[Chairperson] Over to you see, the Land Bank. It is a different bank from other banks because of the law that we are passing in this House. We want to give them first priority so that when we deal with the broader banks we understand what we are dealing with, the disparity in those fields.

[………] Just to begin by giving an outline. The Land Bank has of course presented to the Portfolio Committee on 3 occasions in the last year. I want to avoid the repetition of some of the material that we have already presented which really dealt with what we are trying to do as a bank, the vision, the mission, and our commitments to the strategic plan on South African Agriculture, and to be a bit more specific this time around, what it is we are doing, to whom and to be specific about some of the numbers involved. This is the view of the Portfolio Committee. The last time we met they indicated that they wanted some specifics around the actual work that was been done on the ground. So there were 4 questions that were posed to us. Firstly, how much has been advanced for agricultural development from 1994 to date, what activities have been organized or embarked upon around agricultural developments, what further inputs programmes will this institution be involved in, and lastly, our relationship with the Department of Agriculture and the Department of Land Affairs. I will begin by addressing the first question, which is how much has been advanced for agricultural development? I should just preface my remarks by saying that in terms of total agriculture in the period under review from our records we have advanced to the total agricultural sector some R76.5 billion of the total sector. Our work and agricultural development effectively started in the last 4 years. There is not a great deal to talk about before that, and certainly we did not record it separately or in a distinguishable way. So although I say that this is the figure since 1994, it really reflects the figure since around 1999. Our total advance to agricultural development has been just over R2 billion. That R2 billion represents about just over a R1 billion to individual farmers, some R475 million to development projects, and I will go through some of those. We have advanced some R345 million through our Micro Finance Product, Step Up. We have advanced grants through the agency system with the Department of Land Affairs in excess of R100 million, totalling the R2 billion in the period. I should point out that this R2 billion excludes any advances that we have made to black commercial farmers, by that I mean larger scale farmers who are categorized in what we call our gold category. We have advanced in the order of R700 million to those farmers, but those are excluded for the purposes of this presentation, and are included in the general commercial book. But if you certainly wanted to get a fair indication of how much it has advanced to PDIs in general, then you would have to add that R750 to R800 million on top of the R2 billion, and that I refer to. So that effectively gives the magnitude of the advances that have been made to farmers in the last 4 years. And I think to give a flavour of exactly where that money has been going, I want to address the second issue which is around the activities that the Bank has embarked upon on agricultural development. First and foremost we entered into recently an agency agreement of the Department of Land Affairs with regard to LRAD. Through that programme the Bank has dispersed in excess of R116 million as part of the agency agreement. That agency agreement has now terminated and the latest indications are that the Department of Land Affairs will not be renewing the agency agreement with the Land Bank on account of the fact that the R270 million they have been allocated they can fully utilize themselves and will not be in a position to advance further funding to the Bank for onward distribution. That situation is under review and in fact we are making representations to Government with respect to increasing the amount of funding available to LRAD. The initial programme exceeded our expectations considerably, and there is a case to be made for continued if not increased involvement by this institution. Furthermore, the second issue I would like to highlight is what we have done with regard to the properties that have come into the Bank’s possession. Questions were raised about this in my last visit here. We have made available some 72 farms to black farmers. We have had turning through our books an excess of 200 farms for this purpose, and so we have been able to make available 40 000 hectares in the form of 72 farms really on a commercial basis but with a preference to black commercial farmers. And we have a number of other farms that are in the process of negotiation currently. One thing that we felt that was particularly important in agricultural development was the whole issue of mentorship and skills and capacity building, and how we could bring together 2 sections of our book, the established mainly white commercial farmers and the new entrance, and to this end we have developed a particular product to incentivize commercial farmers to enter into mentorship arrangements with their emerging counterparts, and we currently have 85 such arrangements in place on a national basis that were established in the last year. We have also entered into agreements with AgriSA representing commercial farming with regard to their projects on farmer development and have co-funded a number of projects which have benefitted some 832 beneficiaries in the last year. In our quest to encourage the youth to move into agriculture and for the youth to stay on the land in conjunction with the National Youth Commission and with Msebungu, the farm made available on a pilot basis 4 farms specifically for this purpose on a favourable lease basis to encourage youth groups to settle on and develop the farms for their gain. We have 4 such farms, one in the Northern Cape, the other here in the Western Cape, in North-West Province and in the Free State. The Northern Cape farm is now operational. The Free State farm is approaching operation as is the North-West farm. In fact one of the farms formed part of the launch on Youth Day last year. It is a particular important challenge when you talk about agricultural development to look for opportunities of ensuring that the youth specifically stay on farms, and we believe that this is the beginning of an initiative where we can use our properties for youth development. We have of course continued with our Micro Finance Product. This product has now benefitted 126 000 individuals. We have advanced some R345 million through the programme. I did describe Step Up Micro Finance Product last time I was here, so I won’t go into the details. The issue of reach has been very important and how an agricultural development bank is able to reach what are called the so-called deep rural areas, and what are we doing in that