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RISK SHARING PARTNERSHIPS

RISK SHARING PARTNERSHIPS. Prepared for Client Name Your name here Date. AgriSETA Conference Presentation by Diale Mokgojwa, Manager: AgriBEE 15 th September 2011. Exposure to the possibility of loss ; a chance or situation involving such a possibility. Types of Agricultural Risks.

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RISK SHARING PARTNERSHIPS

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  1. RISK SHARING PARTNERSHIPS Prepared for Client NameYour name hereDate AgriSETA Conference Presentation by Diale Mokgojwa, Manager: AgriBEE 15th September 2011

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

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

  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. PRODUCTION MANAGEMENT • (50% of business) • Production risk management • Financial management and admin • Capacity building, skills dev & transfer- technical, business • Measurable milestones • BANK • Access to finance • Credit application • Pay out • Financial services • Capacity building • Marketing • 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 • COMMODITY ORG • Gate keeper • Facilitator • INSURANCE • Mitigates risk • INPUT SUPPLIERS • Quality seeds/ breed • Capacity building • GOVERNMENT • Grant funding • Infrastructure • Mechanisation • 1st loss guarantees

  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. FINANCING OVERVIEW

  9. CREDIT EVALUATION Factors affecting credit evaluation

  10. 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.). Security Pledge Secondary source of repayment; Mortgage bonds on property; Notarial bond over loose assets; Cession of crop income; Cession of insurance; Guarantees & suretyships.

  11. Reasons loans are declined • 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 Business Plans – see www.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 Mokgojwa011 636 8713diale.mokgojwa@standardbank.co.zawww.standardbank.co.za

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