The development of turnaround plan was in part to fulfil the conditions set forth by National Treasury for capital injection and provision of guarantee requested by the Land Bank

1. 5/11/2023 1
Land and Agricultural
Development Bank of South
Africa
Organisational and Operational Alignment
Presentation to the Portfolio Committee
19/02/2008

2. 5/11/2023 2
Background
This document serves to provide a framework of the Land
Bank’s Turnaround Strategy
The development of turnaround plan was in part to fulfil the
conditions set forth by National Treasury for capital
injection and provision of guarantee requested by the Land
Bank
It was also a reaction to:
– The issues that the external auditors had raised
– Management assessment of the Bank’s position
– Fitch Ratings assessment

3. 5/11/2023 3
Progress
While significant progress has been made on the
turnaround objectives, the Land Bank cannot provide
significant detail on progress in this particular report,
as its year-end figures are still in the process of being
finalised.
These figures will be available after year-end (March
2008). Further detail on progress will be consolidated
and presented following the release of these figures.

4. 5/11/2023 4
Turnaround Factors
National Treasury
Turnaround Issues
(National Treasury)

5. 5/11/2023 5
Turnaround Factors
Fitch Rating Agency
 Non performing loans (NPL) ratio deteriorated to 10,6% at FYE06
(FYE05 6,7%). The Agency considered the NPL ratio to be potentially
understated, for instance problematic borrower not classified as non-
performing at FYE06. Consequently, the Agency considered coverage
ratio to be low in light of the bank’s trend of poor recoveries and
realisation rates
 Loan loss Provisions: At FYE06 Land Bank recorded significantly
lower impairment charge of R319,8m (FYE05 R637,4m) primarily as a
result of IFRS adjustment of R172m which excluded suspended
interest from non-performing loans. The Agency though still felt that
the asset quality remains weak and the Agency anticipated that a
longer track record of improved credit processes will be required
before provisions are normalised at this level
 The largest 20 exposures accounted for 45% of gross loan exposure
at FYE06, with the bank’s largest obligor representing 15,3% of total
exposure and 230% of the bank’s capital.

6. 5/11/2023 6
Turnaround Factors
Management
 Delivery of the development mandate
 People and systems
 Risk management
 Brand
 Income/cost
 Low levels of capital

7. 5/11/2023 7
Turnaround focus
ACCUMULATED DEFICIT PERFORMANCE (1)
Key contributing factors to accumulated deficit & deteriorated
performance:
Financial Level
 High personnel cost - adequacy of this cost in relation to skills and
core competency, elusive.
 The retard collection of debt and interest on loans afforded.
 The managing of non-core function assets.
 The consistent investment in share, other funds etc., in absence of
surplus/ profits.
 Inadequate funding/revenue models to determine costs and
required funding.

8. 5/11/2023 8
Turnaround focus
Accumulated Deficit Performance (2)
Operational Inefficiency Level
 Inefficient processes and models in respect of development funding
 An inadequate enforcement process of debt collection, credit management and
revenue management
 Lack of development plans and programmes
 Inadequate systems integration
 Weak management, adjustment and updating of approval system and policies
 Inadequate security management
 Inefficient and/or lack of models in respect of service level determination
forward and demand planning, and networking
 Inadequate risk management strategy and application
 Lack of team integration, operations and support business units resulting in a
lack of strategic and business focus
 Poor expenditure and revenue controls, procedures and support systems
 Weak governance control
 Lack of adequate information technology systems over core business
activities.

9. 5/11/2023 9
Core function of Land Bank
(new business model)
The Bank developed a business model to answer the mandate question. The new
business model has the following components
 Focus on development: ensuring graduation of emerging farmers into
commercial farmers
 Enhancing the role of cooperatives and local agencies
 Linking farmers with markets
 Working with complete agricultural value chain
 Risk management
 Making development profitable
 Commodity focus
 Farmer support
 Partnership and collaboration
 Advisory support
 Making development impact
 Financial sustainability
 Agricultural information and innovation

10. 5/11/2023 10
Process on development of the
turnaround plan
Following development of the new business model, the Bank
engaged the process of developing its turnaround plan
 Scoping of project
 Review and assess current policies & procedures
 Engagement with senior management
 Align Processes & Procedures to Policy & Legislation
 Mapping of Processes & Procedures (Operational)
 Analysis of information
 Report and recommendation
 Presentation to senior management and board
 Presentation and engagement with National Treasury
 Development of a detailed implementation plan and
budget

11. 5/11/2023 11
Turnaround Strategy (1)
 Organisational alignment:
– Policy
– Budget
– Business Units
– Skills audit – Human Resource capital and personnel
cost
 Revenue generation assessment:
 IT platform and business processes:
– Integration of systems and processes
– Management reports
– Client data base

12. 5/11/2023 12
Turnaround Strategy (2)
 Partnerships and Co-operative governance
– Networking
• Agri-Unions
• SETA
• Local & Provincial Government etc.
 Holistic Operational Risk Management Programme
– Cost of Funding
– Bad debt management strategy
– Credit risk (including concentration risk)
 Batho Pele/service delivery
– Review branch network
 Pilot Projects on development & sustainability
– Development Initiative Strategy
– Project scoping
– Focus Areas
– Project implementation
– Time frames on capital investment & return

13. 5/11/2023 13
Implementing The Plan
To implement the turnaround strategy an Operations
Plan has been drawn to integrate the strategy into
daily activities of the Business Units of the Bank by:
 Team of senior officials from the various units within
the Bank
 Developed a holistic integrated project plan with time
frames, accountability, etc.
 Developed an activity plan
 Regular integrated project meetings

14. 5/11/2023 14
Sustainability
Alignment of Core function to New Business Model
Development
Quick Wins
Organisational Alignment
Pilot Projects
Debt Collection
Co-operative Governance
Risk Strategy Integrated IT System
(Monitored Indicators)

15. 5/11/2023 15
Financial Survival Plan
Before the Land Bank can focus on the
implementation of its turnaround plan and
realignment of its business plan we first need
to concentrate on a financial survival plan:
 Maintain the funding
 Halt the flow of bad loans
 Contain expenses

16. 5/11/2023 16
Key Thrusts to Stabilisation
Identify immediate operational issues to stabilise the bank from:
 Long-term strategies aimed at refocusing the Bank as a DFI
while ensuring long-term financial sustainability
 Provide clear strategies for exit from situations of
concentrated risk
 Improve revenue and reduce operational costs
 Alternative funding

17. 5/11/2023 17
Expected outcomes
Business Efficiency (Cost to income ratio)
Mar. 2007 - 81%
Mar. 2008 - 85 %
LOAN QUALITY (NON PERFORMING LOANS)
Mar. 2007 - 15.30 %
Mar. 2008 - 11.70%
PROFITABILITY
ROE-
Mar 2007 - -9.89%
Mar 2008 - -7.80%

18. 5/11/2023 18
Expected Outcomes
CAPITAL RATIO
Mar. 2007 - 5.95%
Mar. 2008 - 6.37%

19. 5/11/2023 19
Performance indicators for
development
The accountability indicators to these outcomes rests on:
 The sustainability of the Development Programme
 Employment creation
 The establishment of Emerging Farmers
 Conclusion of Agri-BEE deals
 Percentage growth in the development loan
book over three years
 Performance of the development loan book
 Networking with related stakeholders
 Provision of advisory service
 Geographic spread

20. 5/11/2023 20
Performance indicators for
Development
NEW FUNDING
 Mar.2008 - R300m
 Mar. 2009 - R1,0b
 Mar. 2010 - R2,0b