regard. Firstly, we have in the last 2 years started to roll out what you call our mobile banking facilities where we can have a larger footprint presence in the country, even if that presence is once or twice a month. The nature of our product is that there is not necessarily a need for everyday banking, and we rolled out that to 64 areas now in the country. So over and above the 27 branches we have and in excess of 40 satellite branches, we have now added the 64 mobile branches. The issue of the cost of money, particularly for developing farmers, has been one of keen interest. And in this regard we firstly have a specific product for the benefit of first-time land buyers, our so-called 10% special mortgage product and it is called 10% because of course it is 10%. That is the interest rate that we charge on it. We are able to do this through sourcing appropriately priced funding for a fixed period to enable us to offer this product to the market. We have in excess of R400 million advanced through that and a similar scheme. The next area that I would like to cover, having been reminded of the time left, is our support to land restitution and to the Land Restitution Commission. We signed an agreement last year with the Land Restitution Commission and with the National Development Agency, a tripartite agreement where the Department of Land Affairs obviously would make a land available, NDA, the National Development Agency, would assist with skills and capacity building and we would bring in appropriate financial support. And to date we have approved facilities of R784 000 to some 155 beneficiaries on that programme. Over and above that, in order to improve our reach we have also developed relationships with like-minded or sister institutions, particularly involved in an agricultural development finance, Uvimba Bank in the Western Cape, Ithala in Natal, and we have made available additional facilities of some R50 million to these institutions on lending to development clients. We have so far got to the point of signing an MOU with the Post Bank, but we see that as a particularly good opportunity through their extensive network of some 2000 branches around the country to extend our reach to particularly the deep rural. Over and above that we don’t have a corporate social investment programme as such. Certainly we don’t call it that. All the funding that we make available for those purposes is aimed at skills and capacity building in the Agricultural Sector, and exclusively so. We earmarked last year some R8 million for that purpose. Probably the chief beneficiary of that has been the National African Farmers Union, NAFU, together with ……, and they have received financial support of the order of R885 000 from the Bank for capacity building of their particular institutions. We have also entered into agreements with the National Department of Agriculture with regard to making flood relief available through the NDA scheme, and we are managing the R160 million scheme on behalf of the NDA for that purpose. Over and above that the Bank did source some special rate funding particularly aimed at flood relief victims, an amount of R45 million which we have made available at a special rate of 10%. Looking very carefully at the watch, I would like to just spend a few minutes talking about the challenges for agricultural development finance, because I think that is particularly important and I don’t want to run out of time before that happens. The rest of the presentation I know you have in front of you and you can ask me questions around that. But the key issue in agricultural development finance is that as an institution we have realized the importance of a holistic approach that while our core focus is around access to finance, what is equally important to ensure the success of beneficiaries is access to skills and capacity building, access to information and technology, access to markets, and access to land. And we have endeavoured through our partnerships, some of which I have just mentioned, to enable our clients to gain access to these crucial elements to their success. And indeed a comprehensive farmer support programme particularly for development for farmers is going to be absolutely key and absolutely critical if the financing that we have made available is going to succeed. The other major challenge that faces the Agricultural Development Finance Sector, an immediate challenge is really around the issue of debts and the debt burden that farmers have, the arrear situation and their ability to repay. All development financial institutions are impacted by this to a lesser or greater degree. Really you can almost divide these people with this problem into 2 areas, those who are unable but are willing, and our approach there as a development finance institution has to continue to be – what can we do to ensure that those people are rehabilitated, if I can use the word. And we have entered into arrangements with other financial institutions like …… North-West to try and help those people. And then there are what I call the able but not willing. The message that we have as a development financial institution is that those people are effectively making money not available for general development, for other people in terms of development finance. And our view is that we would take whatever steps are necessary to recover whatever we can from people who indicates a tendency of being able but not willing. I am happy to pause there. I do have further material that is in the presentation around some of the major projects we have been involved in. I have indicated the project, where we were involved in it, the activity in terms of the commodity that is involved, the number of beneficiaries that have benefitted, and the value of our involvement that has contributed to the 375 million that I referred to a little earlier on. I have also indicated a number of projects that we have been involved in with the private sector as joint partners. This is a particular challenge for us. The Land and Agricultural Development Bank Act does implore us to get involved or to encourage private sector involvement in this area. And you can see that there are a number of projects and partnerships that have been established, but there are issues around the inherent risk of this sector. It is imperative that we start addressing some of the issues around that risk, and we are very happy going forward to be involved with a number of initiatives and particularly the National Department of Agriculture’s initiative around risk management and the development of suitable risk management products, particularly those that are accessible to developing farmers. I have outlined another of the areas that we are involved in going forward under section 3, which I won’t go through, the focus being really of this presentation to say what we have done as opposed to what we are hoping to do. And I would pause at that stage and perhaps entertain a few questions.

