Looks at cutting edge agricultural development through public-private partnership finance models. Experiences of Mphiwe Siyalima Enterprises in South Africa, a small to medium size farming corporation, are shared.
The End of Business as Usual: Rewire the Way You Work to Succeed in the Consu...
Gift mafuleka :cutting edge agric value chain financing
1. CUTTING EDGE AGRICULTURAL DEVELOPMENT THROUGH
PUBLIC PRIVATE PARTNERSHIP FINANCE MODELS
----------------------------------------------------------------------
Including experiences of Mphiwe Siyalima Enterprises in
South Africa, a small to medium size farming corporation.
Gift Mafuleka
BTech: Agriculture: TUT
Foum for Agricultural Research in Africa
6th Africa Agricultural Science Week,
ACCRA, GHANA
15-20 July 2013
2. OUTLINE
1. Background: Agricultural Development in Africa
2. Introduction: Agricultural Financing in Africa
3. Main challenges: The 4 Production Factors
4. Enterprise Level Financing
5. Industry Level Value Chain Financing
6. Risks Management
7. Conclusion
3. BACKGROUND: AGRICULTURAL DEVELOPMENT IN AFRICA
19th Century
• Agricultural Extension Services
• Agricultural Co-operatives
• International Donor Funding –Supply Driven
20th Century
• Agricultural Value Chains
• Agricultural Technology
• International Donor Funding –Market Driven
4. 1. Background: Agricultural Development in Africa
2. Introduction: Agricultural Financing in Africa
3. Main challenges: The 4 Production Factors
4. Enterprise Level Financing
5. Industry Level Value Chain Financing
6. Risks Management
7. Conclusion
5. INTRODUCTION: AGRICULTURAL FINANCING
• The Future and the Past co-exist in the Present
• Subsistence and Smallholder farming versus
modern, high tech, integrated value chains
operating globally.
• New global competition – manufactured
competitiveness (value chains) versus old natural
/comparative advantages or competitive
advantages
6. INTRODUCTION: AGRICULTURAL FINANCING (Cont.)
• “What are we as Africa doing to ensure that we
champion and pioneer development successes in
food value chains across geographical spheres?”
8. INTRODUCTION: AGRICULTURAL FINANCING (Cont.)
Financial
Analysis
Socio-economic
contribution
Job creations and
Skills Development
Real ImpactBefore After
9. 1. Background: Agricultural Development in Africa
2. Introduction: Agricultural Financing in Africa
3. Main challenges: The 4 Production Factors
4. Enterprise Level Financing
5. Industry Level Value Chain Financing
6. Risks Management
7. Conclusion
10. CHALLENGES
• Lack of self-driven agripreneurs – Entrepreneur
• Disintegrated or lack of relevant training - Management
• Unfavourable land tenure systems – Land
• Lack of cognitively restructured financing - Capital
11. 1. Background: Agricultural Development in Africa
2. Introduction: Agricultural Financing in Africa
3. Main challenges: The 4 Production Factors
4. Enterprise Level Financing
5. Industry Level Value Chain Financing
6. Risks Management
7. Conclusion
16. 1. Background: Agricultural Development in Africa
2. Introduction: Agricultural Financing in Africa
3. Main challenges: The 4 Production Factors
4. Enterprise Level Financing
5. Industry Level Value Chain Financing
6. Risks Management
7. Conclusion
17. AGRICULTURAL VALUE CHAIN FINANCING
(ENTERPRISE LEVEL)
17
Farmer produces for a
specific off taker
Off-
taker
Contract
Production output
Production input
Contract Farmer
Backgrounder
Feedlot operators
Agro-processors
Exporters
Peas seed delivery Harvesting & deliveryCrop husbandryPlanting of peas
18. AGRICULTURAL VALUE CHAIN FINANCING
(INDUSRTY LEVEL)
Collateral Guarantee Fund
18
18
Government & Donors
Collateral (50% - 90%
of loan value)
Agricultural
Development Bank
Funding flow
Agricultural Lender
Collateral Guarantee Fund
Fund
administration +
participation
Eligible Lender
With extension services
Credit
Assessment
& loan
Eligible Borrower
Farmer of Agribusiness
Partnerships with public
& private sectors can be
Formal market
Futures, Off-take
agreements, Open etc.
