Minister of Agriculture & Land Affairs address & Land Bank Budget /Strategic Plan 2008/2009 briefing

Agriculture, Land Reform and Rural Development

05 May 2008
Chairperson: Mr R Mohlaloga (ANC)
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Meeting Summary

The Minister of Agriculture and Land Affairs introduced the Land Bank’s new Board, appointed by Cabinet on 05 May 2008, and expressed her fullest confidence in the board’s abilities to steer the Bank onto a course of recovery and success.

The Chairman of the Land Bank Board said that the Board members had found the Bank ‘in a state of dereliction’ when they took up their appointments, and felt that the Board must not only provide leadership and direction, but, for the time being, also involve themselves in the day to day issues and affairs of the bank, while developing the management skills of the bank’s executive staff. In its budget presentation the Bank requested from Government a substantial capital injection and guarantees for the new funds that the Bank would have to raise to proceed with its plans. Such support would help the Bank to reduce the cost of funding agricultural development. The Bank could not support the agricultural sector by itself, but would have to develop partnerships with the commercial banking sector.

Some Members commended the Land Bank on its work over the past month and the briefing by the Acting Chief Executive Officer. However, others expressed some concern that the Board should be cautious not to assume the role of management, although it was appreciated that the current difficulties in the interim phase called for unusual measures. Other Members raised a number of questions relating to policy, the amount of interest, whether more support was needed for emerging farmers, attachment of farms for non payment, and whether previous practices of assistance should not be reintroduced. The Committee pledged that it would give support to the Bank, but would scrutinise the Bank’s progress and insist that commitments to be fulfilled.
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Meeting report

Land and Agricultural Bank of South Africa (Land Bank  / the Bank) Budget and Strategic Plan 2008/9
The Chairperson noted that the Land Bank had been scheduled to appear on 18 March 2008 to brief the Committee on its budget and strategic plan, but had requested postponement, since the new Board had just been appointed.

The Chairperson welcomed Ms Lulama Xingwana, Minister of Agriculture and Land Affairs, and the Land Bank delegation, comprising members of the Bank’s new Board and the Bank’s management team.  Advocate Dirk du Toit, Deputy Minister of Agriculture and Land Affairs, joined the meeting later in the morning.

The Chairperson said that the budget vote debate would be held on 21 May 2008. This made it incumbent on the Committee to complete its public hearings by that date.

Introduction by the Minister of Agriculture and Land Affairs
Hon Lulama Xingwana, Minister of Agriculture and Land Affairs, introduced the Bank’s new board, which had been appointed by Cabinet on 05 March 2008 and informed of its appointment on 06 March 2008. It had been a hectic time for the Board members, who had had ‘to hit the ground running’, and were still in the course of orientating themselves in the challenges and programmes of the Land Bank. The Board would be working with other departments, including National Treasury (NT), to accommodate this within the Bank’s turnaround strategy, which, hopefully, would be ready in a month’s time. However the Board members would speak for themselves.

The Minister then introduced the Board members present. They were the Chairperson, Mr Themba Langa, an attorney from Johannesburg; the Deputy Chairperson, Professor Herman D van Schalkwyk from the Department of Agriculture at the University of the Free State; Reverend Otto Mbangula, non-executive Board member, who was President of the Free State branch of the National African Farmers' Union, a former Truth and Reconciliation commissioner and a retired minister in the Methodist church. Other members were introduced as Ms Patience Mnxasana, a chartered accountant; Ms Jesmane Boggenpoel, non-executive Board member, Chair of the South African Institute of Tax Practitioners and a senior member of the Association for the Advancement of Black Accountants of Southern Africa; Mr Malungelo Zilimbola, a senior equity analyst at RMB Asset Management, as well as a portfolio manager and an executive member of RMB Asset Management's management board; Mr Patrick Mathidi, a portfolio manager at RMB Asset Management; Mr Modise Motloba, director at Harmony Gold Mining, with experience at RMB Asset Management, and the former President of the Association of Black Securities and Investment Professionals; Mr Joe Mthimunye, a chartered accountant and managing director of aloeCap, Johannesburg, and a member of the education committee of the Public Accountants' & Auditors' Board and a member of the Black Management Forum; Mr Moses Sindane, also a chartered accountant, with senior banking experience including a spell in the office of the Auditor General; and seven directors who had been reappointed to the board: T H Ramphele, A T M Mokgokong, N Qata, and J T Potgeiter.  Three of the Board members were unable to be present. 

