1. Click to edit Master subtitle style 5/24/12 NCERA FARMS (PTY) LTD TURNAROUND STRATEGY- PRESENTED BY M.M. TITIMANI 22 MAY 2012 11

2. 5/24/12 INTRODUCTION  The Turnaround Strategy is in reference to the Annual Report and Audit Report of 2010/2011 financial year  SECTION 1– BACKGROUND,MR M MANKAZANA (CARETAKER OF THE BOARD)  SECTION 2–TURN AROUND STRTEGY, MR MM TITIMANI (CEO NCERA FARMS)  SECTION 3–FINANCIALS, MISS K GWAZELA (CFO) NCERA FARMS) 22

3. 5/24/12 SECTION 1 -MANDATE  NCERA Farm (Pty) Ltd is a public company listed in schedule 3B of the Public Finance Management Act, 1999 (Act 1 of 1999) with the Department of Agriculture, Forestry and Fisheries as a sole shareholder. The mandate granted by the shareholders, the objectives of the entity is to provide extension, mechanical services, training and agricultural support services to the farmers settled on Ncera Farmland as well as the neighbouring communities  The entity is surrounded by nine villages. The neighboring villages have a population of ± 18 000 and are under Chief Jongilanga. There are five primary schools and three high schools. The unemployment rate of the area is estimated at 80%. 33

4. 5/24/12 BACKGROUND  The annual report summed up all the challenges at Ncera. ( Profit & Loss Acc. KPI – calving & mortality rates.)  Turnaround Strategy listed all the possible opportunities. Focus was put on the Beef & Goats enterprises.  Training Gap identified – Lack of Agriseta Accreditation.  Infrastructure Gap –identified with water supply and fencing as the main constraints for a meaningful production.  Governance related matters 44

5. 5/24/12 SECTION 2 - FACTORS LEAD TO Turnaround strategy, AS AT 2010 1. GOVERNANCE  No Board of Directors  No Audit Committee  No CEO appointed  No Accredited Trainings  No Policies, Procedures and systems within the finance unit  No Strategy, Forensic investigation conducted 55

6. 5/24/12 FACTORS LEAD TO TAS AS AT 2010 CONT. 2. FARM BUSINESS MANAGEMENT ISSUES 2.1.Forestation - Invasion of noxious species e.g. wattle 2.2. Dairy  2.2.1.Breeding Stock- unhealthy, low milk production  2.2.2. Milking Parlour - Outdated 2.3. Beef  2.3.1. Inbreeded stock - loss of conformation 2.4. Poor Fencing and handling facilities 2.5. Inadequate water storage facilities/irrigation and drinking 2.6. Poor veld management 66

7. Click to edit the outline text format Second Outline Level  Third Outline Level Fourth Outline Level  Fifth Outline Level  Sixth Outline Level  Seventh Outline Level  Eighth Outline Level  Ninth Outline LevelClick to edit Master text styles  Second level  Third level  Fourth level  Fifth level 5/24/12 2.1 forestation  Invasion of noxious species e.g. wattle 77

8. Click to edit the outline text format Second Outline Level  Third Outline Level Fourth Outline Level  Fifth Outline Level  Sixth Outline Level  Seventh Outline Level  Eighth Outline Level Ninth Outline LevelClick to edit Master text styles Click to edit the outline text format Second Outline Level  Third Outline Level Fourth Outline Level  Fifth Outline Level  Sixth Outline Level  Seventh Outline Level  Eighth Outline Level  Ninth Outline LevelClick to edit Master text styles  Second level  Third level  Fourth level  Fifth level Click to edit the outline text format Second Outline Level  Third Outline Level Fourth Outline Level  Fifth Outline Level  Sixth Outline Level  Seventh Outline Level  Eighth Outline Level  Ninth Outline LevelClick to edit Master text styles  Second level  Third level  Fourth level  Fifth level 5/24/12 dairy  Breeding stock unhealthy-low milk production  Milking parlour- Outdated 88

9. Click to edit the outline text format Second Outline Level  Third Outline Level Fourth Outline Level  Fifth Outline Level  Sixth Outline Level  Seventh Outline Level  Eighth Outline Level  Ninth Outline LevelClick to edit Master text styles  Second level  Third level  Fourth level  Fifth level 5/24/12 2.3. beef  Inbreeded stock Loss of conformation Loss of weight Loss of fertility Prone to diseases Weak genotypically 99

