L Xingwana: Micro-Agricultural Finance Institutions of South Africa
launch

19 July 2007

Honourable Acting Premier
Honourable MEC Tina Joemat-Pettersson
Members of the Executive Council
Members of the Provincial Legislature
Mayor of Phokwane Municipality
Representatives of organised agriculture (Nafu and Agri-Noord-Kaap)
Members of Women in Agriculture and Rural Development (Ward)
Representatives of agribusiness sector
Farmers present
Colleagues in government
Programme director
Ladies and gentlemen

Our country faces a great challenge of eradicating poverty and government
takes its responsibility in this regard very seriously. This is the reason why
the Department of Agriculture has developed the Micro-Agricultural Financial
Institutions of South Africa (Mafisa). The scheme was piloted in the provinces
of Limpopo, Eastern Cape and KwaZulu-Natal for a year ending March 2007.

It is very important for me to highlight the three main objectives of
Mafisa, which are to:
* provide funding through accredited participating institutions to the target
market;
* address the financial service needs of entrepreneurs (and rural communities)
in the second economy; and
* strengthen the agricultural development finance systems for the benefit of
the target market.

Programme director, ladies and gentlemen

Mafisa's target groups are small producers engaged in agricultural
activities throughout the value chain in areas of widely varying potential.
Direct access to financial services affects the small producers' productivity,
asset formation, and income and food security. Mafisa is designed to provide a
complete financial services package ranging form credit, facilitation of
savings mobilisation, micro-insurance, facilitation of marketing and capacity
building.

Rural finance is not a panacea, it is only one of several important areas
for investment in poverty reduction and its impact is fully felt when conducive
policies are in place, markets are functioning, and non-financial services are
available. The very poor, i.e. those without income, may be more effectively
reached through direct micro-enterprise promotion, income transfers, safety
nets and improved infrastructure.

Mafisa confirms its commitment to continue its search for better ways of
providing support to the rural financial sector in order to benefit the rural
poor.

It is understood that the scheme does not cover all fields of intervention
and cannot be applied mechanically. It has to be adapted to the socio-economic
setting of each area and leave room for financial innovations beyond the scope
of this scheme.

The challenge to eradicate poverty is not just a government responsibility.
It is everyone's responsibility. It starts with us as individuals. We must as
the youth, emerging farmers, as businessmen and women strive to develop our
agricultural businesses. Businesses that will make money to feed our families
educate our children and make a better life for us. This takes hard work and
diligence, however, in the long run by persisting you can be successful.

About 46% of South African households are considered poor or low-income
earners. There are more than 15 million poor people living in rural areas in
South Africa. More than 60% of black households can be defined as low income
and rely mostly on the informal sector for an income. It is estimated that 60%
of our people live below what the United Nations describes as the poverty
line.

Programme director, ladies and gentlemen

Government and its civil society partners are challenged to develop new
innovative ways to provide assistance to the poor to start viable small
businesses. Successful small businesses can grow and develop into successful
medium-sized businesses and ultimately into big businesses. It is through this
increased business activity that our people may rise above poverty and look
towards a better future and sharing in a prosperous South Africa. In future, we
all want to be able to look back with satisfaction at what we have achieved in
improving our quality of life, through hard work.

Businesses at the early stages of development need finance to grow and
develop. This finance can be from your own savings and/or from borrowed
capital, which the business must pay back. Poor people are not well served by
financial institutions and find it difficult to borrow money to start their
businesses.

It is realistically estimated that only 13% of South Africa's population is
"adequately banked" and has access to retail financial services. A recent
analysis indicated that more than 80% of South Africa's adult population has
been denied access by the formal banking sector and conventional credit
facilities. It is therefore difficult for poor people to get out of the poverty
trap.

Agriculture and related activities play an important role in poor people's
daily struggle to develop themselves. As the Department of Agriculture we have
a duty and a responsibility to make a meaningful contribution with our
colleagues in the public sector and in partnership with the private sector and
civil society to assist people to use our natural resources profitably and in a
sustainable way to protect the resources for use by our children.

My department has been working tirelessly to develop appropriate policies
and systems that will contribute to assisting the working poor to maintain
existing agricultural businesses and start new agricultural businesses, and be
able to develop into fully commercial operations.