[………] The speaker has just described a category of people that we need to pay tremendous attention to. And this is a category of people who are able but not willing. What I would wish to know is how these people have been identified, because probably it might be very useful for us as a Portfolio Committee to have a workshop with them. The other questions are not as important as this one.

[………] Yes, the able but not willing. Broadly speaking, they fall into 2 categories. There are the commercial farmers, long established farmers who have traditionally regarded the Land Bank and Land Bank loans as the last loans that they have to pay. So they will pay everyone else they owe money to, and if there is anything left over that will go to the Land Bank. It has been a traditional issue because the Land Bank has generally been viewed as supportive of farmers, but probably wrongly so in the sense that other people get paid first. We have sufficient evidence, certainly in the course of the last year, when we have acted quite decisively and quite aggressively, and entrenched our rights in this regard that we are not prepared to be last in line for people who have got money but prefer first to pay other creditors and then, if there is anything left over, they will come to us. That is one troublesome category with which we are dealing. The second category is a group of farmers who have, if I can call it almost a cultural non-payment, they are used to working with regimes where it appeared not to have been imperative. And we have particular problems that are recognized in provinces like the North West and in the Eastern Cape, where we have had this problem of people perhaps used to lending from governments or other regimes where the imperative to repay, there was never an imperative. And those are the two categories that in a way it was Government money in the ……, it is Government money so we don’t really have to pay. And secondly in the first instance that the view of the Bank by some farmers, some large farmers, is that they will never act against you. And indeed we have acted against more farmers in the last year, and we have recovered more money from the farmers who we have acted against in the last year than ever before. That is why I put them in the category of able but not willing.

[……….] Thank you Mr …… for a very good presentation. There is one particular item I see here and in major development projects funded, Annexure 2(1), and this is referred to earlier in another presentation, the …… project in Goodhouse. I just looked at the relationship of the value per beneficiary is 3 to 5 times higher per beneficiary than the others. And you referred to the debt burden and ability to pay back. I don’t expect you to be able to answer that here now, I am sure you can’t be familiar with …… But could you just give us an indication in a follow-up maybe by way of a written submission on how 55 beneficiaries got access to 55 million which is a million per beneficiary. And if they …… how did the bank structures get repayment ability there. And then secondly, you referred to LRAD and the expectations were considerably exceeded in the requirement of funding. Now on the strength of this, could you venture a guess as what should the budget for LRAD be per year? It is an issue we debate in Parliament every year. We have a standard practice to say that everybody obviously wants more money and can do with more money. But this is a very serious issue, and what would the banks venture be? At what level should that be in the next 2 to 3 years.

[………] Let me just start with the Paprika Project first. I can certainly make more details available to you but just in terms of the amount that is available per beneficiary really is based on the total viability of the Project. So there we have farmers who also have bought into a processing factory. So it is not only primary agriculture, it is the primary and secondary agriculture, and the nett value of that justifies the loan. I am speaking in broad terms but we can try to be more specific around that. The question around LRAD and how much funding is depends to an extent on what the objective is. We understand that we have an objective of 30% x 2015. Now how much of that is going to be LRAD assisted, and depending on the answer to that, you will then come back to your answer around how much should be made available. But my last estimate was that we were at around 5% of the target with the sort of money that we had. So again I can give you a detailed written answer in terms of working out the assumptions, the figures, how much of that would come through. But I can quite easily say that R250 million was made available last year of which the Land Bank was allocated R50 million and R200 million was directly through the Department of Land Affairs. We have on our books in excess of 500 million in applications. That is on our books, and it is waiting and it is parked. And that 500 million, if no money comes through this year, will not happen. So that gives you an indication of some of the frustrations and the issues around LRAD. My view is that we really should be looking at something in the order of maybe 750 000 per year, a million per year to make a meaningful dent through the LRAD programme. Restitution is considerably more. Restitution is about 700. Those should be closer to equal than they are now. To have only 200 to 250 available for LRAD and 3 times that available for restitution, was probably an incorrect calculation which is why we are supporting a revisit of that, and are making a formal submission around what we believe would be a reasonable figure for that.

[………] Thank you Mr …… for that information. We all had possibly a question. But just on a technical base, we haven’t got the annexures in our documents for the public private sector. The submission is just blank as …… was when you had the technical problems together with the stakeholder’s relationship and your way forward. That would be important if we could get that to the Secretariat. Just a question on your wholesale financing unit. Could you indicate what percentage rate you use for on-lending to those particular agencies, and what is the criteria for qualification? Is it all or is it only those selective banks that you picked up like ……, and I think you mentioned one in Kwazulu-Natal. So if you could just let us know what your on-lending rate is for those qualified banks and how do they qualify, or are they selective? And then, just a point on the Youth Farm Project that you have set up, those 4 farms, what is the objective finally there? Is it that you have a number of youth that you would selectively then say, here is an entrepreneurial person, here is a farmer, having gone through some processes and then settle him/her on that farm or is it just purely to get the basic knowledge of farming for them to go somewhere else and to farm. If you could just explain.