Sales
Formal Markets
19. AGRICULTURAL VALUE CHAIN RISK
MANAGEMENT MODEL
19
19
OPEN
e.g. Traders, Agro-processors,
Supermarkets, Retailers.
(Spot price)
HEDGING
e.g. Futures Market,
Grain traders - Fixed prices
Farmer
60% of direct costs – Grain crops
Eligible Lender
OFF-TAKE
e.g. Agro-processors, Feedlot,
Exporters - Fixed Prices
20% of direct costs – Grain crops
20% of direct costs - Grain crops
Deliver
Proceeds on saleProceeds less direct input costs
Cessionofaportionof
theproductionoutput
Insurance cover i.r.o.
Quality & Quantity
Insurance wont cover
Bad Farming Practices
Proceeds
(Normally informal markets)
80% of out– Ornamental crops
20% of out– Ornamental crops
20. 1. Background
2. Introduction
3. Main challenges: The 4 Production Factors
4. Enterprise Level Financing
5. Agricultural Value Chain Financing
6. Risks Management
7. Conclusion
22. Weather
RISK MATRIX
22
Low Manageability
Watch Factors
Distracters Tactical Factors
Strategic Drivers
BEE and Land Reform
Regulatory Compliance
Consumer activism
Food safety
Food Security
Cyber crime
Ethical Trade and Social Upliftment
Water Quality
Available Human Capital
Climate Change
Availability of Resources
Value Chain Integration
New Technology
Global Economy
High Impact
Low Impact
High Manageability
Food Inflation
Uncertain monitory, tax and
fiscal policies
Labour Laws
Illegal Trading
Strategic Alliances
Alternative Energy
Data fraud
Political uprising
Globalization
23. Weather
RISK MATRIX
23
Low Manageability
Watch Factors
Distracters Tactical Factors
Strategic Drivers
BEE and Land Reform
Regulatory Compliance
Consumer activism
Food safety
Food Security
Cyber crime
Ethical Trade and Social Upliftment
Water Quality
Available Human Capital
Climate Change
Availability of Resources
Value Chain Integration
New Technology
Global Economy
High Impact
Low Impact
High Manageability
Food Inflation
Uncertain monitory, tax and
fiscal policies
Labour Laws
Illegal Trading
Strategic Alliances
Alternative Energy
Tea
Coffee
Dairy
Livestock
Fishing
Rice and Maize
AgribusinessesPiggery
Data fraud
Political uprising
Globalization
24. Weather
RISK MATRIX
24
Low Manageability
Watch Factors
Distracters Tactical Factors
Strategic Drivers
BEE and Land Reform
Regulatory Compliance
Consumer activism
Food safety
Food Security
Cyber crime
Ethical Trade and Social Upliftment
Water Quality
Available Human Capital
Climate Change
Availability of Resources
Value Chain Integration
New Technology
Global Economy
High Impact
Low Impact
High Manageability
Food Inflation
Uncertain monitory, tax and
fiscal policies
Labour Laws
Illegal Trading
Strategic Alliances
Alternative Energy
Tea
Coffee
Dairy
Livestock
Fishing
Rice and Maize
AgribusinessesPiggery
Data fraud
Political uprising
Globalization
25. 1. Background
2. Introduction
3. Main challenges: The 4 Production Factors
4. Enterprise Level Financing
5. Agricultural Value Chain Financing
6. Risks Management
7. Conclusion
26. CONCLUSION
• A focus on developing and improving agricultural value
chains will change the image of farming, perceptions by
the bankers, young people and our governments.
• Micro Financiers remain an integral part to smallholder
farmer development in Africa.
• Our skill, experience and drive as farmers is an asset to
our enterprises
• Private Public Partnerships as well as agripreneurship and
technology drive.