1. RISK SHARING PARTNERSHIPS Prepared for Client Name Your name here Date AgriSETA Conference Presentation by Diale Mokgojwa, Manager: AgriBEE 15 th September 2011

2. Exposure to the possibility of loss; a chance or situation involving such a possibility.

3. Types of Agricultural Risks External Natural (location, weather, etc.) Price (market/sales prices, inputs prices, discounts) Legislative (Policies, taxes, liabilities) Internal Human resources (dependability, quality of work) Product Management Admin

4. RISK SHARING Risk management method in which the cost of the consequence of RISK is distributed among several participants in an enterprise.

5. The Power of PARTNERSHIPS

6. INPUT SUPPLIERS  Quality seeds/ breed  Capacity building INSURANCE  Mitigates risk BANK  Access to finance  Credit application  Pay out  Financial services  Capacity building  Marketing PRODUCTION MANAGEMENT (50% of business)  Production risk management  Financial management and admin  Capacity building, skills dev & transfer- technical, business  Measurable milestones MARKETING MANAGEMENT (50% of business)  Product  Off-take contract (price risk management)/ hedging/ export  Support FARMER  Access to land  3 year track record  Willingness to partake  Full disclosure of financial position GOVERNMENT  Grant funding  Infrastructure  Mechanisation  1st loss guarantees COMMODITY ORG  Gate keeper  Facilitator

7. Partnership Opportunity Leverage the Bank’s balance sheet to lend across the value chain Amount of Risk Sharing facilities enable the Bank to leverage that amount 10 times the guarantee facility Private & Public sector entities with similar goals DE-RISK THE MARKET

8. Purpose of financeKind of finance Overdraft Business Revolving Credit Plan (BRCP) Business Term Loan Medium Term Loan Agricultural Production Loan Vehicle and asset finance Working CapitalYes No Input costs, crops, livestockYes NoNo-YesNo Implements, machinery and other capital equipment NoYes NoYes Office equipmentNoYes NoYes VehiclesNo Yes PropertyNo Yes No FINANCING OVERVIEW

9. CREDIT EVALUATION Factors affecting credit evaluation

10. Security 1.Pledge 2.Secondary source of repayment; 3.Mortgage bonds on property; 4.Notarial bond over loose assets; 5.Cession of crop income; 6.Cession of insurance; 7.Guarantees & suretyships. Financial position  Own capital contribution;  Capital & funding position and requirements;  Solvency and liquidity ratios;  Interest coverage ratio. Repayment ABILITY Historic income & cost:- Income statement;  Projected income & cost:- Cash flow;  Income:- Price & yield assumptions;  Loan value v/s repayment ability. Risk Management  Nature of business;  Key risks (product, production, price, people, cash flow and capital);  Management expertise;  Risk mitigation (hedging, insurance, etc.).

11. Business is unsound, risk is too high, bank cannot determine risk – business is not sustainable Insufficient security or lack of collateral Lack of owners commitment, often indicated by his/her contribution to the business Business plan does not provide adequate information Purpose of the finance required is not justified Character or suitability of owner Passive investment – owners not involved in the business Adverse behaviour on existing credit facilities Reasons loans are declined Business Plans – see www.standardbank.co.zawww.standardbank.co.za Business >> Starting a business >> Getting started >> Starting a business >> How to draw up a business plan

12. Wisdom “If you are looking for a helping hand you will find it at the end of your arm”. Chinese Proverb “ After all is said and done, usually more is said than done”. Unknown

13. KE A LEBOGA CONTACT: Diale Mokgojwa 011 636 8713 diale.mokgojwa@standardbank.co.za www.standardbank.co.za diale.mokgojwa@standardbank.co.za www.standardbank.co.za

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