[………] I am going to answer the first question a little bit of a round about way, because I am surrounded by bankers here and I don’t want to start talking about my rates. But the objective is to ensure that the on-lending institution is able to offer the products to farmers at the same rate that we offer them. So we give them a margin, but I am not going to reveal what the margin is, so that regardless of whether the clients come to us directly or they go through our intermediary they get the same rates. With regard to the second issue on the farm projects, there are multiple objectives around the farm projects. The first really is around getting in a buzz and excitement, if I can call it that, and getting young people interested in farming to show them that there is a future in farming and that the exciting life is not all investment banking and marketing, and all that stuff. So there is that issue and the way that they are going to be set up in terms of exposing them to relevant people and techniques, etc. will help to secure that. Yes, potentially we would certainly see it as a breeding ground, if I can call it that, for identifying people who then want to go on and take a facility and develop their own farming enterprise, or two of them split up and develop their own piece of farming advice. So it is an opportunity to expose people to see who runs with it and who adapts well to it, and what opportunities then can come out of that exercise. But the overall objective is how do we make farming more attractive? The statistics that I have in the bank because the average age of our commercial farmers on our books is over 50 years old, and that situation obviously is just not sustainable. So really we are trying to prevent farming being purely an old age home, if I can put it that way.

[………] How many participants are there?

[……….] Currently, on these first 4 projects? There is an average of about 6 to 8 per project. The first 4, we have only identified 4, and the 4 are specifically pilots with obviously the view of rolling out to the other provinces.

[………..] Just two questions. On the programmes you indicated that the developing products to encourage mentorship between established commercial farmers and new entrances, so you also talk about social discomfort that introduced to incentive vibes commercial farmers by providing …… a discount interest rate. Now my question would be – how many farmers success stories do you have in this regard, and how many pockets of excellence do you have? Number 2 is a question of Step Up Loans for rural poor individuals. We have been told by some organization that for this category of people, the Land Bank has played a limited role in their agricultural development. The key issues there revolved around the bank ability of the applicants. Looking at issues like blacklisted creditors, by Credit Bureaus, credit references, to fixed employment, income sources and so forth – Is there another way except these Step Up Loans that people without collateral, in money form or otherwise, but had the potential in agriculture, can be held?

[………] I will begin with the second question around Step Up. With our lending the criteria of relating to the record for the credit record that a person has is taken into account, but it is not an automatic disqualification criteria. It will depend on magnitude. So many people seem to have R30 that they didn’t pay their dentist 2 years ago, we will view that in a very different light to somebody who has a string of 20 or 25 entries against them for substantial amounts. So it is certainly not an automatic disqualifier. The product is designed effectively is aimed at the so-called unbankable. So the issue of bankability is what the product is attempting to establish. It is enabling people to establish a track record that they can use with us or with any other financial institution based on that. And there is no income requirement. The main requirement is that people indicate that they’ve got a plan and show us a plan around what they want to do, and that they attend an elementary financial management introductory course which the bank runs on its premises. The issue of fixed address has certainly arisen, and it arose specifically around our ability to communicate with the clients that are involved. It is not actually a fixed address, it is just that somebody must have an address through which we can communicate with them which is a little different from necessarily having a home, but they must have an address through which we can communicate with them. And in fact when they sign on to the system we send them their first communication which is related to their loan and through which they can draw their loan. We communicate through that address to establish how to find their address. Over and above that the Bank does have non-collateral facilities and can grant a non-collateral facility of up to R25 000. The key there again is the issue of the business plan, and certainly a bank record or a negative bank record is something that is taken into consideration. I spoke earlier on about the able but unwilling, and certainly that is at one point at which we can establish whether we are entering into an agreement with somebody who is

[……..] Let me go back to the first question of the social discount product as what it was called. That product has been made available to and is used by about 80 beneficiary partnerships in the country. The success of it has been tempered by the reluctance of farmers to get involved, and there are two reasons for that. One was that there was not a working model, and farmers indicated that, yes, we may be interested in doing this but show us what we must do, show us how we are going to make our mentorship work. The second which is quite an inhibitor as well is that there are certain criteria that people, who apply for this loan, have to meet and have to answer to, specifically issues around how they conduct themselves on their farms from its inception and before the law was introduced issues of minimum wages, issues of the establishment of pension funds, the sort of facilities that they make available, particularly to their farm workers and how readily they conduct particularly human resource element on their farms. A number of farmers have been unwilling to subject themselves to that sort of scrutiny. I am not necessarily saying because they wouldn’t have met the standard, but in some cases I dare say they wouldn’t have, and there was just a general reluctance that they didn’t think it was sort of our business to delve into those basic human rights issues on their farms. But it is absolutely consistent that if you are saying that you can mentor people, and you are not applying basic standards on your own operation, the two things are just not compatible.

[………] Firstly thanks for the presentation Mr Land Bank. My first question would be on your challenges though they are not part of this presentation, I would just try to ask. Your challenges, the way you have listed them is information, IT, market, finance and land. My immediate question why land is last on your list, that is number one. Number two, in relation to the agricultural development, your funding is categorized in terms of your clients. If I am correct there are about 3 categories, it is your silver, your gold and your platinum. Then my understanding is that the majority of those who fall within the category of being assisted as agricultural development per se, the majority of them own silver, you correct me if I am wrong, which therefore means that at the end of the day they are part of the category which the Land Bank, when they are assisting them, they are sort of stringed at times enriched to various issues, I am not going to explain the various issues. My question is linked of course to the history of Land Bank that those who are today successfully commercial farmers they were mostly assisted by the previous regime up to 0. As your colleague says you were answering no more questions that we have that understanding that it is Government money, there is no need for us to pay back. I suppose that those people that are saying that are the very people that they are here today because of the Land Bank. Now if that is the understanding, why then are those people who are supposed to be primary assisted are falling into that category. Number two, you are I suppose given money to Agri-business. Agri-business was before us yesterday. What I want to know, the fund that are given them, is it a fund for special projects or is it a grant to them, they can use whatever they want to use, which again links to the structures under Agri-business.