10. Click to edit the outline text format Second Outline Level  Third Outline Level Fourth Outline Level  Fifth Outline Level  Sixth Outline Level  Seventh Outline Level  Eighth Outline Level  Ninth Outline LevelClick to edit Master text styles  Second level  Third level  Fourth level  Fifth level 5/24/12  Well breeded livestock High feed conversion rate High fertility Improved calving percentage High returns R/kg 1010

11. Click to edit the outline text format Second Outline Level  Third Outline Level Fourth Outline Level  Fifth Outline Level  Sixth Outline Level  Seventh Outline Level  Eighth Outline Level  Ninth Outline LevelClick to edit Master text styles  Second level  Third level  Fourth level  Fifth level 5/24/12 Handling facilities  Poor Fencing and handling facilities Injury to the handlers and animals Time consuming Labour intensive Un economical 1111

12. 5/24/12 EFFICIENT, ECONOMICAL, MODERN AND PROFESSIONAL HANDLING FACILITY 1212

13. 5/24/12 NCERA FARMS (PTY) LTD AS AT 2010 Cont… 3. RESPONSES - TURNAROUND STRATEGY  3.1. June 2011 the CEO was appointed  3.2. SWOT analysis was developed (refer to next slide)  3.3. Turnaround Strategy Developed 1313

14. Click to edit the outline text format Second Outline Level  Third Outline Level Fourth Outline Level  Fifth Outline Level  Sixth Outline Level  Seventh Outline Level  Eighth Outline Level  Ninth Outline LevelClick to edit Master text styles  Second level  Third level  Fourth level  Fifth level 5/24/12 SWOT ANALYSIS  Appointment of the new CEO to turn around the fortunes of the entity.  Strategic plan for 2011/12 to 2015/16 has been developed.  Framework for the establishment of a Stakeholder Council has been developed & agreed upon by all relevant stakeholders.  More than 3000ha of high potential agricultural land available for farming purposes (increasing number of tunnels for hydroponics).  The prevailing soil & climatic conditions of the area are generally conducive for cash crops, grain & livestock production (especially beef).  The entity is only 30km from East London which is the economic hub of the area.  Availability of tailor-made farmer support services of training, mechanisation, and vegetable & livestock production.  Ability to produce vegetables throughout the year by making use of hydroponics.  High potential for beef and goat production.  Noncompliance to corporate governance & poor business management principles (absence of Board of Directors).  Lack of well defined governance & policy framework.  Production is largely dependent on climatic conditions which can only be partially manipulated by man through irrigation.  Collapsing dairy cost centre with high net losses.  Poor agricultural infrastructure (fencing, milking parlour and aging dairy cows).  Poor proper camping facilities and farm road maintenance.  Inadequate access to sufficient water supply (especially for PTO farmers).  Mixed breeds of both dairy and beef enterprises.  Uncertainty of farmers due to land reform issues (lack of lease agreements).  Relatively high input and capital costs.  Poor skills and knowledge of the new farmer entrants.  Lack of funding for farming operations and investment on new agro-processing ventures STRENGTHSWEAKNESSES 1414

15. Click to edit the outline text format Second Outline Level  Third Outline Level Fourth Outline Level  Fifth Outline Level  Sixth Outline Level  Seventh Outline Level  Eighth Outline Level  Ninth Outline LevelClick to edit Master text styles  Second level  Third level  Fourth level  Fifth level 5/24/12 SWOT ANALYSIS CONT…  Unaccredited & irrelevant training programmes may lead to preference of other training competitors.  Skewed & undefined technical & advisory services  Lack of programmes directed at supporting local & regional economic growth.  Communal land conflicts and possible land invasions.  Lack of mutual respect between stakeholders  Oversupply of vegetables to the East London Fresh Produce Market which will decrease prices per unit.  Availability and cost of irrigation water.  Impact of climate change (global warming).  Inflation rate with regard to cost of labour, costs of general production inputs.  Availability of various stakeholders (traditional leaders, municipalities, Department of Rural Development & Agrarian Reform, East London Industrial Development Zone, etc.) to forge sustainable partnerships.  High market demand for vegetable products (3 million people in Mdantsane Township).  The East London Fresh Produce Market is about 40km from the Ncera Farms.  Alleviation of poverty and decrease unemployment rate of the area.  Increasing demand due to the consumers demand for healthy diets.  Potential for increased local market consumption.  Increased urbanization.  Harmonization of the institutional environment THREATSOPPORTUNITIES 1515

