Presentation to the Portfolio Committee on Agriculture and Land Affairs, 6 May 2008

2. 2 Background Purpose Key elements of our Corporate Plan Scanning the environment and building capacities Supporting values Operating principles Objectives Financial resources and sources of income (refer to budget presentation) Conclusion The document consists of 5 sections, preceded by an introduction. The introduction explains the structure of the document and discusses how changes to it will be dealt with. Section 1, as you can see, deals with the main pieces of legislation and the regulations which govern the bank’s operations. It covers the levels of approval allowed by both the Acts and by the Treasury Regulations, and the responsibilities of various parties in terms of the PFMA and Treasury Regulations. Section 2 deals with the delegation of powers by the CEO to Bank officials, to allow the Bank to conduct its day-to-day operations. Section 3 covers the signing powers conferred on various Bank officials by the CEO, to allow them to exercise their delegated powers. Section 4 addresses the Bank’s obligations in terms of the PAIA. Section 5 looks at the responsibilities that you, the Board of the Land Bank, have under Code of Corporate Practice and Conduct proposed by the second King Committee on Corporate Governance.The document consists of 5 sections, preceded by an introduction. The introduction explains the structure of the document and discusses how changes to it will be dealt with. Section 1, as you can see, deals with the main pieces of legislation and the regulations which govern the bank’s operations. It covers the levels of approval allowed by both the Acts and by the Treasury Regulations, and the responsibilities of various parties in terms of the PFMA and Treasury Regulations. Section 2 deals with the delegation of powers by the CEO to Bank officials, to allow the Bank to conduct its day-to-day operations. Section 3 covers the signing powers conferred on various Bank officials by the CEO, to allow them to exercise their delegated powers. Section 4 addresses the Bank’s obligations in terms of the PAIA. Section 5 looks at the responsibilities that you, the Board of the Land Bank, have under Code of Corporate Practice and Conduct proposed by the second King Committee on Corporate Governance.

3. 3 BACKGROUND Over the past five years the Land Bank has had low levels of capital and has been making losses Land Bank is currently not delivering effectively on its development mandate About R821m are development loans Funding development in the financial markets presents challenges for the Land Bank The Land Bank has lost its market share over the past five years due to the following: Growth of the financing in the sector outpaced that of the Bank Constraints of financial resources Removal of Government subsidies and financial support to farmers The document consists of 5 sections, preceded by an introduction. The introduction explains the structure of the document and discusses how changes to it will be dealt with. Section 1, as you can see, deals with the main pieces of legislation and the regulations which govern the bank’s operations. It covers the levels of approval allowed by both the Acts and by the Treasury Regulations, and the responsibilities of various parties in terms of the PFMA and Treasury Regulations. Section 2 deals with the delegation of powers by the CEO to Bank officials, to allow the Bank to conduct its day-to-day operations. Section 3 covers the signing powers conferred on various Bank officials by the CEO, to allow them to exercise their delegated powers. Section 4 addresses the Bank’s obligations in terms of the PAIA. Section 5 looks at the responsibilities that you, the Board of the Land Bank, have under Code of Corporate Practice and Conduct proposed by the second King Committee on Corporate Governance.The document consists of 5 sections, preceded by an introduction. The introduction explains the structure of the document and discusses how changes to it will be dealt with. Section 1, as you can see, deals with the main pieces of legislation and the regulations which govern the bank’s operations. It covers the levels of approval allowed by both the Acts and by the Treasury Regulations, and the responsibilities of various parties in terms of the PFMA and Treasury Regulations. Section 2 deals with the delegation of powers by the CEO to Bank officials, to allow the Bank to conduct its day-to-day operations. Section 3 covers the signing powers conferred on various Bank officials by the CEO, to allow them to exercise their delegated powers. Section 4 addresses the Bank’s obligations in terms of the PAIA. Section 5 looks at the responsibilities that you, the Board of the Land Bank, have under Code of Corporate Practice and Conduct proposed by the second King Committee on Corporate Governance.