[………] The fact is that Agri-business says that it is a grant. So lets not discuss whether it is a grant. I want us to go to the facts. The facts is that that is a grant it is not a loan, so that you should not look around. That is what is being said.

[……….] Having said that, the Agri-business has informed us until the money that was given ………… They were indicating that the money that was given them they also assist other institutions like your CTI and others. So on the basis of that I want to check from you whether the money that you are dishing out to the number of institutions, do you think that this money was spent in relation to some of those activities. The other issue linked to them, which has been partly covered of course that the question of mentorship, they indicated to us that the Agri-SA that the question of mentorship don’t think that is the criteria in terms of mentorship. And I want you to link that with the question of the development that if those …… are coming in they need to be developed. Do you think in your own view that the question of mentorship is not a critical issue as far as the development is concerned? Maybe lastly, the results before us yesterday around the LRAD, there was a view that the LRAD should be privatized …… I want to hear your comment on it in relation to the agricultural development specifically.

[……….] Let me start with the first question, and I think the question was given that I was talking about this holistic view of agricultural development, that it is important to have access to skills and capacity building, access to information technology, and I think it answers why do I say land last. What I normally put last on that is finance as opposed to land. The real issue is that all those components are important. What the realization that we have come to is that unless we can ensure that there is adequate access to all that, particularly the emerging farmer needs to be successful, that money itself on its own is not sufficient. So the whole issue of farmer support, the skills and capacity building is important. Land is sort of a given because you can’t really do much farming activity without it. But our realization, and hence why we have moved our resources towards skills and capacity building, those are the only projects that were going to support out of what would have been made, if I can call it a CSI Fund that we would do away with the CSI Fund that gives money to everyone for any reason depending on the nature of the application that we will divert all our resources to skills and capacity building as far as agriculture is concerned. And that is where our resources go. So it is coincidental that it is last. The point I was trying to make is that all of the factors are important. We know as bankers that if you simply go to people, you give them money, you walk away and you come back in a year’s time, you won’t get your money if they don’t have the other support that they need. If the extension is not there, it is not going to work. This is the whole issue, this is the whole approach around LRAD, for example, for agricultural development.

[………] Lets not go that way. Is land less important than the others?

[………] The second question was around the various categorization of products and you said that silver and bronze is where the bulk of the development farmers are funded. But I wasn’t quite clear as to what the question was in terms of, what do you want to know about those two categories?

[………] You’ve got 3 categories with your clients. Then tell your 3 categories of clients, the majority of your emerging clients are in the lowest category, and therefore that if that is the case why, because ……… clients are supposed to be most assisted as opposed to those who are well off.

[………] Are you referring perhaps to the issue of interest rates or whatever it is, when you say most assisted? There are indeed most assisted in terms of what we do for that client base from a support point of view, enabling access to all the other factors of success, they are the most assisted. The approach that we take with interest rates being a privately funded organization is the risk versus return. So yes, do they pay you a percentage rate more than established farmers, yes they do. So our most expensive in terms of interest rate products apply to that sector, but it is a risk return issue in terms of the funding that we get. That is why we have specifically gone out to source special funding for that purpose, not from only our traditional investors who stipulate what returns they are looking for from the different risk categories that they are taking which have enabled us to give the 10% products to that category. It is really to help address that issue of cost of funding for that category, but otherwise it is based on a risk return given that we are 90% privately funded as an institution. We don’t have Government funding as part of our make up. If I can move onto the issue of Agri-business and the grant, both Agri-SA and NAFU, the two major farmers unions, well you know who they represent, get grant funding from us. The grant funding for Agri-business is stipulated. We stipulate what they can use the grant funding for. It is around research and international interaction aimed at bringing in competitive technology, that sort of international exposure. So we do fund them to, for example, go on study trips for specific commodities. That is the one. The second area that we fund them for is related to that development work. So they have a programme that they run with the German Cooperative Institution on the DGRV and some of our funding goes to that institution. Those are the two main funding criteria for AgriSA. NAFUs funding criteria are slightly wider, but they are all around capacity. The challenge for NAFU is how we build capacity in that organization, and some of the capacity issues in NAFU are really around even administrative capacity.