16. Click to edit the outline text format Second Outline Level  Third Outline Level Fourth Outline Level  Fifth Outline Level  Sixth Outline Level  Seventh Outline Level  Eighth Outline Level  Ninth Outline LevelClick to edit Master text styles  Second level  Third level  Fourth level  Fifth level 5/24/12 TURNAROUND STRATEGY DEVELOPED  3.3.1. Closing of the Beef and Dairy Section  Processes – Inspection and selection, TB and CA testing, seven animals reacted positive to the TB test, slaughtered and confirmed negative- Animals were auctioned 07 March 2012 (see annexure A and DVD)  305 Animals sold at the auction  197 Dairy animals  108 Beef animals  10 Nguni’s selected for breeding  Total Income R1 261 140,33  7%COM = R95 011.87 1616

17. 5/24/12 TURNAROUND STRATEGY DEVELOPED CONT....... FORENSIC INVESTIGATION REPORT, AUDIT REPORT RESPONSES 3.3.2. Governance  3.3.2.1.Policies developed (sample available)  3.3.2.2. Public advert was placed and interviews conducted for prospective candidates of Board (see annexure B)  3.3.2.3. Application submitted to Agri-seta for training accreditation- (see annexure C) 1717

18. 5/24/12 BEEF PROCESSING, HIGH VALUE COMPARED TO ANIMALS ON HOOVES 1818

19. Click to edit the outline text format Second Outline Level  Third Outline Level Fourth Outline Level  Fifth Outline Level  Sixth Outline Level  Seventh Outline Level  Eighth Outline Level  Ninth Outline LevelClick to edit Master text styles  Second level  Third level  Fourth level  Fifth level 5/24/12 PROCESSING VALUE AND LEATHER TANNING 1919

20. Click to edit the outline text format Second Outline Level  Third Outline Level Fourth Outline Level  Fifth Outline Level  Sixth Outline Level  Seventh Outline Level  Eighth Outline Level  Ninth Outline LevelClick to edit Master text styles  Second level  Third level  Fourth level  Fifth level 5/24/12 BOER GOAT FARMING ENTERPRISE  Less capital intensive  Breed faster-high fertility, high kidding rate  High demand(meat, milk, customs, rituals)  Disease resistant 2020

21. Click to edit the outline text format Second Outline Level  Third Outline Level Fourth Outline Level  Fifth Outline Level  Sixth Outline Level  Seventh Outline Level  Eighth Outline Level Ninth Outline LevelClick to edit Master text styles Click to edit the outline text format Second Outline Level  Third Outline Level Fourth Outline Level  Fifth Outline Level  Sixth Outline Level  Seventh Outline Level  Eighth Outline Level  Ninth Outline LevelClick to edit Master text styles  Second level  Third level  Fourth level  Fifth level Click to edit the outline text format Second Outline Level  Third Outline Level Fourth Outline Level  Fifth Outline Level  Sixth Outline Level  Seventh Outline Level  Eighth Outline Level  Ninth Outline LevelClick to edit Master text styles  Second level  Third level  Fourth level  Fifth level 5/24/12  TOMATOES AT NCERA TO DATE  GREENPEPPERS AT NCERA TO DATE 2121

22. Click to edit the outline text format Second Outline Level  Third Outline Level Fourth Outline Level  Fifth Outline Level  Sixth Outline Level  Seventh Outline Level  Eighth Outline Level  Ninth Outline LevelClick to edit Master text styles  Second level  Third level  Fourth level  Fifth level 5/24/12 EIGHT MORE HYDROPONICS ENTERPRISE  Less labour intensive  All the year round production  Easy pest and disease control  High value crops  Easy picking and packing  No cultural practises. 2222

