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Strictly Private and Confidential 1 International Food Aid & Development: Africa Agriculture Kansas City Strictly Private and Confidential 1 International Food Aid & Development: Africa Agriculture Kansas City – August 2010

Global representation 2 Standard Bank has extensive expertise in the complicated dynamics of emerging Global representation 2 Standard Bank has extensive expertise in the complicated dynamics of emerging markets, enabling us to effectively partner clients and our stakeholders in achieving their strategic objectives Africa Rest of world Key regional offices • 17 African countries • Over 1, 000 Branches & 5, 000 ATMs across these geographic regions • 16 countries outside Africa • 90 branches in Argentina • Offices in key regional financial centre's including London, Moscow, New York, Hong Kong, Sao Paulo and Dubai

Outline n Looking ahead … What are the emerging trends and opportunities shaping business Outline n Looking ahead … What are the emerging trends and opportunities shaping business in Africa? n Africa’s Changing landscape n Opportunity for Africa Agriculture – Expand agricultural production; – Develop agricultural value chain. n Financial Sector. 3

4 Section 1: Looking ahead. . . 4 Section 1: Looking ahead. . .

7 Key Trends: n Shift from G 7/8 to G 20: Integration of other 7 Key Trends: n Shift from G 7/8 to G 20: Integration of other emerging markets, including Africa, into the world system, is the long term story for economic growth and development; n South Africa remains a major economy, but there is a shift of economic power to SSA & North Africa; Investors are making more confident commitments to the continent! Shift from Aid towards investment and self development! n n Growth in BRICs – in particular, China and India – has a major impact on Africa. n With better governance and policies in place, Africa is poised to reap the economic bounty the demographic transition promises n Advances now allow Africa in some instances to leapfrog to “best of breed”. n Shift from Food Aid to Food Security. The time is now for Africa to fulfil this Agricultural potential. 5

Then and now…… n 6 Africa in the 1950 s and 1960 s appeared Then and now…… n 6 Africa in the 1950 s and 1960 s appeared to have a bright future. But that is not how it turned out. Why? ► ► Lack of communication technologies, mainly rural populations, Cold War rivalry – all worked to allow bad leaders to stay with wrong policies ► n Negative demographics Stagnation for commodity producers At the beginning of the 21 st century, the outlook for Africa is positive – and fundamentally better. Why? ► Demographic dividend is beginning ► New technologies allow Africa to leapfrog to best of breed ► Better policies being implemented – no serious alternative to this; or else isolation ► Populations more urban, more educated, and technologies are a better check on bad policies ► Shift in locus of global growth to BRICs is very positive to Africa The Agricultural growth story for Africa is compelling

7 Section 2: Changing landscape creates opportunity for Africa Agriculture 7 Section 2: Changing landscape creates opportunity for Africa Agriculture

Changing landscape creates opportunity for Africa Agriculture n Africa: More that a decade of Changing landscape creates opportunity for Africa Agriculture n Africa: More that a decade of > 5% average annual economic growth rates; n Average per capita production increased since mid-1980 (West & North) and mid-1990 s (East & Southern); n Sea-change in the patterns of demand for food; n Africans have been urbanising at a rapid rate; n Concomitant rise in modern supply chains. 8

Changing landscape creates opportunity for Africa Agriculture Opportunities: n Opportunity to expand production n Changing landscape creates opportunity for Africa Agriculture Opportunities: n Opportunity to expand production n Complex and more lucrative supply chains from farmers to urban markets; n Export opportunities as trade barriers gradually erode; n Import substitution that will arise from competitive African agribusinesses. 9

10 Section 3: Expand Production 10 Section 3: Expand Production

Supply 11 The green revolution has not yet reached African yields Productivity improvements – Supply 11 The green revolution has not yet reached African yields Productivity improvements – – Upswing in yields in emerging markets holds significant potential – n Cereal yields have only improved by 1. 3% per annum in the past 20 years Environmental requirements on fertilizer and pesticide usage and concern over genetically modified crops will limit upward trend in yields Land availability – Increasing industrialisation in the developing world and environmental restrictions reducing stock of land used for farming – China and India are self sufficient in grains, but have degraded much of their arable land are running at lower national stock levels. Slight variations in seasonal conditions have seen them forced to import in recent years – Climate change remains a considerable risk and changing regional rain patterns can severely impair productive values – Agri-stressed countries like Saudi, Kuwait, China and South Korea have contracted to lease or buy 9 m Ha of farmland in 12 African countries in the last 3 years – SA grows 3 m Ha of maize and wheat, so 3 SA’s. Average Agricultural Land Prices Global arable and permanent cropland has risen only 13% since 1961 – Source: FAO $’ 000 per Ha n Source: Eurostat, USDA, FAO