4. 4 BACKGROUND (Cont) Demand for agricultural finance has increased due to Improved farm incomes Rising input costs Expanding production The document consists of 5 sections, preceded by an introduction. The introduction explains the structure of the document and discusses how changes to it will be dealt with. Section 1, as you can see, deals with the main pieces of legislation and the regulations which govern the bank’s operations. It covers the levels of approval allowed by both the Acts and by the Treasury Regulations, and the responsibilities of various parties in terms of the PFMA and Treasury Regulations. Section 2 deals with the delegation of powers by the CEO to Bank officials, to allow the Bank to conduct its day-to-day operations. Section 3 covers the signing powers conferred on various Bank officials by the CEO, to allow them to exercise their delegated powers. Section 4 addresses the Bank’s obligations in terms of the PAIA. Section 5 looks at the responsibilities that you, the Board of the Land Bank, have under Code of Corporate Practice and Conduct proposed by the second King Committee on Corporate Governance.The document consists of 5 sections, preceded by an introduction. The introduction explains the structure of the document and discusses how changes to it will be dealt with. Section 1, as you can see, deals with the main pieces of legislation and the regulations which govern the bank’s operations. It covers the levels of approval allowed by both the Acts and by the Treasury Regulations, and the responsibilities of various parties in terms of the PFMA and Treasury Regulations. Section 2 deals with the delegation of powers by the CEO to Bank officials, to allow the Bank to conduct its day-to-day operations. Section 3 covers the signing powers conferred on various Bank officials by the CEO, to allow them to exercise their delegated powers. Section 4 addresses the Bank’s obligations in terms of the PAIA. Section 5 looks at the responsibilities that you, the Board of the Land Bank, have under Code of Corporate Practice and Conduct proposed by the second King Committee on Corporate Governance.

5. 5 PURPOSE The objects of the Bank are the promotion, facilitation and support of Equitable ownership of agricultural land, in particular the increase of ownership of agricultural land by historically disadvantaged persons Agrarian reform, land redistribution or development programmes aimed at historically disadvantaged persons or groups of such persons for the development of farming enterprises and agricultural purposes Land access for agricultural purposes Agricultural entrepreneurship Removal of the legacy of past racial and gender discrimination in the agricultural sector The document consists of 5 sections, preceded by an introduction. The introduction explains the structure of the document and discusses how changes to it will be dealt with. Section 1, as you can see, deals with the main pieces of legislation and the regulations which govern the bank’s operations. It covers the levels of approval allowed by both the Acts and by the Treasury Regulations, and the responsibilities of various parties in terms of the PFMA and Treasury Regulations. Section 2 deals with the delegation of powers by the CEO to Bank officials, to allow the Bank to conduct its day-to-day operations. Section 3 covers the signing powers conferred on various Bank officials by the CEO, to allow them to exercise their delegated powers. Section 4 addresses the Bank’s obligations in terms of the PAIA. Section 5 looks at the responsibilities that you, the Board of the Land Bank, have under Code of Corporate Practice and Conduct proposed by the second King Committee on Corporate Governance.The document consists of 5 sections, preceded by an introduction. The introduction explains the structure of the document and discusses how changes to it will be dealt with. Section 1, as you can see, deals with the main pieces of legislation and the regulations which govern the bank’s operations. It covers the levels of approval allowed by both the Acts and by the Treasury Regulations, and the responsibilities of various parties in terms of the PFMA and Treasury Regulations. Section 2 deals with the delegation of powers by the CEO to Bank officials, to allow the Bank to conduct its day-to-day operations. Section 3 covers the signing powers conferred on various Bank officials by the CEO, to allow them to exercise their delegated powers. Section 4 addresses the Bank’s obligations in terms of the PAIA. Section 5 looks at the responsibilities that you, the Board of the Land Bank, have under Code of Corporate Practice and Conduct proposed by the second King Committee on Corporate Governance.

6. 6 PURPOSE (Cont) enhancement of productivity, profitability, investment and innovation in the agricultural and rural financial systems Programmes designed to stimulate the growth of the agricultural sector and the better use of land Programmes designed to promote and develop the environmental sustainability of land and related natural resources Programmes that contribute to agricultural aspects of rural development and job creation Commercial agriculture Food security The document consists of 5 sections, preceded by an introduction. The introduction explains the structure of the document and discusses how changes to it will be dealt with. Section 1, as you can see, deals with the main pieces of legislation and the regulations which govern the bank’s operations. It covers the levels of approval allowed by both the Acts and by the Treasury Regulations, and the responsibilities of various parties in terms of the PFMA and Treasury Regulations. Section 2 deals with the delegation of powers by the CEO to Bank officials, to allow the Bank to conduct its day-to-day operations. Section 3 covers the signing powers conferred on various Bank officials by the CEO, to allow them to exercise their delegated powers. Section 4 addresses the Bank’s obligations in terms of the PAIA. Section 5 looks at the responsibilities that you, the Board of the Land Bank, have under Code of Corporate Practice and Conduct proposed by the second King Committee on Corporate Governance.The document consists of 5 sections, preceded by an introduction. The introduction explains the structure of the document and discusses how changes to it will be dealt with. Section 1, as you can see, deals with the main pieces of legislation and the regulations which govern the bank’s operations. It covers the levels of approval allowed by both the Acts and by the Treasury Regulations, and the responsibilities of various parties in terms of the PFMA and Treasury Regulations. Section 2 deals with the delegation of powers by the CEO to Bank officials, to allow the Bank to conduct its day-to-day operations. Section 3 covers the signing powers conferred on various Bank officials by the CEO, to allow them to exercise their delegated powers. Section 4 addresses the Bank’s obligations in terms of the PAIA. Section 5 looks at the responsibilities that you, the Board of the Land Bank, have under Code of Corporate Practice and Conduct proposed by the second King Committee on Corporate Governance.