Introduction by the Chairman of the Board, Land Bank
Mr Themba Langa, Chairman of the Board, Land Bank, introduced the management team.
Mr Langa said that when the Board members took up their appointments, they were faced with the choice of whether ‘to take the low road or the high road’. They faced a decision as to whether to leave ‘some of the parts of the bank to die’. The status of the organisation determined how members would respond and how to perform their duties in the circumstances. The Board members had found themselves obliged to involve themselves deeply in the day-to-day issues and business of the Bank. They had found the Bank in a state of dereliction; with poor and worrying morale, and submerged in bad publicity. He said that at this stage the Board still had to take a lead, and had decided to adopt an integrated strategy in leadership, so that as well as leading as a Board, its members would also try to develop the skills of the management. It was gratifying to be able to report that the Board and management could speak as one voice, and that customers and the stakeholders now had hope in the Bank’s future. The Board and management would convey the hope that the Board and management had detected amongst the customers, and to report on rising levels of morale within the bank.

In fulfilling its task, the Board was faced with the very difficult question of how best to assist the management. The Board quickly constituted all its committees, such as the human resources committee, audit committee, and operations committee, of which the last was of special importance to management because it interfaced closely with the management team.

Such measures had been very helpful to the Bank by providing support and confidence. It was necessary to highlight that the Board had throughout observed its role as defined in the Land and Agricultural Development Bank Act 15 of 2002 and the Public Finance Management Act (PFMA).

One of the major issues that had confronted the new Board was the consequence of the 2007 financial scandal including irregular authorisation of non-agricultural loans worth approximately R1 billion. The forensic audit investigation had identified serious irregularities likely to result in criminal changes against executives who might have benefited from irregular transactions. The voluminous forensic audit report had been referred back to the Bank for further internal investigation at the time of the Board taking up office. The Board examined the recommendations and constituted a committee to examine the matter further and advise.

There were many issues to be addressed, including identification and apprehension of miscreants. The Board briefed two advocates to advise the Board by 19 May 2008, whereafter the Board would be able to report to the Portfolio Committee. The Board was determined to achieve finality, root out bad elements and “not let the Land Bank be a reserve space for bad deeds.”

The Board saw the Bank as a visionary and premier institution that would always play a role essential to South Africa in its production of sufficient food to feed its population. Bad publicity had to be eliminated. The Board assured the Committee that it would provide all details of what had transpired in contravention of the Act. Its investigations involved external auditors and the Auditor-General.

The Board congratulated those members of management staff who remained despite the difficulties. The first issue in the corporate plan was the need to build capacity. The Bank had lost many skilled staff and would have to attract skilled personnel.

Secondly, the Board had budgeted for research and development to enhance consumer products. Also the Board sought partnership and networking with co-operatives, universities and commercial banks, and was confident that through such partnerships such a premier institution as the Bank could recover and create new capacity. The preliminary corporate plan indicated briefly the direction in which to proceed with regard to agrarian reform, and the Bank’s position between the development groups and the commercial banks, noting that it had to support both. 

Mr Langa stressed that the Bank’s management information system was ‘archaic’ and in desperate need of transformation. This was a major priority in the preliminary corporate plan, since inadequate management information resulted in long delays in processing applications for loans, with many complaints about delays in customer service. Much effort was being invested into improving the Bank’s communications with its stakeholders.

The figures given in the presentation were to be regarded as preliminary, pending consultation with important stakeholders such as the National Treasury. Definitive figures were expected to be available by 30 June 2008, and before this date the Bank expected to be able to return to the Portfolio Committee with a turnaround strategy. It was appreciated that Members of the Portfolio Committee might be fatigued by the succession of turnaround strategies from the Bank, but the Board believed that the Bank was now on course and would be able to meet its commitments.

Presentation
Mr Saki Zamxaka Acting Chief Executive Officer, tabled a document ‘The Land and Agricultural Development Bank of South Africa (Land Bank). Preliminary Corporate Plan 2008/09’. He asked Members to refer to this, especially page 54 onwards, for full details of the actions that the Bank would take, and for detail on the short and long term objectives.

