Hon Chairperson, hon Minister, the Chairperson of the Portfolio Committee on Finance, officials from the department, and hon members, allow me to deal with and respond precisely to the issues that were raised by the hon Koornhof. I'm offering free Adult Basic Education and Training, Abet. I invite your attention as I'm going through my presentation.
The objective of the Asset and Liability Management Programme of the Treasury Budget Vote is to exercise shareholder oversight over these entities to ensure that they promote government's policy objectives while remaining financially sound institutions. The optimal allocation and use of financial resources and sound corporate governance in the state-owned entities through financial oversight in accordance with government policy is promoted by the State-owned Entity Financial Management and Governance subprogramme.
The Land Bank - a schedule 3(b) national government business enterprise - is an agricultural development finance institution whose mission is to support developing and resource-poor farmers by providing them with retail, wholesale, project and microfinance. As a specialist agricultural financier with a mandate to address agricultural and rural development in South Africa, the bank's aim is to improve the sector by providing the necessary support, especially for training and capacity-building of developmental farmers and the sustainability of the sector.
At its 52nd National Conference, the African National Congress resolved that greater resources must be devoted to the challenges of rural development, land reform and agrarian change, in particular to the mandate capacity and operations of institutions such as the Land Bank, in order to ensure that the state is able to provide directed credit and capital for investment in support of a transformed agricultural sector and rural economy.
At the ANC's third national general council meeting, matters related to rural development and agricultural support systems were discussed. It was agreed that these matters must be pursued with greater vigour and that the obstacles to progress must be enunciated and acted upon.
The Land Bank operates in the agricultural and agribusiness sectors and is regulated by the Land and Agricultural Development Bank Act of 2002, as well as the Public Finance Management Act. It is keen to resume the development component of its mandate, which is evident in the projects that are moving through the pipeline.
In the 2008-09 financial year the bank recorded a positive profit and received an unqualified audit report. This marked the beginning of a more stable period that is evidence of the turnaround strategy implemented by the incumbent board of directors and the new executive management. The strategy involved three phases: cleaning up, stabilisation and sustainability. It is currently working on the sustainability phase of the turnaround strategy, which should see the bank entrench its strategic position in the agricultural finance sector and pursue its mandate more robustly.
The bank made a profit of R379 million in 2009-10, compared to R168 million in 2008-09, and also received an unqualified audit report. The bank is also reviewing its pricing and funding models.
In the parliamentary speech made by Minister Patel in the debate on the state of the nation address in the National Assembly on 15 February 2011, he said, "Over the four years to 2014, our infrastructure expenditure estimates provide for more than a quarter trillion rand a year." This assertion by said Minister insinuates that money is not all we need. It also requires careful planning and execution to ensure that we achieve the largest number of jobs and promote economic sustainability. To give effect to this, national departments, state-owned enterprises and development finance institutions are beginning to work in a much more strategically co- ordinated way.
A key recent achievement was the diversification of investors to fund the growing loan book. In 2010-11 the bank launched the domestic medium-term note and secured additional loan capital of R1,1 billion, raised in bank bonds that are subscribed to by investors in the private sector.
In 2009 the National Treasury increased the guarantee to the bank from R1,5 billion to R3,5 billion to put it in good standing with existing and potential creditors. This guarantee is being reduced progressively through periodic cash injections into the bank, which will be continuously included until the R3,5 billion has been transferred.
In December 2009 and October 2010 the bank received R1 billion and R746 million as part of the recapitalisation programme, reducing the government guarantee to R1,8 billion. The recapitalisation funding for the Land Bank will end in 2011-12.
As the bank liquidity stabilises, it is in a position to embark on the next phase of its development plan, including addressing information technology, IT, deficiencies in procurement, payroll and banking; intensifying efforts to recover nonperforming loans and improve the balance sheet; managing an acceptable cost-to-income ratio; and implementing a divesting strategy on the land for development finance unit's portfolio.
Through the Fit for the Future Project the bank seeks to address operational efficiencies by reviewing the way its business is conducted. This allows the bank to respond competitively and in good time to business demands, as well as to optimise the use of its resources.
The main Land Bank Finance Programme provides long-term mortgage loans or fixed instalment loans for capital expenditure. It strives to be a provider of world-class agricultural financial services, with part of its mandate contributing to rural development and stability, social upliftment and job creation. Congratulations, hon Minister Gordhan.
The Land Bank's spending focus over the medium term will be on financing developing farmers. Over the Medium-Term Expenditure Framework, MTEF, period expenditure is expected to increase from R1,4 billion in 2010-11 to R1,8 billion in 2013-14, mainly driven by interest paid on funding liabilities.
The Development Bank of Southern Africa - the DBSA, as it is more generally known - is a schedule 2 major public entity which was reconstituted, in terms of the Development Bank of Southern Africa Act of 1997, as a development finance institution with the primary purpose of promoting sustainable economic development and growth, human resource development and institutional capacity-building. It does this by mobilising financial and other resources from national and international private and public sectors for sustainable development projects and programmes.
Given the scope of the development challenge, the DBSA aims to proactively broaden and deepen its development impact to support government in accelerating service delivery, job creation, integrated spatial development and regional integration. Over the medium term the DBSA's strategic goals are to catalyse, expand and enable delivery of basic and social services; to provide and build human and institutional capacity; to promote broad- based economic growth, job creation, efficiency, fixed capital formation, and regional integration; and to engender sustainability, internally and externally, in financial, environmental, institutional and social terms.
The DBSA has a total budget of R3,4 billion in 2010-11, which is used mainly in the Siyenza Manje and Vulindlela Academy programmes. Siyenza Manje improved the capacity of municipalities to mitigate performance constraints that hamper sustained service delivery. It entails focusing on unlocking and implementing mainly municipal infrastructure grants and assisting municipalities to improve their financial management.
We have a role to play as members of this committee to be responsible for ensuring that the communities we lead access the opportunities that exist in government. [Time expired.]