Africa’s Emerging Potential n Africa has abundant arable land water, relative to Asia and Africa’s Emerging Potential n Africa has abundant arable land water, relative to Asia and the Middle East: – Only 15% of Africa’s arable land is used, versus 60% in Asia and 140% in ME. In China, “the land is little and the people are many”, while in Africa the opposite is true Africa’s per capita water resource is 4, 600 m 3, versus Asia’s 3, 000 m 3 and ME’s 164 m 3 – 12 Population (% of world total) n There is a shift from “food aid” to “food security”, driving policy changes and significant donor efforts to catalyse investment in both commercial and small scale farming: – Measures to address constraints such as weak land tenure, poor seed, low use of fertilisers, and lack of access to finance and markets – World Food Programme now sourcing in local markets n Rising per capita incomes are lifting domestic food demand, and attracting investors n The perception of a “Land Grab” needs to be addressed, and a combination of political pressure and donor support will put significant resources behind small scale farmers, using “out-grower’ and other models. Source: FAO

Africa is attracting a wall of money, from donors. . and Private Investors. n Africa is attracting a wall of money, from donors. . and Private Investors. n In 2009 the WB increased its spending on agri by 50% to USD 6 bn n AGRA work with a number of local Banks to support finance to smallholder agriculture n USAID & USDA – “Feed the Future” n AGRA, AFD (France), IFAD and Af. DB have seeded a USD 500 m African Agriculture Fund – institutional investors have since committed. n USAID is supporting Agrifuturo in Mozambique and has committed USD 40 m to small scale agriculture in Zimbabwe last year (50% via commercial banks). n Number of Private Sector Investors / Equity Funds 13

Private Sector Investment: Return vs. Perceived Risk Supportive agribusiness environment: n Access to markets Private Sector Investment: Return vs. Perceived Risk Supportive agribusiness environment: n Access to markets and natural resources; n Good Infrastructure; n Stable macro-economic and political environment Agric specific factors: n Risk Management; n Supply chain coordination; n Specialized infrastructure; n Support services related to compliance to international food safety &standards. 14

15 Section 4: Value Chain 15 Section 4: Value Chain

Broad Themes in the Value Chain Promoting market penetration (e. g. Yara in Beira Broad Themes in the Value Chain Promoting market penetration (e. g. Yara in Beira Corridor) Strategic value of logistics 16 Input and Logistics Suppliers Seeking direct access to market Farmers (small and commercial) Seeking control over Production. More value added processing Commodity Traders Integrating inputs and logistics e. g. Poultry Co’s buying stock feed co’s; BAT out-growers scheme Primary Processors Demanding low cost plus food safety, traceability, working capital. Greater selling and sourcing in emerging markets Food & Beverage Companies Greater drive to processed foods, locally sourced. Ruthless on cost control Wholesales and Retailers

17 Section 5: Financial Sector 17 Section 5: Financial Sector

Linking Smallholders to the Market 18 n Essentially a wholesale model that leverages commercial Linking Smallholders to the Market 18 n Essentially a wholesale model that leverages commercial aggregators in the value chain n Through these aggregators, gain informed access to a large farmer base to gain access to smallholder farmers at scale n Secure market linkage through aggregators n Ability to provide insurance and price hedging products at bulk aggregator level n Resulting per farmer transaction and service cost is lowered n Partnership with risk partners and technical assistance providers n Opportunity to build a credit history of individual farmers in order to integrate into the formal banking economy The Bank launched a USD 100 m fund In 2009, with AGRA / MCC / Kilimo Trust

Agriculture: The power of “PPP” 19 Food Security 1 Government subsidy for inputs 2 Agriculture: The power of “PPP” 19 Food Security 1 Government subsidy for inputs 2 6 3 4 5

CONTACT DETAILS 20 Jacques Taylor Director / Head: Agricultural Banking Standard Bank, Africa Mark CONTACT DETAILS 20 Jacques Taylor Director / Head: Agricultural Banking Standard Bank, Africa Mark Chiaviello Director: International Development Group Standard Bank, NY Jacques. [email protected] co. za Mark. [email protected] com Disclaimer Confidentiality and disclaimer This document is provided on the express understanding that the information contained herein will be regarded and treated as strictly confidential and proprietary to The Standard Bank of South Africa Limited (“Standard Bank”), its holding company Standard Bank Group Limited, and the subsidiaries of its holding company (“the Standard Bank group”). By retaining it the recipient undertakes that it is not to be delivered and nor shall its contents be disclosed to anyone other than the intended recipient, and nor shall it be reproduced or used, in whole or in part, for any purpose other than for the purpose described herein, without the prior written consent of Standard Bank. Whilst every effort has been made to ensure the accuracy and completeness of the information contained in this document, no responsibility is accepted by the Standard Bank group for the treatment by any court of law, tax, banking or other authorities in any jurisdiction of any transaction based on the information contained herein. There may be tax implications to consider in any transaction and these should be identified and understood before investing. Separate tax advice should therefore be sought when appropriate. Should anything contained herein contribute to the acquisition of a financial product the following must be noted: there are intrinsic risks involved in transacting in any products; no guarantee is provided for the investment value in a product; any forecasts based on hypothetical data are not guaranteed and are for illustrative purposes only; returns may vary as a result of their dependence on the performance of underlying assets and other variable market factors and past performances are not necessarily indicative of future performances. Any client that is not a merchant banking client as defined in the Financial Advisory and Intermediary Services Act must note that unless a financial needs analysis has been conducted to assess the appropriateness of any product, investment or structure to its circumstances, there may be limitations on the appropriateness of any information provided by a member of the Standard Bank group and careful consideration must be given to the implications of entering into any transaction, with or without the assistance of an investment professional.