The Bank had a historical background of losses, resulting in a low level of capital that handicapped it in supporting agricultural development. Also the Bank had lost its market share to other competitors, more especially since agriculture was seen as a high risk industry following removal of government subsidies. Agriculture could not sustain itself without government support, especially in an age of rising food prices.

According to the Act, the Bank’s purpose was to contribute to food security and job creation. The elements of the corporate plan reflected this purpose. 

The Bank now sought to stabilise its business. It was endeavouring to overcome the problem of bad debts, losses, and high operating costs. The Bank sought to deliver on its mandate, manage costs and develop its information technology (IT) structure.

The Bank’s mission was to promote the ownership of land by previously disadvantaged persons. The Bank did so mainly by providing financial support to emerging farmers, and to commercial farmers in an environment where food security was a major issue. It also sought to increase the productive use of land. The Bank was guided by Batho Pele principles. Integrity was one of the key pillars of the organisation, but as the Chairman had mentioned, it had been challenged in the past. The Bank also sought to uphold honesty, ethical behaviour, professionalism, improved accountability, and innovativeness.

The international outlook was negative, with rising inflation, commodity prices, import costs and high interest rates. Farming income had declined until 2006; but profitability had improved since, except where countered by rising import costs. There were various barriers to the success of small-scale farmers, and more consolidation among big commercial farmers was noted. The rise in food prices was one of the biggest challenges facing many countries around the world.

The Land Bank offered certain advantages over commercial banks, such as less stringent requirements for loans, which was of especial importance for emerging farmers. However, in other respects the commercial banks offered some services that the Land Bank did not, such as investment banking.

Interest rates were of concern, for the current interest rates virtually set up emerging farmers for failure. Government support was critical, and instruments such as MAFISA, with 8% interest on loans, were of especial relevance to help emerging farmers.

The Bank’s service delivery was poor because its IT system was outdated and inadequate. It was intended to have a new IT system in place within 18 months.

Some interim measures were being taken, such as the short term recruitment of individuals with relevant skills. Although it was realised that the recruitment of consultants tended to create unease, in these circumstances it was unavoidable. 

The Bank intended to augment its branch network of 27 branches to 47, in line with the municipalities, and develop a system of ‘one-stop-shops’ to provide finance to emerging farmers. It also intended to develop partnerships with extension officers.

The development loan book would be separated from the commercial loan book, in order to inspire greater confidence in investors. It was recognised that in the agricultural sector there would always be a difference between market value and productive value.

The Bank projected that if the corporate plan would be put into effect and given the funding required, the Bank would attain profitability.

Mr Mnwana Kambule, Acting Chief Financial Officer, Land Bank, presented the budget, highlights of which included the necessity for the Bank to execute initiatives as articulated in the corporate plan especially with regard to the restructuring programme. Secondly, for the Bank to achieve this focus, it needed a capital injection from the Government. This would be detailed in the discussion of the cash requirements of the Bank. Thirdly, it would be important for the Bank to have a guarantee from Government in respect of the new funds that the Bank would have to raise in order to move forward and reduce the cost of funding. Fourthly, it had to be recognised that the Bank could not support the agricultural sector by itself; it needed co-operation in the form of partnerships with the banking commercial sector. One of the key focuses of the budget was for the Bank to be able to fill key gaps in its staffing complement. An historical analysis of the Bank’s financial position was given.  It was expected that the Bank’s commercial book would grow. The Bank intended to write off some of its development book. Money was sought for the refurbishment of the Bank’s building as currently it was in rented accommodation. The Bank’s new credit scoring model required finance, as did the Bank’s restructuring process, which would require R83 million. The Bank also sought to raise funds from the market at favourable rates. Details of cash requirements were given, and support was requested from the Committee.

Mr Langa added that within the next 30 days it was expected that the Bank would be able to announce the name of its new, permanent Chief Executive Officer.
 
Discussion
The Chairperson welcomed the news that permanent appointments would be made.