23. Click to edit the outline text format Second Outline Level  Third Outline Level Fourth Outline Level  Fifth Outline Level  Sixth Outline Level  Seventh Outline Level  Eighth Outline Level  Ninth Outline LevelClick to edit Master text styles  Second level  Third level  Fourth level  Fifth level 5/24/12 SUSPENDED UNACCREDITED TRAINING AT NCERA  Unrecognised qualification  Discourages learners 2323

24. Click to edit the outline text format Second Outline Level  Third Outline Level Fourth Outline Level  Fifth Outline Level  Sixth Outline Level  Seventh Outline Level  Eighth Outline Level  Ninth Outline LevelClick to edit Master text styles  Second level  Third level  Fourth level  Fifth level 5/24/12 ACCREDITED TRAINING  Recognised qualification  Competitive to job market  Better job opportunities  Improved socio economic life of the communities 2424

25. Click to edit the outline text format Second Outline Level  Third Outline Level Fourth Outline Level  Fifth Outline Level  Sixth Outline Level  Seventh Outline Level  Eighth Outline Level  Ninth Outline LevelClick to edit Master text styles  Second level  Third level  Fourth level  Fifth level 5/24/12 IMPROVED MECHANISATION PROGRAM 2525

26. 5/24/12 BENEFITS OF MECHANISATION AND TRAINING PROGRAM-ACCREDITATION  Currently 10 tractors and equipment  Serving 9 villages of ±18 000 people  Increased food security, in the area  Provide job opportunities  Reduce poverty and hunger for community  Training programs on tractor driving,maintanance,plough setting, welding etc.  Fully fledged workshop with modern equipment 2626

27. 5/24/12 Section 3 TURNAROUND STRATEGY BUDGET Description2012/20132013/20142014/20152015/2016Grand Total (R) External FencingR 1 500 000R 1 000 000R 1 300 000R 500 000R 4 300 000 De-BushingR 2 000 000 R 3 500 000 R 11 000 000 Drilling Boreholes/ pipes / Irrigation R 750 000 R 2 000 000R 3 750 000R 7 250 000 Roads, dams & fire-guards, handling facilities R 1 500 000R 3 000 000R 5 000 000R 3 000 000R 12 500 000 Watering PointsR 0R 150 000R 250 000R 2 500 000R 2 900 000 HydroponicsR 500 000R 50 000R 500 000R 100 000R 1 150 000 Internal FencingR 0R 1 500 000 R 500 000R 3 500 000 Pasture Fortification R 0R 500 000 R 1 500 000 Goats – breeding stock R 100 000R 150 000R 250 000 R 750 000 2727

28. 5/24/12 TURNAROUND STRATEGY BUDGET cont. Description2012/132013/142014/152015/16Grand total Beef – Breeding stock R 0 R 3 000 000 R 6 000 000 Experimental Farm, demonstrations R 200 000 R 800 000 Facilitation of Agri- village establishment R 300 000 R 600 000R 3 000 000R 4 200 000 Dormitories for trainees/.Cadets R 2 500 000 R 0 R 5 000 000 Training/Agri setaR 500 000 R 2 000 000 Mechanisation training centre R 2 000 000 R 50 000R 500 000R 4 550 000 Training for Staff members.(HRD) R 200 000 R 800 000 Policy Development R 1 000 000R 200 000R 250 000R 300 000R 1 750 000 2828

29. 5/24/12 TURNAROUND STRATEGY BUDGET cont. Description2012/132013/142014/152015/16Grand Total(R) IT Equipment for training R 350 000R 100 000R120 000R 150 000R 720 000 Consultant, Farm Business Advisor R 300 000R 350 000R 400 000R 450 000R 1 500 000 Law firmR 500 000R 550 000R 600 000R 650 000R 2 300 000 Buildings (repairs and maintenance) R 500 000R 200 000R 250 000R 300 000R 1 250 000 TotalsR 14 700 000R 16 200 000R 20 970 000R 23 850 000R 75 720 000 2929

