Click to edit Master subtitle style 5/24/12 NCERA FARMS (PTY) LTD TURNAROUND STRATEGY- PRESENTED BY...

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5/24/12

NCERA FARMS (PTY) LTDTURNAROUND STRATEGY- PRESENTED BYM.M. TITIMANI

22 MAY 2012

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INTRODUCTION

The Turnaround Strategy is in reference to the Annual Report and Audit Report of 2010/2011 financial year

SECTION 1– BACKGROUND,MR M MANKAZANA (CARETAKER OF THE BOARD)

SECTION 2–TURN AROUND STRTEGY, MR MM TITIMANI (CEO NCERA FARMS)

SECTION 3–FINANCIALS, MISS K GWAZELA (CFO) NCERA FARMS)

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SECTION 1 -MANDATE

NCERA Farm (Pty) Ltd is a public company listed in schedule 3B of the Public Finance Management Act, 1999 (Act 1 of 1999) with the Department of Agriculture, Forestry and Fisheries as a sole shareholder. The mandate granted by the shareholders, the objectives of the entity is to provide extension, mechanical services, training and agricultural support services to the farmers settled on Ncera Farmland as well as the neighbouring communities

The entity is surrounded by nine villages. The neighboring villages have a population of ± 18 000 and are under Chief Jongilanga. There are five primary schools and three high schools. The unemployment rate of the area is estimated at 80%. 33

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BACKGROUND

The annual report summed up all the challenges at Ncera. ( Profit & Loss Acc. KPI – calving & mortality rates.)

Turnaround Strategy listed all the possible opportunities. Focus was put on the Beef & Goats enterprises.

Training Gap identified – Lack of Agriseta Accreditation.

Infrastructure Gap –identified with water supply and fencing as the main constraints for a meaningful production.

Governance related matters

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SECTION 2 - FACTORS LEAD TO Turnaround strategy, AS AT 2010

1. GOVERNANCE

No Board of Directors

No Audit Committee

No CEO appointed

No Accredited Trainings

No Policies, Procedures and systems within the finance unit

No Strategy, Forensic investigation conducted

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FACTORS LEAD TO TAS AS AT 2010 CONT.2. FARM BUSINESS MANAGEMENT ISSUES

2.1.Forestation - Invasion of noxious species e.g. wattle

2.2. Dairy

2.2.1.Breeding Stock- unhealthy, low milk production

2.2.2. Milking Parlour - Outdated

2.3. Beef

2.3.1. Inbreeded stock - loss of conformation

2.4. Poor Fencing and handling facilities

2.5. Inadequate water storage facilities/irrigation and drinking

2.6. Poor veld management

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2.1 forestation

Invasion of noxious species e.g. wattle

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dairy

Breeding stock unhealthy-low milk production

Milking parlour- Outdated

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2.3. beef

Inbreeded stock

• Loss of conformation

• Loss of weight

• Loss of fertility

• Prone to diseases

• Weak genotypically

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Well breeded livestock

• High feed conversion rate

• High fertility

• Improved calving percentage

• High returns R/kg

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Handling facilities

Poor Fencing and handling facilities

•Injury to the handlers and animals

•Time consuming

•Labour intensive

•Un economical

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EFFICIENT, ECONOMICAL, MODERN AND PROFESSIONAL HANDLING FACILITY

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NCERA FARMS (PTY) LTD AS AT 2010 Cont…3. RESPONSES - TURNAROUND

STRATEGY

3.1. June 2011 the CEO was appointed

3.2. SWOT analysis was developed (refer to next slide)

3.3. Turnaround Strategy Developed1313


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SWOT ANALYSIS

Appointment of the new CEO to turn around the fortunes of the entity.

Strategic plan for 2011/12 to 2015/16 has been developed.

Framework for the establishment of a Stakeholder Council has been developed & agreed upon by all relevant stakeholders.

More than 3000ha of high potential agricultural land available for farming purposes (increasing number of tunnels for hydroponics).