Dr A Van Niekerk (DA) said that today’s presentation was the first competent briefing from the Bank in four to five years. Until now the Committee had always been trying to get in contact with Chief Executive Officers who should have been present but for unexplained reasons were not. He was pleased to see that at last there seemed to be responsible people in place to lift Land Bank out of its previous dire position.  The Land Bank was an important financial institution for agriculture, without which the agricultural sector would not be able to contribute effectively to food security, which was so important to South Africa. Until now, the Land Bank had been in the press for the wrong reasons. The Land Bank was a State institution and the Committee therefore had a duty to ask questions and to receive answers. He appreciated the list of actions that the Board had taken thus far. To restore confidence amongst the investors, it was necessary to move away from the past. It was important to be open with each other.

Dr van Niekerk said to the Minister that there were questions about the forensic report. At least the Committee now knew that the findings of the report would eventually be open. Until now the Committee had not known clearly what actions had been taken by the Cabinet, which had retracted its first decision and referred back to the Minister, or by the Land Bank. At last the Committee knew that action was being taken. It was gratifying to note that persons who had misused their positions in the Bank had been removed. There had previously been a fear that those who had misused their positions would have been allowed to remain in office under new management. He reiterated that the Committee wanted to know exactly what had happened and what actions were being taken.

Dr Van Niekerk said that in any organisation somebody had to take responsibility. There could be only one boss. He was concerned about the impression that the Board was assuming the role of management. While he appreciated that in this interim phase it was necessary for the Board to intervene, the Bank’s managers should report to the board, and each should have its own functions

The Minister said that the Board had decided to assist the staff, but as a temporary measure. She acknowledged that it was an abnormal situation.

Dr Van Niekerk stressed to the Minister that it was absolutely important that a Chief Executive Officer be appointed who was thoroughly au fait with banking and able to do what was necessary. At the moment, too many positions were left unfilled and too many people, when put to the test, declined to accept any responsibility.

Dr Van Niekerk noted that the Land Bank was the heart of commercial agricultural food production; it financed co-operatives, crops, and helped to give input loans. It now had the additional political instruction to undertake development. The profits made from the commercial side could not continuously be used to fund development. The development function and subsidy must come from the State. The Strauss Commission had examined the interface between the commercial banks and the Land Bank as an agricultural credit Board in the pre-1994 situation. The Strauss Commission removed the constraints of the Agricultural Credit Act, which, in a sense had protected the Land Bank, and gave it a priority in terms of bonds. He did not want to see the old Act restored, but new legislation was needed including some of the previous provisions. He pleaded with the Minister to enable the Bank, with new instructions, to undertake development successfully.

The Minister acknowledged the need for urgent action to comply with the recommendations of the Strauss plan and filling of vacancies. This government would not be able to finalise the Bank’s plans in the months remaining to it. The Minister said there were similar banks in a number of overseas countries including Malaysia, India, and Chile. The Minister had urged the Board and management to examine those examples.

Dr Van Niekerk required that the Committee be kept informed. He noted criticisms that it lacked commercial expertise. He concluded by commending the new Board for achieving more in one month than previous boards had achieved in four years.  

Mr A Botha (DA) endorsed Dr Van Niekerk’s commendation. In the broader context, he asked why the Land Bank referred to ‘market values’ and ‘productive values’. The trends in market values of land could be gleaned from estate agents and the Deeds Office. However, the productive value of land would be subject to volatile rises and falls occasioned by weather extremes and other factors. If the Bank planned to work on productive values, then it would be exposing itself to even more problems in the future.

Mr Zamxaka replied that, with regard to productive and market values, the analogy made was not quite correct. The Bank had examined the matter from a financial perspective. Longer term loans might be an answer to those whose land’s productive value was less that its market value. 

Mr Botha asked what Mr Zamxaka meant with regard to his remarks on municipalities on page 6 of the document circulated. He also asked for clarification of the reference on page 8 to 47 municipalities acting as branches. With reference to grants from the Departments of Agriculture and Land Affairs, mentioned on page 47, he asked who would assume the risk of managing such grants. He commended the Minister on the composition of the new Board, but said that there was a glaring omission as commercial agriculture was not represented.

Mr J Bici (UDM) also commended the new Board, and was happy that it included a farmer as a member. He asked for a timeframe for the turnaround. He asked how the Bank intended to implement the agricultural programmes in rural areas. Most of the properties in those rural areas would not have title deeds.