[……….] Can I …… that you provide the Committee with a criteria for ………

[………] There is a question that you raised about LRAD, and somebody expressing the view that LRAD should be outsourced to the private sector. That is their view, they are entitled to it. I don’t support that view. You asked me if I support it, I don’t support it. The frustration which has emanated is that the demand for LRAD has been so excessive. Some people have the view that if the private sector has had it, they would have got more money. Those two things just don’t correlate. So in other words we’ve got R50 million from the DL Aid to distribute. Now does that mean that if we were a private sector company we would’ve got R100 million? I just don’t see the connection quite honestly. Then the last issue was on mentorship. You asked a question on the importance of mentorship. We certainly considered it as something key. That is why we have developed a product around it, and that is why we encourage our clients specifically to enter into arrangements. We have had some very successful arrangements, particularly in the grain industry together with Grain SA in terms of the study group methods that have been established in the North West and in the Free State.

[………] We take your point. It is very critical. But lets understand your opinion or view on the issue that AgriSA was saying yesterday, it is not necessarily a good thing for mentorship to be paid for. People should …… with that thing without payment.

[………] That is ideal. There is no direct correlation. There are some farmers that we have seen and there are customers of ours who get paid nothing and who have done some very significant mentorship work. What we were attempting to do is to highlight and bring this to the attention of farmers. One way of doing it was to give them an incentive and say, have you thought about this, and if you haven’t here is something to help you think about it. But ideally if they will do it because they want to do it and without monetary consideration, I think that will be ideal.

[………] But can I send my questions to Mr …… tomorrow morning. I’ll fax it to him and I’ll make replies available to the Committee just to say thank you.

[………] Let the question come through the Committee Chair so that I see them going through that thing and the response would come, because they are not coming to him, they are coming to the Committee.

[………] My question is very short. It concerns the LRAD situation. Because I think it is an embarrassment, this termination of agreement with the Department of Land Affairs. It has led to some frustration. I don’t know how far the negotiations progressed with Treasury to get more funds. But I would like to ask Mr …… if this Portfolio Committee, because I do think it is in the interests of land reform, if this Committee could assist in any way, because I do think that we have a duty. And the other ties in, the problem with our mentorship, I do think that in some instances those commercial farmers who make use of Land Bank loans are not necessarily the farmers best equipped to be mentors. And I would like to ask Mr …… and the Land Bank to just take a new look if there isn’t a better ……, and it probably wouldn’t involve any compensation to acquire mentors to assist you.

[………] Traditionally in this country we have these rural provinces which I would have thought they would be very small, KZN, Limpopo, Eastern Cape. According to the information here only KZN does feature to an extent but Eastern Cape and Limpopo we do not …… I would wish to know through you Chair what is going on. Secondly, when it comes to their elementary financial tutoring, I would like to know how can the farmers in my area in Limpopo, whether in Polekwane or whether in Tzaneen he said these lessons are being offered on the Land Bank premises. I just would like to know first of the syllabus and secondly, where can we send these people too so that they access the service.

[……….] The last question, if you could have the list of where and all those things could be done.

[……….] I can make that available to the Honourable Member. We do have a branch in Polokwane. It is worth adding that the MEC for Limpopo, Dr ……… we have briefed quite extensively on this issue and he has certainly directed a number of people to that. But I would be happy if you can widen that net, so I will make those available to you.

[………] On the participation the overall servicing in terms of the projects and the funding, etc., I am not sure whether emerging farmers in our province are they able and unwilling. But it looks like their participation is minimal if any at all here. I just need to be clarified.

[……….] I will also make available the breakdown by province of our exposure. That was really an omission in terms of this because I had presented it before to the Portfolio Committee, but I can present you an update and we are in fact relatively active in Limpopo in terms of development. And I have done a number of projects specifically with the assistance of the Department of Agriculture where we find that we get a lot of support from the MEC. As far as LRAD is concerned, yes I am obviously also deeply concerned. That is part of the reason I raised the matter here, and I am interested that there is the will to see how much more resources can be made available to LRAD. But I think it is a serious situation to sit with R500 million of applications minus 400 even 400+ applications is not a healthy situation. It doesn’t give the right impression of what we are trying to do to address issues of land reform. As far as progress is concerned we had a meeting last week with Land Affairs. They are meeting with Treasury in fact today. We then jointly will meet with them next week. We are assisting them in preparation of a Cabinet memorandum to address the matter directly to Cabinet, because I think it is that important. And certainly any further assistance that one can get from the House would be most appreciated. We really think there is an opportunity of a project that has sort of over-delivered, if I can call it that.

[………] Is there a possibility of you looking into a other way of dealing with the matter?

[………] There certainly is, and we would like to think that we encourage all our farmers to get involved. The difficulty to an extent is the farmers come back and they say, give us a framework as to how we get involved in this. But also the point which I suppose I haven’t made here is that we have more farmers who are our clients helping with mentoring that are not on the incentive programme than are. So the greater number are not. But this has introduced really to heighten awareness and start getting people thinking about it, because I suppose we are bankers. The only way we can think of making people think about anything is to wave a little bit of money in front of them, but we take your point.

