Absa Agri Business in Africa Presentation to the
Absa Agri. Business in Africa Presentation to the Southern Africa Trade Hub Delegation May 2011 1
Contents • Footprint • Background • Agricultural Risks • Typical Agricultural Supply Chain • Typical Agricultural Value Chain as basis for Financial Solutions • Products and Initiatives 2
Footprint Absa Africa operates conventional banking in 2 countries: - Barclays Bank Mozambique • Tanzania - National Bank of Commerce (NBC) • Namibia - Representative Office • Mozambique Barclays Bank operates in the following countries: 1. Botswana 2. Seychelles 3. Egypt 4. Tanzania 5. Ghana 6. Uganda 7. Nigeria (Rep. Office)8. Zambia 9. Kenya 11. Mauritius 10. Zimbabwe
Background • Farmers exposed to market risks (Quantity and Price). • Limited development of the agro-processing sector (prolonging shelf life, value added outside region of production). – Inelastic demand supply. – Price volatility – prices at the bottom soon after harvest. – Poor effective demand (Poverty in the local communities). • Poor Profitability – Reduced production and no incentive to increase productivity. • Less adoption of quality seed. • Less/no attention to soil quality and thus fertiliser usage. – In the large-scale commercial environment, farmers will increase scale or reduce costs to remain profitable. • No incentive to protect environment. 4
Agricultural Risks • Market Risk (Price, Storage, Third party risk) – African farmers face prices greatly influenced by the international markets. – Have very little control over pricing levels and tend to be price takers with prices varying between import and export parity. – Factors influencing prices over which they have no control include international production trends, subsidies, exchange rates, import and export tariffs. • Production risk – Production risk due to climatic changes (drought, hail, etc. ) – Poor management and planning. – Risks can be managed through insurance and technology improvements.
Typical Supply Chain in Southern Africa
Typical Agricultural Value Chain as basis for Financial Solutions Finance Cycle Input Supply Credit Manufacture Transport Manufacture Store Input Supplies Contract Farming Plant Produce Harvest Growing Crop Warehouse Receipts Store Transport Harvested Produce Process Consumer Food & Energy Start on Right of Value Chain One up one down strategy
Products and Initiatives • Products – – Vanilla type of products (Term loans, ODs, Asset finance). Input Cost/Production cost type of finance. Import and export Finance. Inventory Finance. • Initiatives/Collaboration – Discussions with stakeholders to increase finance. • Guarantee funds. • Non-Governmental Organisations. – Private Equity Funds. • Equity investments 8
Thank you Hans Balyamujura Tel +27 11 350 6160 Email hans. balyamujura@absa. co. za Disclaimer: Although everything has been done to ensure the accuracy of the information, the Bank takes no responsibility for actions or losses that might occur due to the usage of this information.
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