The prevailing soil & climatic conditions of the area are generally conducive for cash crops, grain & livestock production (especially beef).

The entity is only 30km from East London which is the economic hub of the area.

Availability of tailor-made farmer support services of training, mechanisation, and vegetable & livestock production.

Ability to produce vegetables throughout the year by making use of hydroponics.

High potential for beef and goat production.

Noncompliance to corporate governance & poor business management principles (absence of Board of Directors).

Lack of well defined governance & policy framework.

Production is largely dependent on climatic conditions which can only be partially manipulated by man through irrigation.

Collapsing dairy cost centre with high net losses.

Poor agricultural infrastructure (fencing, milking parlour and aging dairy cows).

Poor proper camping facilities and farm road maintenance.

Inadequate access to sufficient water supply (especially for PTO farmers).

Mixed breeds of both dairy and beef enterprises.

Uncertainty of farmers due to land reform issues (lack of lease agreements).

Relatively high input and capital costs.

Poor skills and knowledge of the new farmer entrants.

Lack of funding for farming operations and investment on new agro-processing ventures

STRENGTHS WEAKNESSES

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SWOT ANALYSIS CONT…

Unaccredited & irrelevant training programmes may lead to preference of other training competitors.

Skewed & undefined technical & advisory services

Lack of programmes directed at supporting local & regional economic growth.

Communal land conflicts and possible land invasions.

Lack of mutual respect between stakeholders

Oversupply of vegetables to the East London Fresh Produce Market which will decrease prices per unit.

Availability and cost of irrigation water.

Impact of climate change (global warming).

Inflation rate with regard to cost of labour, costs of general production inputs.

Availability of various stakeholders (traditional leaders, municipalities, Department of Rural Development & Agrarian Reform, East London Industrial Development Zone, etc.) to forge sustainable partnerships.

High market demand for vegetable products (3 million people in Mdantsane Township).

The East London Fresh Produce Market is about 40km from the Ncera Farms.

Alleviation of poverty and decrease unemployment rate of the area.

Increasing demand due to the consumers demand for healthy diets.

Potential for increased local market consumption.

Increased urbanization.

Harmonization of the institutional environment

THREATS OPPORTUNITIES

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TURNAROUND STRATEGY DEVELOPED

3.3.1. Closing of the Beef and Dairy Section

Processes – Inspection and selection, TB and CA testing, seven animals reacted positive to the TB test, slaughtered and confirmed negative- Animals were auctioned 07 March 2012 (see annexure A and DVD)

305 Animals sold at the auction

197 Dairy animals

108 Beef animals

10 Nguni’s selected for breeding

Total Income R1 261 140,33

7%COM = R95 011.87 1616

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TURNAROUND STRATEGY DEVELOPED CONT.......FORENSIC INVESTIGATION REPORT,

AUDIT REPORT RESPONSES

3.3.2. Governance

3.3.2.1.Policies developed (sample available)

3.3.2.2. Public advert was placed and interviews conducted for prospective candidates of Board (see annexure B)

3.3.2.3. Application submitted to Agri-seta for training accreditation- (see annexure C) 1717

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BEEF PROCESSING, HIGH VALUE COMPARED TO ANIMALS ON HOOVES

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PROCESSING VALUE AND LEATHER TANNING

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BOER GOAT FARMING ENTERPRISE

Less capital intensive

Breed faster-high fertility, high kidding rate

High demand(meat, milk, customs, rituals)

Disease resistant

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TOMATOES AT NCERA TO DATE

GREENPEPPERS AT NCERA TO DATE

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EIGHT MORE HYDROPONICS ENTERPRISE Less labour intensive

All the year round production

Easy pest and disease control

High value crops

Easy picking and packing

No cultural practises.

