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5/24/12
NCERA FARMS (PTY) LTDTURNAROUND STRATEGY- PRESENTED BYM.M. TITIMANI
22 MAY 2012
11
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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 Milking Parlour - Outdated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
3737