Investor Confidence in South African Agriculture

1. Investor Confidence in South African Agriculture AMT AGRI OUTLOOK CONFERENCE 1 & 2 October 2008 John Purchase Agricultural Business Chamber (ABC)

2. Introduction • Broad South African Agriculture situation • ABC/IDC Agribusiness Confidence Index • Factors impacting on confidence in the agricultural business sector • What must be done to place agriculture on a high growth scenario path?

3. Broad South African Agriculture situation

4. Role of Agriculture in SA Economy Strategic sector – provides food, fiber and wine, satisfying two basic needs of man (+ others!) Has provided national food security since the start of the 20th century (Pop: ~4,0 million), right through to the 21st century (Pop: ~47,8 million, ~60% in cities)

5. Role of Agriculture in • SA Economy • With Agro-food complex, ~14% of GDP (OECD, 2006) • Further forward linkages, around 20-30% of GDP • ~46 000 commercial producers, down from ~58 000 in 1993 (Ag censa in 1993 & 2002) • In 2007, ~R29,5 billion exports (~8% of total SA exports) • ~940K labourers, ~10% of SA work force (2002) • ~630K labourers, ~8% of SA work force (2006)

6. Y/Y % Change for Agric GDP

7. Contribution of Primary Agriculture to GDP (Source: Statssa) %

8. Investment situation and climate • Gross fixed capital formation has remained stagnant • Capital stock in Agriculture has declined over the past decade, but showing signs of a turnaround due to improved profitability.

9. 9000 8000 7000 6000 5000 4000 3000 2000 1000 0 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Current prices Constant 2000 prices Gross fixed capital formation: Agriculture, forestry and fishing: 1994-2006 R million Source: Sector Plan Review, 2008

10. 82000 81000 80000 79000 R Million 78000 77000 76000 75000 74000 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Year Capital Stock in Agriculture (Constant 2000 prices): 1995 - 2007 Source: Sector Plan Review, 2008

11. Fixed capital formation in agriculture as a % of SA total %

12. Performance of Sector

13. Performance of SectorGross Value of Production in R million R'million

14. Agricultural Export and Import Volumes: 1998 - 2006 Source: Sector Plan Review

15. Agricultural Trade Balance: 1998 - 2006 Source: Sector Plan Review

16. Measuring & Analysis Framework • Competitiveness Status Index (ACS) • Agribusiness Executive Survey (AES) • Determinants of Competitiveness Index (ADC) • ABC/IDC Agribusiness Confidence Index (ACI)

17. ABC/IDC Agribusiness Confidence Index

18. Defining confidence Confidence is in effect, a belief, a self-assurance in one’s own ability. It is essentially a feeling of having an expectation of success (Vealey, 2001). Business confidence is a belief, an assurance in the business environment, company’s resources and in the business’s ability to compete (ABC, 2001).

19. Methodology • The measure of business confidence is an important indication of the status of the decision-making environment in which businesses operate. • Since 2000 data collected every quarter from a representative group of agribusinesses. • Survey of senior executives of agribusinesses • Information analysed by a team of experts and used to construct the ACI on a quarterly basis.

20. Trends in the confidence of agribusinesses in South Africa 40.00% 20.00% % Change 0.00% 1st 2nd 3rd 4th 1st 2nd 3rd 4th 1st 2nd 3rd 4th 1st 2nd 3rd 4th 1st 2nd 3rd 4th 1st 2nd 3rd 4th 1st 2nd 3rd 2001 2002 2003 2004 2005 2006 2007 -20.00% -40.00% Quarters Is there confidence in the sector? Devaluation of Rand Sharp commodity price increases Economic growth Increases in commodity prices High commodity prices Drought Strength of Rand Low product prices Unfavourable agricultural conditions Economic slow down 1st 2nd 4th 3rd 2008 Favourable weather

21. Factors impacting on confidence in the agricultural business sector

22. Y/Y movement in sub-indices of ABC/IDC Agribusiness Confidence Index (3rd Quarter)

23. What must be done to place agriculture on a high growth scenario path?

24. Current broader environment Negative impacts: • Political uncertainty, also internationally • Crime, safety and security • Macro-economic situation, esp. internationally • Infrastructure constraints, esp. electricity • Resource situation, e.g. water quality • Policy issues, esp. Trade and Tariff Policy • Competitiveness (Technology and innovation!)

25. ABC Agribusiness Competitive Status Index Government support Low interest rates Low inflation Sanctions Marketing boards Drought High interest rates 1st phase deregulation Deregulation (from co-ops to companies Weak Rand New markets Strong Rand Drop in Business confidence Drought Political Uncertainty

26. Current broader environment Positive impacts: • Democracy, albeit immature and developing • Free press • Independent Judiciary • Market economy (part of global system) • Greater cooperation between Govt and PS • More external and internal investors • New technology/expertise through multinationals • General commodity and agribusiness infrastructure

27. Conclusion • Agriculture key to South Africa’s development • Recent signs of improved growth and confidence in sector after difficult period • Still many major concerns that need to be addressed urgently to put agriculture on high growth scenario path – finalize and implement Strategic Plan for SA Agriculture • Challenge to new political leadership and private sector to engage constructively to create improved confidence in agricultural sector

28. THANK YOUwww.agbiz.co.za

29. Group Structure of MGK & Temo Intrax Share Trust Zeder Public MGK Holdings 17,1% 15,1% 18,6% 29,0% 20,2% MGK BUSINESS INVESTMENTS LTD. 70% SIYAKA 80,5% MGK Bee Employee Share Trust TEMO AGRI INVESTMENTS 19,5% 10% MGK Bee Farmer Share Trust 20%

30. OUR TRACK RECORD

31. TEMO AGRI SERVICES • Hereby we wish to thank the following organizations / departments for their interest in, and loyal support to the farmers participating in the Temo Projects. Crop Insurance Dept: Agriculture, Environment and Conservation Rustenburg & North-West Government Maize Trust Oliesade Advieskomitee Olie-en Proteïnsade Ontwikkelingstrust