In 1998 the Cabinet accepted the recommendations of the Strauss Commission.
The main recommendations were that:

* The state must accept its responsibility to facilitate as well as
co-ordinate the provision of a balanced range of trustworthy financial services
to the rural people of South Africa, with special attention to the needs of
women and their legal disadvantages.
* The provision of a full range of services from savings to credit and money
transmission facilities together with the infrastructure required to support
such services has to be developed to service the poor.
* The services should be expanded gradually with the use of agents on a pilot
basis to develop the correct quality of service.
* The state's role should be to support and complement the private sector to
take advantage of their efficiency, taking note of the fact that local level
financial institutions will require appropriate and active support.
* The system will require state funds to support the developmental nature of
the task.

We also at the time resolved to close the Agricultural Credit Board and
relied on the Financial Sector to provide the required financial needs of the
micro and very small farmer and agribusiness sector. Reviews undertaken between
2000 and 2003 have indicated that one of the major constraints still facing
rural and urban agricultural micro-enterprises and low-income households in
South Africa remains the lack of access to financing facilities.

To this end the President in his State of the Nation Address of 21 May 2005
announced the re-establishment of the Agricultural Credit Scheme within the
Department of Agriculture.

Ladies and gentlemen, let me take this opportunity to say that government's
desire to establish Mafisa is directed by the following policy
objectives:
* re-establish an agricultural credit scheme through the Department of
Agriculture targeted at micro and small agricultural and related businesses;
and
* provide capital to increase agricultural and other forms of related
activities.

Subsequently, government established Mafisa to direct and facilitate the
development of financial services, which will contribute to the development of
very small and micro-level farmers, emerging farmers, processors,
micro-entrepreneurs, and the working poor.

People who qualify for Mafisa's financial assistance must:

1. be active within the agricultural sector, whether it be in the rural or
peri-urban areas;
2. be able to embark on self-help initiatives to:
* improve their livelihoods
* reduce poverty
* develop viable businesses, and show potential to develop into larger
commercial businesses;
3. be able and willing to repay the money they borrow.

Mafisa is not aimed at replacing existing programmes by the various
stakeholders, but seeks to complement and optimise the use of the existing
financial intermediation infrastructure and increase outreach in order to
improve access to financial services by the poor.

The target market for Mafisa is mostly the economically active poor and
typically includes the following:

* farm workers
* farm tenants
* small agricultural processors
* land and agrarian reform beneficiaries
* small, medium or emerging farmers
* food garden producers
* rural micro-entrepreneurs.

As government we understand that small-scale producers need much more than
just financial assistance and so we have developed various supporting policies
and programmes to contribute to the developmental challenges and needs.

In recognition of the current fragmented nature of the Ministry's farmer
support programmes, I have ordered an alignment of these programmes in a
one-stop service arrangement which, in my view, will deliver value to the
poor.

This means that where necessary Mafisa will be packaged along with Land
Redistribution for Agricultural Development (LRAD), Comprehensive Agricultural
Support Programme (CASP), AgriBEE, etc.

The LRAD grant system provides an instrument for emerging farmers to acquire
freehold farmland for commercial agricultural purposes. We have also recognised
the need for comprehensive support mechanisms and have therefore developed the
CASP programme, which rests on the following six pillars:

* information
* technical advice
* training and capacity building
* marketing and business development
* on and off-farm infrastructure
* finance.

As indicated earlier on that Mafisa was started with a pilot programme, we
are here today to launch the rollout of Mafisa beyond the pilot stage. This
entails the continuation of Mafisa providing financial services through
participating institutions to its target market who are largely the rural
working poor. Mafisa will continue to work in combination with the Jobs for
Growth Programme of the Accelerated and Shared Growth Initiative of South
Africa (AsgiSA) and other relevant partners to facilitate the mobilisation of
savings and establishment of small and medium enterprises (SMEs) through
community-based organisations (CBOs).

For the time being in this province Mafisa will be available from the
branches of the Land Bank. Efforts are being made to bring in more institutions
to participate in Mafisa in order to increase outreach, thereby addressing
access constraints experienced by the poor. In launching Mafisa in this
province we also confirm that the development of additional products, including
livestock products, is being finalised and will be announced in due course.

Let us work together to make this programme a success.

I thank you.

Issued by: Ministry of Agriculture and Land Affairs
19 July 2007
Source: Department of Agriculture (http://www.nda.agric.za)