7. 7 KEY ELEMENTS OF CORPORATE PLAN

8. 8 SUPPORTING VALUES Guided by Batho Pele Integrity Honest and ethical conduct in all of our interactions. Honoring the dignity and worth of all. Ensuring fairness and equitable access to our services Professionalism and Service excellence Executing all activities in a professional manner thereby ensuring that we exceed delivery expectations for quality, responsiveness and value to our customers. Accountability Taking personal ownership to meet commitments The document consists of 5 sections, preceded by an introduction. The introduction explains the structure of the document and discusses how changes to it will be dealt with. Section 1, as you can see, deals with the main pieces of legislation and the regulations which govern the bank’s operations. It covers the levels of approval allowed by both the Acts and by the Treasury Regulations, and the responsibilities of various parties in terms of the PFMA and Treasury Regulations. Section 2 deals with the delegation of powers by the CEO to Bank officials, to allow the Bank to conduct its day-to-day operations. Section 3 covers the signing powers conferred on various Bank officials by the CEO, to allow them to exercise their delegated powers. Section 4 addresses the Bank’s obligations in terms of the PAIA. Section 5 looks at the responsibilities that you, the Board of the Land Bank, have under Code of Corporate Practice and Conduct proposed by the second King Committee on Corporate Governance.The document consists of 5 sections, preceded by an introduction. The introduction explains the structure of the document and discusses how changes to it will be dealt with. Section 1, as you can see, deals with the main pieces of legislation and the regulations which govern the bank’s operations. It covers the levels of approval allowed by both the Acts and by the Treasury Regulations, and the responsibilities of various parties in terms of the PFMA and Treasury Regulations. Section 2 deals with the delegation of powers by the CEO to Bank officials, to allow the Bank to conduct its day-to-day operations. Section 3 covers the signing powers conferred on various Bank officials by the CEO, to allow them to exercise their delegated powers. Section 4 addresses the Bank’s obligations in terms of the PAIA. Section 5 looks at the responsibilities that you, the Board of the Land Bank, have under Code of Corporate Practice and Conduct proposed by the second King Committee on Corporate Governance.

9. 9 Cost consciousness Using all our resources in the most cost effective manner Innovation Open and receptive to new ways of conducting ourselves and our business, seeking to continuously improve our service delivery SUPPORTING VALUES

10. 10 The document consists of 5 sections, preceded by an introduction. The introduction explains the structure of the document and discusses how changes to it will be dealt with. Section 1, as you can see, deals with the main pieces of legislation and the regulations which govern the bank’s operations. It covers the levels of approval allowed by both the Acts and by the Treasury Regulations, and the responsibilities of various parties in terms of the PFMA and Treasury Regulations. Section 2 deals with the delegation of powers by the CEO to Bank officials, to allow the Bank to conduct its day-to-day operations. Section 3 covers the signing powers conferred on various Bank officials by the CEO, to allow them to exercise their delegated powers. Section 4 addresses the Bank’s obligations in terms of the PAIA. Section 5 looks at the responsibilities that you, the Board of the Land Bank, have under Code of Corporate Practice and Conduct proposed by the second King Committee on Corporate Governance.The document consists of 5 sections, preceded by an introduction. The introduction explains the structure of the document and discusses how changes to it will be dealt with. Section 1, as you can see, deals with the main pieces of legislation and the regulations which govern the bank’s operations. It covers the levels of approval allowed by both the Acts and by the Treasury Regulations, and the responsibilities of various parties in terms of the PFMA and Treasury Regulations. Section 2 deals with the delegation of powers by the CEO to Bank officials, to allow the Bank to conduct its day-to-day operations. Section 3 covers the signing powers conferred on various Bank officials by the CEO, to allow them to exercise their delegated powers. Section 4 addresses the Bank’s obligations in terms of the PAIA. Section 5 looks at the responsibilities that you, the Board of the Land Bank, have under Code of Corporate Practice and Conduct proposed by the second King Committee on Corporate Governance.

