Akwandze Agricultural Finance - Swaziland
Akwandze Agricultural Finance - Swaziland
Akwandze Agricultural Finance - Swaziland
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<strong>Akwandze</strong><br />
<strong>Agricultural</strong> <strong>Finance</strong><br />
“a partnership for growth”
Mpumalanga SSGs<br />
• 1,200 Medium & Small-scale Growers<br />
• 10,000 hectares of irrigated SSG<br />
sugarcane.<br />
• Approximately 20% of Mpumalanga<br />
production.
The birth of <strong>Akwandze</strong><br />
• SASA – FAF 1973/74, UAF 2001 –<br />
2005/06.<br />
• SASA decision to decentralise.<br />
• Birth of <strong>Akwandze</strong>.
Rationale for <strong>Akwandze</strong><br />
• Large portion of area requires replanting to<br />
avoid decline in production.<br />
• Portion of area, which could be producing,<br />
was out of production.<br />
• Local financial organisations lack sufficient<br />
capacity to provide adequate financial<br />
services to meet above needs.
<strong>Akwandze</strong> Structure<br />
• <strong>Akwandze</strong> <strong>Agricultural</strong> <strong>Finance</strong> is<br />
a 50:50 partnership between Tsb<br />
Sugar RSA and Liguguletfu Cooperative<br />
Ltd.
Liguguletfu Co-op<br />
• Registered co-operative.<br />
• All growers can be members.<br />
• Main purpose to invest in <strong>Akwandze</strong> – R5 million<br />
• Growers wishing to be members levied for share<br />
payment.<br />
• Shares based on R1,000 / hectare up to max of<br />
R8,000 obligatory shareholding.<br />
• Approximately 900 members.
Business Model<br />
Financial Services<br />
<br />
Cane Growers
Business Model<br />
<strong>Akwandze</strong> <strong>Agricultural</strong> <strong>Finance</strong><br />
Tsb Sugar<br />
RSA<br />
Liguguletfu<br />
Co-op<br />
Financial Services<br />
Cane Growers
Business Model<br />
Dept Agric Extension Services<br />
Tsb Extension & Training Support<br />
Services<br />
<strong>Akwandze</strong> <strong>Agricultural</strong> <strong>Finance</strong><br />
Tsb Sugar<br />
RSA<br />
Liguguletfu<br />
Co-op<br />
Financial Services<br />
Tsb Technical Support Services<br />
SA Sugar Research Institute<br />
Cane Growers
Business Model<br />
Dept Agric Extension Services<br />
Tsb Extension & Training Support<br />
Services<br />
<strong>Akwandze</strong> <strong>Agricultural</strong> <strong>Finance</strong><br />
Tsb Sugar<br />
RSA<br />
Others<br />
Liguguletfu<br />
Co-op<br />
Financial Services<br />
Tsb Technical Support Services<br />
SA Sugar Research Institute<br />
Cane Growers
<strong>Akwandze</strong> Capitalisation<br />
(x million)<br />
MSFA Partners Total<br />
Tsb R3 R8 R11<br />
Liguguletfu R6 R5 R11<br />
Total R9 R13 R22
<strong>Akwandze</strong> Growing<br />
• <strong>Akwandze</strong> partnership with a DFI.<br />
• R75 million.
New business model<br />
Dept Agric Extension Services<br />
Tsb Extension & Training Support<br />
Services<br />
DFI/<strong>Akwandze</strong><br />
<strong>Agricultural</strong> <strong>Finance</strong> Fund<br />
<strong>Akwandze</strong><br />
<strong>Agricultural</strong><br />
<strong>Finance</strong><br />
<strong>Akwandze</strong><br />
<strong>Agricultural</strong><br />
<strong>Finance</strong><br />
DFI<br />
Tsb Technical Support Services<br />
SA Sugar Research Institute<br />
Cane Growers
<strong>Akwandze</strong> Goals<br />
• Ensure adequate grower financing.<br />
• Cost effective and appropriate<br />
financing.<br />
• Ensure interdependence between<br />
financial and technical services.<br />
• Economic upliftment of local<br />
communities.
<strong>Akwandze</strong> Objectives<br />
• Enable maximisation of growers<br />
production.<br />
• Provide funding that will enable growers to<br />
farm profitably.<br />
• Provide funding on an efficient and<br />
effective basis while containing and<br />
managing risks.
