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Absa AgriBusiness in Africa

Presentation to the Southern Africa Trade Hub Delegation

May 2011

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Contents

• Footprint• Background• Agricultural Risks• Typical Agricultural Supply Chain• Typical Agricultural Value Chain as basis for Financial Solutions• Products and Initiatives

Footprint

Absa Africa operates conventional banking in 2 countries:• Mozambique - Barclays Bank Mozambique• Tanzania - National Bank of Commerce (NBC)• Namibia - Representative Office

Barclays Bank operates in the following countries:1. Botswana 2. Seychelles3. Egypt 4. Tanzania5. Ghana 6. Uganda7. Nigeria (Rep. Office) 8. Zambia9. Kenya 10. Zimbabwe11. Mauritius

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• 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 and 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.

Background

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

Store Produce Store ProcessTransport Transport

Input Supplies Growing Crop Harvested Produce

Plant Harvest Consumer

Food & Energy

Input Supply Credit Contract Farming Warehouse Receipts

Finance Cycle

ManufactureManufacture

Typical Agricultural Value Chain as basis for Financial Solutions

Start on Right of Value Chain

One up one down strategy

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• 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

Products and Initiatives

Thank you

Hans BalyamujuraTel +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.