30. 5/24/12 Bridging budget DESCRIPTIONBUDGETYEAROUTCOMEOUTPUTINCOME Board Fees, remuneration/ Allowances 1,000,0002012/2013The organisation will have a board of directors The entity will have a proper governance structure Institution Board Regulations 1,000,0002012/2013Properly regulated, the entity will operate in a smooth and professional manner. The relationship between the entity, the board and the department and the other stakeholders is lawfully regulated. Workshop renewal, Training/ Accreditation 250,0002012/2013Trained candidates are employable. Properly, technically trained candidates. The organisation will have accredited courses/ technical training. Fully fledged training centre with all relevant tools and equipment. 3030

31. 5/24/12 Bridging budget – CONT. DESCRIPTIO N BUDGET YEAR OUTCOMEOUTPUT iNCOME Debushing1,000,000Increased grazing browsing capacity. Regrowth of the palatable desirable species Eradicate all undesirable trees and shrubs species. Fencing1,500,000Stock theft/loss minimized. Eliminate in breeding Properly demarcated land and grazing camps Handling Facilities (Cattle and Goats) 800,000Livestock is properly handled and managed The farm hasdipping tanks, spray machines, dehorning equipment, electronic scales.etc. 3131

32. 5/24/12 Bridging budget – CONT. DESCRIPTIONBUDGETYEAROUTCOMEOUTPUTINCOME Breeding Stock/Pregnant Heifers 800,0002012/2013 2013/2014 2014/2015 Improved breeding stock and progeny Improved feed conversion rate Good breeding stock for training purposes New breeding stock for the entity 0 R200 000 Goats70,0002012/2013 2013/2014 Higher returns Good breeding stock for training purposes Good breeding stock for the entity Fertile animals More than 100% Kidding R80 000 3232

33. 5/24/12 Bridging budget – CONT. DESCRIPTIONBUDGETYEAROUTCOMEOUTPUTINCOME Hydroponics600,0002012/2013Profits generated.Good quality produced, high valued crops R120 000 Vegetable processing plant 1,200,000 Profits are generated Serves as a training centre for processing. Vegetables will be processed. Meat processing plant 2,500,000 Staffing costs480,000 TOTAL11,200,000 3333

34. 5/24/12 ASSUMPTIONS  Beef 50 participates,Trained for 120 days@R600pp(increased annually)  Goat :50 participates trained for 120 days@ R600pp(increased annually)  Crop production : 40 participates trained for 60 days@ R600pp(increased annually)  Tractor Maintenance: 30 participates trained for 60 days@ R600pp(increased annually)  Computer Training: 20 participates trained for 60 days@ R600pp(increased annually)  Community Training:500 participates trained for 80 days@ R100 pp  Breakeven point will be reached in 2017/18 financial year  Net profit as at 2019/20 will be R84 592,000  Professional fees including accommodation and other administration costs will be R17, 128,000 3434

35. 5/24/12 Training – Prof. and Community 3535

36. 5/24/12 Different categories included in the GRAPH Beef Farming Goat Farmi ng Crop Produ ction Tracto r Maint enanc e Comp uter Cours e Comm unity Traini ng TOTAL Reven ue YEAR Reve nue TOTAL 2012/ 13 0000000 2013/ 14 3,6 M 1,8 M1,4 M 1,68 M 840 K4.0 M 13,4 M 2014/ 15 4,2 M 2,1 M 1,68 M 1,9 M960 K4.8 M 15,6 M 2015/ 16 4,8 M 2,,4 M1,9 M 2,16 M 1,08 M 5.6 M 17,9 M 2016/ 17 5,4 M 2,7 M 2,160 M 2,4 M1,2 M6.4 M 20,2 M 2017/ 18 6,0 M 3,0 M2,4 M2,6 M1,3 M7.2 M 22,5 M(BE) 2018/ 19 6,0 M 3,3 M2,6 M 2,88 M 1,4 M8,0 M 24,8 M 2019/ 20 7,2 M 3,6 M 2,88 M 3,1 M 1,56 M 8,8 M 27,1 M 2020/ 21 7.8 M 3.9 M3.1 M3.36 M 1.68 M 9,6M29,4 M 3636

37. 5/24/12 SUMMARY  Job created – 400 jobs and 66 permanent jobs  This will be contributing to the 80 % of unemployment rate of 18000 people  Organisation will be accredited  Workshop will be upgraded  Good breeding stock for breeding and training  Reduce poverty and hunger  Produce professional and technical trained cadets 3737