Organisational Structure<br />
Chief Executive Officer<br />
Secretary<br />
Loans<br />
Manager<br />
Admin/Financial<br />
Manager<br />
Loans Officer<br />
Malelane<br />
Administration<br />
Clerk<br />
Loans Officer<br />
Komati<br />
Administration<br />
Clerk
Products<br />
• Medium term loans.<br />
• Ratoon management loans.<br />
• Retention advance loans<br />
• Electricity loans.<br />
• Irrigation Maintenance loans.<br />
• Irrigation infrastructure loans<br />
• Contractor loans.<br />
• Retention savings.
Terms<br />
• Interest 16% members, 18% nonmembers.<br />
• Cession on proceeds – % deduction.<br />
• Must belong to retention savings<br />
scheme.
Risks<br />
• Loan risks related to lack of collateral.<br />
• <strong>Agricultural</strong> - Drought etc.<br />
• Managerial - Lack of knowledge and<br />
experience.<br />
• Limited knowledge of client.<br />
• Market risk – market and price.<br />
• Political risk.
Risk Mitigation.<br />
• Cessions for the redemption of loans.<br />
• All production irrigated – water security.<br />
• Tsb Sugar RSA extension and technical support<br />
services.<br />
• Project based production – Growers grouped.<br />
• Tsb Sugar RSA cane delivery agreement –<br />
guaranteed market.<br />
• Known price of sugar.
Risk Mitigation<br />
• One of the most important elements in the<br />
mitigation of risk is the sound management<br />
of risk.<br />
– Ensure creditworthiness of borrower and<br />
finance within cash flow capacity.<br />
– Monitor, monitor, monitor --------<br />
– Follow-up timeously.
Critical Success Factors<br />
• Loans structured to cash flow for viable and<br />
sustainable production.<br />
• Maximise recovery – Bad debt < 2%.<br />
• Minimise costs:<br />
• Funding costs.<br />
• Operational costs.
Critical Systems<br />
• Information System<br />
• Monitoring System
Information System<br />
SASA – UAF<br />
• System can:<br />
• Manage loans.<br />
• Manage savings.<br />
• Manage multiple funding sources.<br />
• Provide extensive reports.<br />
• System is tried and tested; features<br />
specific to servicing sugarcane growers.<br />
RMF – 18 May 2009
Strengths of <strong>Akwandze</strong><br />
• UAF back-office IS.<br />
• Retention savings system.<br />
• Grower / Tsb partnership.<br />
• Significant institutional experience in area.<br />
• Growers in a creditworthy position.
Rewards<br />
• Increase of 20% - 25% in SSG yields.<br />
• Increased income to growers.<br />
• Spin-off effects on the local economy.<br />
• Significant economic upliftment of the<br />
region – inclusion of MSG and JVs (i.e.<br />
post land claims structures).
Resources from Tsb Sugar<br />
• Extension support services.<br />
• Technical support services.<br />
• Equity share.<br />
• Office accommodation.
Resources from Growers<br />
• Equity share.<br />
• Management input at local level.
Resources from SASA<br />
• Specially developed advanced<br />
financial Information System – real<br />
time.<br />
• Back-office support.<br />
• Retention savings system.
Procurement
<strong>Akwandze</strong> <strong>Agricultural</strong><br />
<strong>Finance</strong><br />
Suppliers<br />
Savings / Loan<br />
Grower Support<br />
Services<br />
Growers
<strong>Akwandze</strong> <strong>Agricultural</strong><br />
<strong>Finance</strong><br />
Suppliers<br />
Savings / Loan<br />
Orders<br />
Grower Support<br />
Services<br />
Order<br />
Supply<br />
Growers
Payment<br />
<strong>Akwandze</strong> <strong>Agricultural</strong><br />
<strong>Finance</strong><br />
Invoice<br />
Suppliers<br />
Savings / Loan<br />
Orders<br />
Grower Support<br />
Services<br />
Order<br />
Supply<br />
Growers
Payment<br />
<strong>Akwandze</strong> <strong>Agricultural</strong><br />
<strong>Finance</strong><br />
Invoice<br />
Suppliers<br />
Savings / Loan<br />
Input<br />
Procurement<br />
Co-ordination<br />
Orders<br />
Grower Support<br />
Services<br />
Supply<br />
Order<br />
Growers
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