Sustainable Livelihoods Framework for Rural Development and Urban Renewal

1. JOINT BUDGET COMMITTEE HEARING ON MTBPSTheme 3: Rural Development and Urban RenewalMasiphula M. Mbongwa DDG: DEPARTMENT OF AGRICULTURECommittee Room E249Parliament02 November, 2004,

2. Sustainable Rural Livelihoods Framework • OUTCOMES • more income • more jobs • better well-being • reduced vulnerability • improved food security • better sustainable use of NR-base • ISRDP • STRATEGIES • LRAD • CASP • IFSNP • ARM • AgriBEE • MAFISA • Land Care • Non-NR-based TRANSFORMING STRUCTURES & PROCESSES • CAPITAL ASSETS • Natural • Social • Physical • Human • Financial • VULNERABILITY CONTEXT • Trends • Shocks • Culture STRUCTURES Government Private Sector Laws Policies Incentives Institutions PROCESSES

3. Presidential Announcement • Re-establish the agricultural credit scheme in the Departmentof Agriculture • Provide capital to increase support to agricultural activities in the communal land areas as well as other small–scale agriculture. • Leave the Land Bank to deal with the commercial sector • Make R1 billion immediately available to start the scheme • Work with the financial institutions to implement the provisions in the financial services charter relevant to the development of small-and medium-farming enterprises

4. Why the Reversal ? Commercial Banks Land Bank Agricultural Credit Board Agricultural Coops Agricultural Coops Agricultural Coops Enterprises Farmers Enterprises Farmers Farmers

5. Why the Reversal ? Commercial Banks Land Bank Agricultural Companies Rural Micro-Finance Institutions Rural Micro-Finance Institutions Enterprises Farmers Farmers Farmers Enterprises Farmers Farmers Farmers Farmers Farmers Farmers

6. Why the Reversal ? Commercial Banks Land Bank MAFISA: Micro-Agricultural Financial Scheme for South Africa Enterprises Farmers Farmers Farmers Enterprises Farmers Farmers Farmers Farmers Farmers Farmers

7. Mission MAFISA is the state-owned entity that provides micro-agricultural financial services on a widest, accessible, cost-effective and sustainable basis in the rural areas.

8. Strategy Human and Social Assets Strengthening the capacity of the rural poor and their organisations Productive Assets and Technology Improving equitable access to productive natural resources and technology Empowering the rural working poor and enterpreneurs in their efforts to improve their livelihoods Financial Assets and Markets Increasing access to financial services and markets

9. Principles • Rural livelihoods strategies guide service delivery; • Collaborate, share and reinforce for service delivery; • Use or improve existing resources and efforts; • Offer and gain something of value to service delivery; • Specialise in something of value to service delivery; • Strive for service delivery within the 20km target; • Go for 10 million customers for scale, leverage and impact; • Optimise tax Rand value return to reduce poverty and hunger; and • Use rural financial services industry benchmark to improve service delivery.

10. Farms and Agribusiness Structure Large commercial farms & agribusinesses 1st Economy IV III II I Small commercial farms & agribusinesses 2nd Economy Emerging farms and agribusinesses Subsistence farms andagribusinesses

11. Socio-Economic Analysis • An estimate of 15 million rural poor people • Women-headed households • Women, youth and people with disabilities • Some form of access to land • Have some form of self-employment • Earn between R600 – R1 000 per month • Farming share less than 10% to total HH income • Move in and out of the 1st and 2nd economies in pursuit of household livelihood strategies • Are not severely malnourished, hungry or destitute • Use credit for high potential areas and high return activities

12. Socio-Economic Analysis • Use savings for subsistence farming and low return productive activities • Rely on remittances, wages, disability, pension and child support grants for production and HH needs • Live in remote and dispersed areas with poor infrastructure • Participate in but do not benefit from the 1st economy • May be creditworthy below and above the poverty datum line • May engage into profitable self-employment investments • Use extended families and social networks to manage production, price and market risks and disasters

13. Business Case • More savers than borrowers in a financial system • Households save more than they borrow • Enterprises borrow more than they save • If 10 out of 15 million rural people are savers, then 5 million rural people should be borrowers • If 10 million people save at least R200 per year, then there should be R2 billion in the rural financial market available for the 5 million rural borrowers.