Mr Zamxaka replied that within the next three years the Bank wanted to increase its book by R3 billion. The Bank would build its turnaround starting from a modest base. Before 30 June 2008 the Bank would confer with National Treasury regarding funding and increasing the book three or four times, while increasing capacity.

The Minister responded that in regard to the value of land and title deeds in the rural areas, this was being dealt with by Department of Land Affairs.

Mr Bici asked how many key vacancies existed and when they would be filled. He did not understand how acquisition costs of pieces of land could exceed their productive value, thus resulting in losses, and asked if the Bank did not assess the productivity of pieces of land before granting loans. He queried the criteria for writing off losses in the loan book, and what recovery processes the Bank applied before writing off.

Mr Zamxaka said that advertising, selection and appointment of staff took from three to six months. For various reasons, the Bank did not claim to be able to fill vacancies within a shorter timeframe.

The Minister acknowledged the need for urgency of filling vacancies. This government in its lifetime would not be able to finalise the Bank’s plans. The Minister said there were similar banks in a number of overseas countries including Malaysia, India, and Chile. The Minister had urged the Board and management to examine those examples.

Mr Zamxaka replied that the Land Bank had lost money on write offs when there had been no security.

Ms C Nkuna (ANC) congratulated the new Board and trusted that it would resolve outstanding issues in an amicable manner. She asked if the Land Bank had other financial institutions as stakeholders, and, if so, of what service they were.

Mr Zamxaka said that the Bank did not have direct links with institutions. It was examining the possibility of collaboration with an international financier that had offered to assist the Bank in co-financing certain customers. This development was the beginning of the Bank’s exploration of partnerships.

Mr D Dlali (ANC) referred to the sections of the Land Bank Act that referred to promoting access to ownership of land. There had been problems with the repayment of loans by emerging farmers, with the result that certain farms had been repossessed by the Land Bank. He asked how many farms had been repossessed.

Mr Xamzaka said that the Bank had taken a decision not to sell any of the repossessed farms, about 32 in number, to individuals unless they were previously disadvantaged, but rather to the Department of Land Affairs. Perhaps on a later occasion the Bank could provide more detail. A study had been conducted on the failures of emerging farmers who had been given loans but had been unable to repay them.

Mr Dlali asked how the Land Bank intended to implement the Act. He asked about the Bank’s implementation plan as set out on page 54 of the document circulated. He requested clarity on the implementation date of 31 March 2009. He asked why the reported mismatches of skills on page 56 under personnel was not included in human resources. In regard to page 54, he noted that there were too many ‘acting’ positions.

Mr Xamzaka acknowledged a mistake in terminology. The correct heading in respect of the skills should have been ‘Recruitment’. Not all staffing levels would be filled within the next two months, so the Bank was setting itself a longer period within which to fill vacancies.

Mr Dlali felt that some of the Bank’s target dates were too far in the future. Processing of loan applications must be accelerated soon, not by March 2009.

The Minister and Mr Xamzaka acknowledged that the turnaround for applications was too long.

Mr Dlali asked for clarification about the budgeting for consultants. He asked about management performance contracts referred to on page 56. He trusted that the ‘acting’ positions would soon be permanent positions. He asked about MAFISA funds.

Mr Kambule said that only to the extent that the Bank lacked the necessary expertise in a certain field would it engage consultants. The hiring of such staff was budgeted for under research and development, and training. 

Mr Xamzaka acknowledged that succession planning must form part of performance contracts and be linked to the targets in the corporate plan. Succession planning was deemed important to ensure that in the event of the departure of a senior staff member, there would not be a vacuum resulting in the halting of management tasks.

Mr Dlali pointed out the need for clearly defined reporting structures, as in some comparable overseas institutions, such as Brazil.

Ms B Thomson (ANC) asked if the Bank’s losses were retrievable. She also asked for details on the 27 branches.

The Minister acknowledged the need for verification about the 27 branches. The Minister reiterated that there were similar banks in a number of overseas countries including Malaysia, India, and Chile. The Minister had urged the Board and management to examine those examples. 