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SUSPENDED UNACCREDITED TRAINING AT NCERA Unrecognised qualification

Discourages learners

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ACCREDITED TRAINING

Recognised qualification

Competitive to job market

Better job opportunities

Improved socio economic life of the communities

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IMPROVED MECHANISATION PROGRAM

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BENEFITS OF MECHANISATION AND TRAINING PROGRAM-ACCREDITATION Currently 10 tractors and equipment

Serving 9 villages of ±18 000 people

Increased food security, in the area

Provide job opportunities

Reduce poverty and hunger for community

Training programs on tractor driving,maintanance,plough setting, welding etc.

Fully fledged workshop with modern equipment

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Section 3 TURNAROUND STRATEGY BUDGET

Description 2012/2013 2013/2014 2014/2015 2015/2016 Grand Total (R)

External Fencing R 1 500 000 R 1 000 000 R 1 300 000 R 500 000 R 4 300 000

De-Bushing R 2 000 000 R 2 000 000 R 3 500 000 R 3 500 000 R 11 000 000

Drilling Boreholes/ pipes / Irrigation R 750 000 R 750 000 R 2 000 000 R 3 750 000 R 7 250 000

Roads, dams & fire-guards, handling facilities

R 1 500 000 R 3 000 000 R 5 000 000 R 3 000 000 R 12 500 000

Watering Points R 0 R 150 000 R 250 000 R 2 500 000 R 2 900 000

Hydroponics R 500 000 R 50 000 R 500 000 R 100 000 R 1 150 000

Internal Fencing R 0 R 1 500 000 R 1 500 000 R 500 000 R 3 500 000

Pasture Fortification R 0 R 500 000 R 500 000 R 500 000 R 1 500 000

Goats – breeding stock R 100 000 R 150 000 R 250 000 R 250 000 R 750 000

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TURNAROUND STRATEGY BUDGET cont.Description 2012/13 2013/14 2014/15 2015/16 Grand total

Beef – Breeding stock R 0 R 0 R 3 000 000 R 3 000 000 R 6 000 000

Experimental Farm, demonstrations

R 200 000 R 200 000 R 200 000 R 200 000 R 800 000

Facilitation of Agri-village establishment

R 300 000 R 300 000 R 600 000 R 3 000 000 R 4 200 000

Dormitories for trainees/.Cadets R 2 500 000 R 2 500 000 R 0 R 0 R 5 000 000

Training/Agri seta R 500 000 R 500 000 R 500 000 R 500 000 R 2 000 000

Mechanisation training centre R 2 000 000 R 2 000 000 R 50 000 R 500 000 R 4 550 000

Training for Staff members.(HRD) R 200 000 R 200 000 R 200 000 R 200 000 R 800 000

Policy Development R 1 000 000 R 200 000 R 250 000 R 300 000 R 1 750 000

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TURNAROUND STRATEGY BUDGET cont.Description 2012/13 2013/14 2014/15 2015/16 Grand Total(R)

IT Equipment for training R 350 000 R 100 000 R120 000 R 150 000 R 720 000

Consultant, Farm Business Advisor R 300 000 R 350 000 R 400 000 R 450 000 R 1 500 000

Law firm R 500 000 R 550 000 R 600 000 R 650 000 R 2 300 000

Buildings (repairs and maintenance) R 500 000 R 200 000 R 250 000 R 300 000 R 1 250 000

Totals R 14 700 000 R 16 200 000 R 20 970 000 R 23 850 000 R 75 720 000

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Bridging budgetDESCRIPTION BUDGET YEAR OUTCOME OUTPUT INCOME

Board Fees, remuneration/ Allowances

1,000,000 2012/2013 The organisation will have a board of directors

The entity will have a proper governance structure

Institution Board Regulations

1,000,000 2012/2013 Properly regulated, the entity will operate in a smooth and professional manner.

The relationship between the entity, the board and the department and the other stakeholders is lawfully regulated.

Workshop renewal, Training/ Accreditation

250,000 2012/2013 Trained candidates are employable.

Properly,

technically trained

candidates.