[………] Mr ……… thank you very much for the presentation. I want to suggest that you provide the Committee with the status of your loan book and categories, black and white, specifically for us to deal with that matter. It is important. The other issues we can deal with them at a later stage. The Banking Council you are invited to be here. I am very sorry that we let you rush for your plane at a later stage. The Banking Council will present and I suppose other banks, ABSA, First National Bank and Standard Bank are here. For specific questions relating to individual banks, ask those questions. People representing those banks will then definitely have to respond to ……… The documentation from the Banking Council is the one that has been circulated. We also have some from ABSA. We will allow them to present.

[………] Thank you to the Committee for inviting us.

[………] Don’t hesitate to deal with every other thing but we are aware that the Banking Council is in negotiations and discussions with the Government. We don’t want to deal with that matter. But if you drift and go to that matter we will ask you penetrating questions in relation to those matters, and it may not be advisable for you to do so.

[……….] When you look at your programme our CEO, ……… is supposed to be here. Unfortunately because of the matters …… negotiations around the Financial Charter he is not able to be here today. He is in negotiation as the Chairperson has indicated. As his assistant I will deal with the Banking Council, who are we, and then my colleague, …… will deal with the actual presentation and we also have a huge contingent of banks here. All the major banks are here, and I will take your questions. The Banking Council in terms of membership we got in the last ……… only the banks that you are familiar with are there, the so-called Big 4, we actually have Big 5 now with …… becoming another big bank. We’ve got 3 forums, there’s big banks, we got independent banks which will be your smaller banks like your African Banks, and we’ve got foreign banks. The Board of Directors of the Banking Council comprised all the CEOs of the 4 major banks, and 2 representatives each from the foreign banks and the independent banks, which is the small banks. The criteria for membership of the Board is quite strict. The liability to the public must exceed about 3%, so that is how you determine whether you are qualified to be in the Board of the Banking Council. Our mission and role is quite simple. We are an industry representative body. We represent the banks. We are the voice of the banking industry in South Africa. Our role is to establish and maintain the best possible platform on which banking groups can do competitive, profitable and responsible banking. That is our role. And our approach in doing that is that of partnership. We have established a number of partnerships with Government departments, Trade and Industry, Finance, recently Agriculture, and in fact basically with all the Government departments. The industry itself employs an estimated 250 000 people on a full time basis and procure services on an annual basis for over R10 billion, which provides work for many thousands more people. So that is the industry as a whole. Given that it is quite clear that the banking industry is a very important asset in the economy. I’ll just pause and give my colleague …… to deal with the actual presentation.