Mr Xamzaka said the reference to increasing the number of branches was contingent on linking them with municipalities, since the Land Bank could not afford the cost of establishing all the needed branches without co-operation and partnership.

Mr S Abram (ANC) asked what kind of interventions the Bank would make to improve productivity in the agricultural sector.

Mr Zamxaka said that the Bank’s contribution to increasing productivity would be through production finance loans. Various departments in the social sector cluster were co-operating with the Department of Agriculture towards increasing agricultural productivity.

Mr Abram noted that in the 2006/2007 corporate plan it was reported that the Bank was reviewing new non-interest revenue sources, new products and new delivery channels to better meet the needs of clients and improve customer service. He asked what progress had been made since that corporate plan. He further asked what initiatives the Bank had undertaken or would be devising to create an enabling environment for AgriBEE, how many black economic empowerment (BEE) transactions it had financed, and for how much.

Mr Zamxaka said that the Bank expected to be involved in future with BEE transactions. It had financed very few to date.

Mr Abram asked that the Bank should also provide a break down in terms of women, youth, and persons with disabilities.

Mr Zamxaka said that the Bank would be able to provide this information.

Mr Abram said that one of the challenges that faced the Bank was the recovery of debts in arrears. In the last two financial years the Bank had provided doubtful debts amounting to R2.3 billion. According to the audit report for 2006/2007 policies and procedures for writing off debts were not formalised. As a result loans were merely written off. Mr Abram asked if the Bank had now formalised policies and procedures for writing off debts, and, if a policy was in place, what was recovered.

Mr Piet Van der Westhuizen, General Manager: Credit, Land Bank, said that the Bank would make every effort to recover bad debts, many of which dated back to the early 1990s, but would have to be prepared to write off some of them. Some of the debts were owed by pensioners and others on small incomes, and recovery could not be made. The Bank had taken a professional approach to debt recovery and had ring-fenced its ‘bad book’, while focusing on the ‘performing book’.

Mr Abram said that emerging farmers were complaining of slow turnaround times in applications for loans, which typically took six months or longer. He asked how the Bank would address this challenge. The excuse of lack of capacity was unacceptable. If the Bank did not accommodate customers’ needs, then other institutions would provide for those customers.

Mr Abram noted that the Bank had decided to sell eight or nine land development loans. He asked what kind of loans these were and for what purposes.

Mr Abram remarked that following the financial scandal it was critical that the Bank should restore the confidence of its investors.

Mr Zamxaka said that stability in the organisation would promote confidence. Stakeholders were now kept informed of developments in the Bank. Ultimately it would be the publication of good results.

The Minister replied that it was essential to be frank and honest in discussing problems like those of the Bank.

Mr Abram noted that the Bank would like to align with Department of Agriculture (DOA) and Department of Land Affairs (DLA) for the various grants. He asked what tangible results the Bank could show in this regard.

Mr Abram, in regard to the 5 million hectares of land to be purchased for distribution to 10 000 farmers, asked for specific details of the Bank’s involvement. He cautioned against creating expectations that could not be fulfilled. The most difficult part was making the land sustainably productive.

Mr Abram admitted that he had not admired the Bank in the past. In discussing the Bank’s problems it was important to be brutally frank. Thousands of emerging farmers felt bitterly disappointed at the lack of response to their needs by the Bank over the years. It was necessary to reflect on the history of the Bank. When it was founded in 1912, recipients of loans were given animals, implements and seeds, and a monthly allowance until the first crops had arrived. What was good for the poor people of 1912 should be good for the poor people of 2008. Now many poor people were left at the mercy of financial institutions and loan sharks.

Mr Abram was adamant that in order to carry out the mandate of the Bank, it needed a massive injection of funding. That funding had to be made available to the developmental community at very affordable interest rates. Even the 8% of MAFISA was not an affordable interest rate. Lenders today showed very little sympathy,  merely a prolongation of the borrowers’ agony by giving an extension of the loan period, over which the accumulated interest during non-servicing of the loan would mount even higher.

Mr Zamxaka said that the Board members agreed with the Committee Members that fulfilment of the corporate plan would hinge on the availability of funds. He also said that each municipality should endeavour to support at least one agricultural product. He also acknowledged that interest rates were a problem. Rates were influenced by the Bank’s cost of funding. If the Bank charged lower interest rates than those available in the market, it would be effectively paying people to borrow money from the Bank.