11. 11 ECONOMIC FACTORS OUTLOOK Slow down in international and local growth Increase in commodity prices Increase in input costs Increase in inflation Increase in interest rates Higher producer prices

12. 12 Current trends in agriculture: To 2006, long-term agricultural profit margins declined despite overall growth in gross farming income In 2007 profitability improved, while production costs are also rising Removal of government intervention has exposed agriculture to inherent volatility Increasing consolidation and sophistication among commercial farmers Favourable opportunities for wheat, other grains (maize) and oil seeds Livestock improvement programme of DoA One municipality one product concept of DoA/DLA Agriculture sector performance

14. 14

15. 15

16. 16

17. 17 Historical Performance 2005 – 2007

18. 18 COST OF FUNDS

20. 20 OPERATING PRINCIPLES We operate on the principles of: Accessibility A network of 27 Branches Direct and indirect lending to agriculture Long term mortgage loans Short and medium term production loans Cash credit facilities to Agri-businesses and co-ops Forming alliances and partnerships Cooperatives and agri-businesses (wholesale funding) Permanent staff of 613 excluding vacancies Supporting emerging farmers Targeting new markets Including former homelands

21. 21 STRATEGY Stabilise the Business Deliver on development Review the funding model

23. 23 Management stability - Filling critical vacancies, including specialists Restore health of staff – culture, morale and performance Improve credit granting & monitoring processes, and policies Source Senior staff; Appoint interim consultants to fill critical areas. Develop and Implement a change management program. Ensure consistent communication and better employee interrelations. Design, develop/acquire and implement an appropriate risk rating system Ensure adequate competency levels to execute credit risk management. Enhance credit risk management systems Accelerate predictive modeling, application scoring and risk rating. STABILISING THE BUSINESS

24. 24 Improve internal controls and governance Build capacity to manage risks associated with development funding Implement Enterprise Risk Management Framework Review Delegation of Powers Form partnerships with Co-ops and other service providers Internal capacity of development specialists in alignment with DoA extension officers and ARC STABILISING THE BUSINESS

25. 25 Restructure high value non-performing loans Maintain support to commercial farmers Interventions to address key non-performing loans taking place to recover outstanding debts LDFU: Awaiting Senior Counsel opinion regarding legal matters and recovering the outstanding debt– 15 May 2008 Continuing to support commercial agriculture STABILISING THE BUSINESS

26. 26 Managing operating costs Overhaul IT infrastructure (12 - 18 months) Review spending on consultants Costs are being managed down Instill culture of budget control Implement core banking solution Customer Relationship Management system Risk Rating system STABILISING THE BUSINESS

27. 27 PROGRESS TO DATE Liquidity position of the bank stabilized Interventions to address key non-performing loans taking place to recover outstanding debts Stabilization of the Finance department taking place External audit firms STABILISING THE BUSINESS

28. 28 Employee Relations Update Sixteen (16) cases in total General Managers Four (4) Senior Managers Eight (8) Specialists One (1) Junior Managers Three (3) Cases finalized = Seven (7) Found guilty / dismissed: GM Risk Fraud GM HR Gross insubordination/negligence Snr Manager Retail Dishonesty Snr Manager IT x 2 Fraud Snr Manager LDFU Gross Misconduct Snr Manager CFU Gross Misconduct In Progress: CFO Gross Misconduct/Dishonesty GM IT Fraud Snr Manager HR Gross Negligence Area Manager Tzaneen – Financial Irregularities Specialist - IT Dishonesty New Cases: 3 Administrative staff Gross Misconduct/Dishonesty 1 Operations Managers Financial Irregularities

29. 29 Critical Vacancies GM Risk GM HR Credit Head – Corporate Banking Head – Internal Audit Head of Retail Senior Manager Finance Contingency plan in place to ensure continuity of functions Short term contracts Consultants on retainer

30. 30 DEVELOPMENT

31. 31 MINISTERIAL PRIORITIES The Bank must also contribute to the implementation of Land and Agrarian Reform Policy (LARP), which has been initiated to accelerate agricultural development through a delivery mechanism that provides a “one-stop-shop” for agricultural and other support services close to farming and rural communities through (for the next two years): Redistribution of 5 million hectares of white-owned agricultural land to 10,000 new agricultural producers Increase Black entrepreneurs in the agri-business by 10% Provide universal access to agricultural support services to target groups Increase agricultural production by 10-15% Increase agricultural trade by 10-15%

32. 32 A key element and priority of this corporate plan is refocusing the Land bank onto the development mandate Financing emerging farmers along the value chain Providing non-financial support to ensure success Continuing to support commercial agriculture Success on this development mandate is dependent on government support/grants The Land Bank will create business centres that will focus on emerging farmer support (As per the Strauss Commission Report): Business Centre 1: Development Finance Business Centre 2: Commercial Finance Increase reach inline with the 47 district municipalities CONTRIBUTION TO AGRICULTURAL DEVELOPMENT

33. 33 PERFORMANCE INDICATORS Grow development Book by R3 billion Profitability Cost to income After restructuring costs Non performing loans

34. 34 FUNDING Recapitalisation Government guarantees Donor funding DoA/DLA Grants

35. 35 CONCLUSION One-stop-shop Stabilising the bank Alignment with the DoA/DLA, and other stakeholders –ARC, DFI Focus on Presidential priorities, Apex priority 7 Focus on increasing agricultural production Long term strategy is to deliver on Land Bank’s mandate