[………] We have circulated the presentation and there are two parts of the presentation in terms of the documentation. The first is the slides that we were to present and the second is the narrative that goes with the slide. Because of time constraints we will not go through the presentation in absolute detail, because you have it in front of you to be able to read it outside this Hearing. The banks also attempted to respond to the questions that were posed to the Banking Council because of the 4 questions that the CEO for Land Bank also tried to address in his presentation. And the structure of the presentation follows a response to those questions. In terms of the contribution of banks to Agricultural Development, the banks do not allocate a particular budget by Agricultural Development because it is in many ways demand driven. But we found a very useful document that is prepared by the National Department of Agriculture, and it is called "Total farming debt in RSA". And I don’t think that this document is in your pack. It is a Excel spreadsheet which indicates the amount of indebtedness that exists in the Agricultural Sector. And it is a very instructive piece of paper. We will make sure that it gets to the Secretariat so that it gets circulated to the Committee. And what it does is it identifies the level of indebtedness from 1995 on a 6-monthly basis, and it gives you an indication of what is happening in terms of what the banks owe to different players. And it lists the Land Bank, commercial banks, cooperatives, Agricultural Credit Board, private individuals who are investing into agriculture. And just as a crude exercise, and it is not accurate, but it was just to try to get some percentages we totalled up from 1995. What was the total amount of indebtedness? Now this is not accurate in terms of what is actually in the grant but just to get a total figure, and we arrived at about R402 billion. And we said, what percentage of that is made available by the Land Bank and the Agricultural Credit Board, and we found that about a third of that money came from those 2 sources. But two-thirds of it would have come from the commercial banks and from private sources. So we then recognize that in fact it is quite a significant part of Agricultural Development that the investment is being made by the private sector. We also found that the percentage of debt over that period 1995-2002, that in respect of total farm debts it averaged at about 36%. So it varies from 33% in 1995 to 42% of total farm debts were owed to the commercial banks. And in terms of that table what we established is that the commercial banks as of 31^st December 2002 were owed about R11 billion out of a total amount owed to the banks, including the Land Bank, of R25.9 billion. So that is intended to give an indication of the scale of indebtedness and the amount of investment that is going into agriculture. I thought it might be useful for the Committee to also be reminded about some of our commitments in the NEPAD context. And there is a report that has recently been published by the FAU for discussion within NEPAD, which indicates that Africa imports about $19 billion worth of food every year. And the report states that if there is an investment of about US$17 billion a year into agriculture in Africa, we could by the year 2015 turn around that situation of our vulnerability and exposure to imports of agricultural commodities in the continent. If we recognize that $17 billion worth of investment in the continent is required, what percentage of that investment is being made in South Africa? And we established that we are looking at about US$3.5 billion being made annually into agriculture in South Africa, and that is 20% of the amount that is required in the continent. It then also indicates this report that over this period until 2015 we are talking about an investment of US$251 billion into agriculture in Africa. And against that backdrop we feel that it is important for us to recognize the role that financial institutions are going to be playing, and the infrastructure that we have in South Africa could play a significant role in the continent. The presentation then goes on to look at the activities of the banks in agricultural development, and we have identified a number of areas of activity that the banks contribution could be grouped into, and this would be under Farmers Support and Development, Land Reform, Training, Publications, and Sponsorships. The details of what could fall into those categories are located on page 2 of the narrative of the Report and page 3 of the Report. So I won’t talk about each of them as it is listed in the documentation. The next question that was posed was the relationship between the Department of Agriculture and the banks. And the point we make in the presentation is that our relationship is a very cordial and positive one with the Department, and many of the banks are participating on particular technical task teams and have made inputs on legislation that have been directed to the banks for comment. We are currently involved in an exercise with the Department of Agriculture on a technical task team that is looking at the role of financial institutions in the transformation of the agricultural sector in this country. In respect of the future involvement and the future kind of activities that the banks are going to be engaged in as the Chairperson indicated, the banks together with other partners in the financial sector, that is including the Life Officers Association, the Association of Unit Trusts, the short-term insurance industry are all sitting together currently, and that is part of the reason why Bob Tucker couldn’t be here today to look at a financial sector charter. The Black Economic Empowerment Financial Sector Charter, which is a document that is at quite a sensitive stage within the sector and will be presented to Government within a matter of days. And we believe that many of the intentions and expectations that we could have of the financial sector we hope could be addressed in that Financial Sector Charter. In terms of other issues, the request had been made by the Portfolio Committee that we should use this opportunity to draw your attention as legislators to other issues that could be impacting on how we are going to promote transformation and agriculture. One of the issues that is quite sensitive at the moment is the question of amendments to the Land Bank Act. We heard the CEO of the Land Bank refer in his presentation to – there are players who would borrow money from the Land Bank, and while they may be able to pay their Land Bank back they are not willing to do that to make that repayment. And he suggested that measures are being put into place to respond to that problem. One of the measures I suspect is legislative amendments which will then give the Land Bank first call over loans that have extended to certain farmers. But the way in which that legislation is being framed, is putting the commercial banks in a disadvantaged position. And it is those discussions that are currently unfolding which we are trying to encourage the creation of what we call a level playing field so that the Land Bank as an agricultural bank can operate in terms of what its requirements are, but also to allow the commercial banks to operate without forcing them out of that market place because of particular legislative constraints that puts the Land Bank at an advantage. The other issues that we have raised in the documentation is about farmers support and development, and again the experience of the banks lending in this area indicate that issues of financial literacy and numeracy, post-communication problems, the issue again supporting the Land Bank position that there needs to be a whole range of support that has to be extended to the new farmers to ensure that they are successful. And it is not just a question of finance, but a whole range of other issues that need to be put in place to allow success in the agricultural sector for the new farmers who are coming into that sector. There are issues related to markets, monitoring and LRAD that the documentation comments on. Finally, the document refers to the role of Government and makes some comments about the need for agricultural insurance services initiating and developing guarantee schemes, finding ways to respond to the communal land rights issues, the issue of securatization as one option that could be considered, the question of strengthening the corporative movement and subjective support that is required for the corporative movement, linking water rights and land usage rights, and so on. So there is a whole range of suggestions that are also contained in the documentation. And finally, in conclusion, the document refers to the Banking Council being committed to playing its part in the transformation of Agri-Business in South Africa and would like to be party to the implementation of this procedure plan for South African Agriculture. In order to compete in the agricultural development market in a way that will create shareholder value in a medium to long term, the banks are amending their strategies to finance and support transformation of agriculture. The banks are committed to increasing the number and quality of developing agriculture clients who have commercial farming as their main objective.

[Chairperson] Honourable Members, I think we must fire on without using our guns and bullets. But before I allow members I was going to suggest that if there is anything that you would want to focus on in relation to individual banks, before we can ask questions, it is important for record for yourselves as part of the delegation, if you like, just on report say who you are, which bank are you representing so that we can then go ahead.

[……….] We’ve got Ms …… from ABSA and Pieter Swanepoel also from ABSA, and Bertus van Heerden from Standard Bank and Jan van Zyl from FNB.

[Chairperson] So we have full compliment of proudly the major banks in the country. Can I have members?

[………] I would like to direct my question to the representatives of the commercial banks here.

[Chairperson] Is there any member who would want to ask questions to the Banking Council specifically so that we allow them to lead and then deal with the specific banks in terms of questions?

[………..] My first question is around red lining. I would like to know whether the Banking Council is …… to what extent are you implementing this red lining policy of yours in the agricultural sector, because we know that you are red lining the townships and so on? Secondly you are saying in your document that presently it will be difficult for you to give a breakdown of the exposure in the Agricultural Sector, I would like to know why? Because for us it is important to have this racial breakdown because it will give us an indication as to whether you are really concentrating on development and agriculture.

[………] I am not aware of any policy on