The organisation will have accredited courses/ technical training.

Fully fledged

training centre with

all relevant tools

and equipment. 3030

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Bridging budget – CONT.

DESCRIPTION

BUDGET YEAR OUTCOME OUTPUT iNCOME

Debushing 1,000,000 Increased grazing browsing capacity.

Regrowth of the

palatable

desirable species

Eradicate all undesirable trees and shrubs species.

Fencing 1,500,000 Stock theft/loss minimized.

Eliminate in

breeding

Properly demarcated land and grazing camps

Handling Facilities (Cattle and Goats)

800,000 Livestock is properly handled and managed

The farm hasdipping tanks, spray machines, dehorning equipment, electronic scales.etc.

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Bridging budget – CONT.DESCRIPTION BUDGET YEAR OUTCOME OUTPUT INCOME

Breeding Stock/Pregnant Heifers

800,000 2012/2013

2013/2014

2014/2015

Improved breeding stock and progeny

Improved feed

conversion rate

Good breeding

stock for training

purposes

New breeding stock for the entity

0

R200 000

Goats 70,000 2012/2013

2013/2014

Higher returns

Good breeding

stock for training

purposes

Good breeding stock for the entity

Fertile animals

More than 100%

Kidding

R80 000

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Bridging budget – CONT.DESCRIPTION BUDGET YEAR OUTCOME OUTPUT INCOME

Hydroponics 600,000 2012/2013 Profits generated. Good quality produced, high valued crops

R120 000

Vegetable processing plant

1,200,000

Profits are

generated

Serves as a training centre for processing.

Vegetables will be

processed.

Meat processing plant

2,500,000

Staffing costs 480,000

TOTAL 11,200,000

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ASSUMPTIONS

Beef 50 participates ,Trained for 120 days@R600pp(increased annually)

Goat : 50 participates trained for 120 days@ R600pp(increased annually)

Crop production : 40 participates trained for 60 days@ R600pp(increased annually)

Tractor Maintenance: 30 participates trained for 60 days@ R600pp(increased annually)

Computer Training: 20 participates trained for 60 days@ R600pp(increased annually)

Community Training: 500 participates trained for 80 days@ R100 pp

Breakeven point will be reached in 2017/18 financial year

Net profit as at 2019/20 will be R84 592,000

Professional fees including accommodation and other administration costs will be R17, 128,000

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Training – Prof. and Community

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Different categories included in the GRAPHBeef Farming

Goat Farming

Crop Production

Tractor Maintenance

Computer Course

Community Training

TOTAL Revenue

YEAR Revenue

Revenue

Revenue

Revenue

Revenue

Revenue

TOTAL

2012/13

0 0 0 0 0 0 0

2013/14

3,6 M

1,8 M

1,4 M

1,68 M

840 K

4.0 M

13,4 M

2014/15

4,2 M

2,1 M

1,68 M

1,9 M

960 K

4.8 M

15,6 M

2015/16

4,8 M

2,,4 M

1,9 M

2,16 M

1,08 M

5.6 M

17,9 M

2016/17

5,4 M

2,7 M

2,160 M

2,4 M

1,2 M

6.4 M

20,2 M

2017/18

6,0 M

3,0 M

2,4 M

2,6 M

1,3 M

7.2 M

22,5 M(BE)

2018/19

6,0 M

3,3 M

2,6 M

2,88 M

1,4 M

8,0 M

24,8 M

2019/20

7,2 M

3,6 M

2,88 M

3,1 M

1,56 M

8,8 M

27,1 M

2020/21

7.8 M

3.9 M

3.1 M

3.36 M

1.68 M

9,6M 29,4 M

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SUMMARY

Job created – 400 jobs and 66 permanent jobs

This will be contributing to the 80 % of unemployment rate of 18000 people

Organisation will be accredited

Workshop will be upgraded

Good breeding stock for breeding and training

Reduce poverty and hunger

Produce professional and technical trained cadets

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