response to this question as there are discussions that are going to take place soon on this issue.

Mr Abram noted that Mr Oricho did not touch anything about mortgage bonds in his presentation.

Mr Oricho replied that the special mortgage was introduced to support development clientele. Some of the interest rates were not sustainable. The issue of syndication is used when the Land Bank has got BEE transaction. " We don't want the Land Bank to be exposed to big amounts and we then look for other funding options (4-5 number of banks).

Mr Abram wanted to know what the Bank envisaging about venture capital and equity funds.

Mr Oricho responded that currently, they have debt instruments, some of the products are suitable for BEE beneficiaries. "The terms are different from the normal lending terms".

Mr Abram wanted to know the gaps that Land Bank has failed to fill.

Mr Fandeso answered that while access to finance is important, it is not the only issue. There are also issues like skills and capacity building are equally important. The approach of the Bank is to be involved in alliances. "We need to be comprehensive and see what support development farmers need".

The Chairperson wanted to know the facts about properties confiscated and auctioned from black farmers.

Mr Fandeso responded that they have reserved prices and they need to be reached.

Dr Schoeman (ANC) noted that although development projects are important, it was disturbing that the these projects funded by the Land Bank do not reach the project beneficiaries and the capital is skimmed off by consultants. Hw wanted to know if Land Bank is aware of this and if it is looking at blacklisting those who are involved in these schemes.

Mr Fandeso replied that this is the issue that was picked up in the LRAD programme. The issue was to assist people to have coherent plans. "Moving forward with the project, consultant remuneration must be commensurate with performance", he said.

Ms Ntuli (ANC) wanted to the nature of the relationship between the Land Bank and Ntsika and Khula.

Mr Oricho responded that they had discussions with Khula in order for the clients of the Bank to get the support. "We are looking at providing training support with SETA's but this has not been given full attention".

Ms Ntuli wanted to know if the Land Bank is net driven.

Mr Oricho responded that they provide finance in a development manner. "Finance is not the only thing. The mandate of the Bank is finance".

Ms Ntuli also wanted to know how the Bank supports previously disadvantaged people like Walter in Limpopo who is struggling in his farm.

Mr Oricho replied that partners in the development field would be coming on board on extending capacity support. The Bank also made its properties available for beneficiaries and this was done in collaboration with Umsobomvu.

Ms Ntuli wanted to know how the Bank deals with the issue of skewed ownership.

Mr Oricho replied that they are trying to address some of the challenges because there are indeed gaps.

Ms Ntuli noted that the response from Mr Oricho does not mention training incoming farmers before they could actually start and ensure that their venture is sustainable.

Ms Ntuli wanted to know what the bank does regarding BEE.

Mr Oricho answered that they assist the government in its programme and try to add value.

The Chairperson indicated that the delegation from the Land Bank needed to provide the Committee with information regarding how many farms were given to black people and taken back. He proposed that these answers must reach the Committee by 8 June so that the Committee can release its policy statement.

Mr van Niekerk (DA) wanted to know what is in the mind of the Bank regarding the Strategic Grain Reserve.

Mr Oricho replied that the regulations were released, the Land Bank was the sole financer of grain.

Mr van Niekerk wanted clarity regarding the disposal policy of the Bank.

Mr Oricho told the committee that when a property is auctioned, the bidding stops at a particular figure. "We make property available for land reform and we are targeting PDI's". If we give the list to the Department of Land Affairs and it is not interested in the property, we give it to black farmers.

The Chairperson indicated that they needed to have information about properties the Land Bank has.

Mr Tshikare told the Committee that regarding capacity building, their lending methodology is not tied to the training precondition. "The Bank is in the process of developing products to look into the matter.

The Chairperson wanted to know what it means to be a development bank.

Mr Oricho told the committee that they are co financing BEE transactions and what to see themselves how they finance BEE. They are looking at warehousing shareholding of the company. There is a need to optimise land use and in some places like Gauteng, there are no massive land opportunities. " The bank never had the guidelines to have superintensives".

Mr Fandeso reported that they negotiated with the IDC to offer preferential products.

Mr Adams wanted to know the total number of interns in the Bank.

Mr Fandeso said that there are currently 20 students. He elaborated that bursars are given internship positions. " We are finding more students than we intend to absorb".

Mr Adams wanted to know if the existence of Vimba Bank duplicates the work of the Land Bank in terms of financing agricultural productivity.

Mr Fandeso responded that there was a need to partner with provincial DFIs. He further indicated that Vimba Bank has increasing access - collaborating with other agencies does not create duplication but seeks to improve access.

Mr Ngema (IFP) wanted to know why the Land Bank delegation was all males.

Mr Fandeso said that the issue of gender representivity is a concern for him. He told the committee that he had attempted to recruit female staff, but that the people he recruited got better offers elsewhere, noting that three staff members had recently left

Mr Adams wanted to know how the tractor scheme is working.

Mr Oricho responded that these are provincial initiatives. "Kwazulu Natal established schemes and there were negotiations with tractor manufacturers and we created a product".

A member raised that there seemed to be a sense of being defensive from the side of the Land Bank. " There is a need for an effort to be made for shareholders of agrarian and land reform and deal with issues relevant to their sector".

Mr van Niekerk thanked the outgoing CEO of the Land Bank for the sterling work he has done.

The Chairperson noted the unacceptable state of the Bank not having female staff at senior level. He however thanked the outgoing CEO and wished him all the luck in his new endeavour.

Financial And Budget Highlights
The presentation was by Mr Tshikare.

Corporate Key Performance Indicators
Growth in Loan Book Growth in value of Loans Portfolio Commercial Clients 9.1%Individual Development Clients 61.3%Business Efficiency Efficient deployment of resources to achieve corporate objectives, measured by ratio of expenses to income Expense: Income Ratio 33.6%

Loan Book Quality Maintenance of high levels of recoverable loans supporting favourable credit rating and entity sustainable. Value of Arrears as a percentage of total loan book of less than 4%NPL's below 7% of the loan Book

Questions, Comments and Answers
Mr Abram wanted to know the logic of the improvement in forecast of operating surplus when the Land Bank took a dip last year.

Mr Tshikare replied that they presented to the Portfolio Committee last year. There have been specialised techniques developed. "In this current financial year, we have seen improvements. There has been significant collection increase of 66%. Land Bank was prescriptive and now it is enabling".

Mr Fandeso elaborated that they had indicated that there needed once off provision and return to levels of service.

This document was generated on: 2004-06-07Disclaimer: Every attempt is made to ensure that this information is accurate, but this report is not an official record of the meeting and therefore should not be regarded as a complete and correct record of the proceedings.



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