Mr Abram declared that if the Bank was unable to fulfil its pledges, then it should be brutally honest to its clients and stakeholders. Everyone was accountable and if any institution took part in something that was known to be wrong, and was creating a debt trap for the people, then it would be answerable for having contributed to it.

Mr Abram said that he was not as optimistic as many of his colleagues, but that was the result of what had happened over many years. The development mandate of the Bank required finance by the State.  At the same time the commercial book should be enlarged, and customers who had left should be encouraged to return. He felt that the Bank’s conditions demanded excessive additional securities for loan applicants, and this discriminated against poor potential customers. The overwhelming majority did not know of insurance policies and did not have financial track records. The bank had withdrawn access to bond facilities. This was wrong, especially after expectations had been given that such a facility was available. Mr Abram appealed for continuity of management staff and for an element of pride in service to humanity.

Mr Zamxaka said that the Bank would have to educate people with regard to insurance products and perhaps consider giving longer-term loans. He also said that beneficiaries of MAFISA loans were not required to provide substantial security. The matter of security should not be viewed negatively.

Mr A Nel (DA) asked for clarity on certain financial figures, and on recovery of debts.

Ms M Ngwenya (ANC) asked about the Bank’s plan for business centres for farmers.

Adv S Holomisa (ANC) asked what plans the Bank had to support subsistence farmers in the communal areas, and how the Bank disposed of properties that it had repossessed.

Mr Zamxaka replied that for the time being it was the Department of Agriculture that was more involved with helping subsistence farmers.

The Chairperson observed that Mr Abram had drawn attention to the core of the Bank’s mandate. He asked the Bank to examine its funding model. He asked how the Bank distinguished commercial or development applicants at the beginning of the application process.

The Minister thanked Members of the Committee for their encouraging remarks about the board, which had ‘walked into a house on fire’. She said that the new Board members had really demonstrated their commitment and dedication, and collectively brought a wide range of skills to the Bank. Senior staff vacancies would be filled in due course. Perpetrators of dishonest acts would be dealt with appropriately.

The bottom line for the Bank was to increase production. People must commit themselves, and be prepared to work hard over long hours. There was a need to increase the amount of land under irrigation, ‘Work for food’ campaigns were being designed. Overseas visitors were expressing interest in investing in agriculture in South Africa, which saw its role as contributing to food security in the region.

Professor Van Schalkwyk, Board Member, Land Bank, said that he wished to acknowledge the importance of the commercial sector, specifically in regard to food security, and also the role of the Land Bank. Simultaneously it was necessary to acknowledge the challenges that agriculture was facing. Commodity prices had increased tremendously, and input costs were expected to rise by 30% to 40%. That would create a scenario in which a substantial injection of funds would be required to sustain production. He added that the ‘one municipality, one product’ concept was an attempt to effect productivity gains by specialisation, whereas the approach in South Africa had traditionally been to try to do everything everywhere. This affected South Africa’s ability to compete internationally.

Professor Van Schalkwyk said that with regard to development agriculture, finance was not the only issue, but there was a need for the total package to succeed. It was necessary to confer with the DOA and DLA. He agreed that the Bank needed a cash injection. 

The Minister said that the ‘one village, one product’ scheme had been learned from Japan. This entailed focusing all resources in a particular village on taking advantage of the natural resources or the competitive advantage of a particular product. The Minister had visited Japan and met those responsible for the scheme, who had agreed in return to visit South Africa to give training and to assist with funding. The President had given his support to the scheme.  

The Chairperson thanked the Land Bank, but warned that the Committee would take its oversight role very seriously. At the same time, he assured the Land Bank of the Committee’s goodwill and that the Committee Members were its partners in the Bank’s efforts to fulfil its mandate. The Committee looked forward to seeing the final product in terms of the turnaround strategy. The funding model and the need for capitalisation of the Bank were matters on which the Committee would have to work, particularly in the context of the forthcoming budget vote debate. The Committee would evaluate the Land Bank on the basis of its mandate. The Land Bank were expected to attend again at the meeting on 21 May 2008. 

The meeting was adjourned.

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