14. Customers • Farm workers; • Small landholders; • Landless; • Food Emergency Beneficiaries; • Farm and labour tenants; • Land reform and agrarian beneficiaries; • Small farmers; • Household producers; and • Rural micro-entrepreneurs.

15. Products and Services Poverty Datum Line

16. Functional Structure Head office District Branches 41 Local Branches Local Branches 500

18. Service Delivery Consortia Land Bank Provincial DoAs Local Municipalities Post Office SAVVEM Provincial DFIs IDC Rural Financial System Donors MAFISA Agri Cos KHULA Banks APEX Fund Rural MFIs Agri-Coops User-Owned

19. Sources of Funding Interest Income MAFISA Grants Investments Parliamentary Appropriation

20. Phased Implementation Plan • Phased over 10 years • Launch quick win products in selected areas; • Increasing institutional sustainability; • Conducive policy and institutional environment; • Gradual expansion of the branch network; • Conduct staff training and deployment; • Building strong partnerships and alliances; • Developing new innovative products and services; • Monitoring and evaluating implementation; and • Assessing the impact on the lives of the rural working poor and entrepreneurs.

21. Expected Outcome • A more efficient and effective agricultural rural finance system; • Financial services which are more accessible, relevant and responsive to farmers and agribusinesses; • Greater productivity in farming and agribusiness operations; • More effective and participation by beneficiaries in input and output markets; • Sustainable institutions with a greater outreach capacity; • Greater and more reliable production of food • Greater asset ownership; and • Increased wealth, growth and development.

22. THANK YOU

23. Sustainable Livelihoods Framework • OUTCOMES • more income • more jobs • better well-being • reduced vulnerability • improved food security • better sustainable use of NR-base • ISRDP • STRATEGIES • LRAD • CASP • IFSNP • ARM • AgriBEE • MAFISA • Land Care • Non-NR-based TRANSFORMING STRUCTURES & PROCESSES • CAPITAL ASSETS • Natural • Social • Physical • Human • Financial • VULNERABILITY CONTEXT • Trends • Shocks • Culture STRUCTURES Government Private Sector Laws Policies Incentives Institutions PROCESSES

24. Sustainable Rural Financial System Stakeholder participation Non-Financial Services Improved sustainable livelihoods Financial Services Rural Financial Infrastructure Outreach Conducive Policies Regulation & Supervision

25. Financial and Enterprise Viability Cycle Viable Financial Institutions Vibrant rural and agricultural economy Growth Growth Viable Rural Enterprises

26. Savings and Credit Household Cycle Savings: Subsistence production and low return ventures Rural and Agricultural Economy Growth Growth Credit: High potential areas and high return ventures

27. Defining the Two Economies Short hand for socio-economic dualism: • First Economy at the cutting edge, globally integrated and with a capacity to export manufactured goods, services and primary commodities • Second Economy exists at the edges, consists of large numbers of the unemployed and the ‘unemployable’, and does not benefit from progress in the First Economy The Second Economy denotes the condition lived by millions of people on the margins of the modern, industrial economy: • People without a steady income based on their own economic activity • Households or individuals with no steady employment, and without an income-generating asset that can practically be ‘realised’ as capital or collateral

28. CASP model Agricultural macro- system within consumer economic environment Farm & Business level activity Household food security & Subsistence The Hungry & Vulnerable Agriculture support 6 pillars Technical & advisory assistance Marketing & Business Development Training & Capacity building Information & Knowledge Management On & off farm infrastructure Financial assistance