THE AGRIBEE FUND
DIRECTORATE: COOPERATIVES AND ENTERPRISE DEVELOPMENT
SEPTEMBER 2014
1. Background
AgriBEE framework was developed in 2004 with the intention to deliberately and
systematically support Black South Africans to actively participate fully in the
agricultural sector as owners, managers, professionals, skilled employers and active
participants in all business interfaces in an attempt to encourage inclusive processes
and a participatory culture to solicit collective efforts towards growth and
development of the South African economy.
The AgriBEE reference document which was framework for the development of the
Agricultural Sector Transformation, the AgriBEE Charter informs the establishment of
the equity fund. The broad outlook towards transformation is measured in terms of
the seven elements, of which contributions are critical to ensure true empowerment
and economic transformation of historically marginalised individuals. In terms of the
Ownership Element of the AgriBEE, being the first and critical along with others
viewed as bearing a heavier contribution towards transformation, government has
made a provision to contribute towards expansion of equity and support for
enterprise development initiatives through grand funding to BEE beneficiaries to buy
shareholding stakes in viable sector commercial establishments and Agriculture,
Forestry and Fisheries enterprises.
The original purpose of the AgriBEE Fund as stated in the Memorandum of
Agreement (MOA) signed with the Land Bank in April 2011 was expanded to include
agro-processing projects as well. Also, with the configuration of Ministerial functions,
Forestry and Fisheries were brought on board, so the Fund is now also geared
towards forestry and fisheries and no longer agricultural projects only.
2. What is the purpose of the AgriBEE Fund?
It is a Fund that draws from the AgriBEE Empowerment Charter for its scope, thus
the entire agricultural value chain such as production, processing, marketing and
distribution. Whilst due care to avoid duplication and overlaps with other government
funding programmes such as CASP and MAFISA etc will be undertaken, projects
funded by these funding programmes may be considered if they meet the set criteria.
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2.1
What are the objectives of the AgriBEE Fund?

To promote the entry and participation of black people in the entire
agriculture, forestry and fisheries value chains, through provision of funding
for equity deals, acquisition of Interests in agriculture, forestry and fisheries
entities and enterprise development (small, medium and micro enterprises) to
the people who were previously marginalized to participate in the economy of
South Africa;

To ensure that there is an increased number of black people who own,
manage and control sustainable enterprises in the agriculture, forestry and
fisheries sector;

That there is improved participation by designated groups as stated in the
AgriBEE Empowerment Charter; namely; Black Women, Black Youth, Black
Farm Workers and black people living with disabilities, throughout the
agriculture, forestry and fisheries value chains;
2.1.1. What is the nature of the AgriBEE Fund/Programme?
There are two conditions that can drive investment in a sector; speculative and
directed/controlled investments.
2.1.1.1.
Speculative investment
Speculative can be described as investment where the investor’s motive is to derive
financial returns in terms of dividend from the enterprise in which the investment is
made. The overriding criterion is that the investor may not be involved in the running
of the enterprise as a business and also, the investor may be any person or
organisation who has no farming intention at all.
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2.1.1.2.
Directed investment
Directed investment is designed for a specific purpose where the investor has a
symbiotic relationship with the organisation in which he or she is investing. In other
words, the relationship goes beyond the investment itself. For example, small
farmers may invest in a local chicken abattoir for the purpose of influencing the
abattoir as active member as well as supplying it with chickens which in this case,
they automatically gain access to the market as producers and also gain when
dividends are declared.
Since the AgriBEE Fund was created to assist small farmers to buy into “whiteowned” established enterprises where they have direct interest (symbiotic
relationship), it is expected that prospective clients of the Fund must seriously
consider the principle of symbiotic relationship for the purpose of demonstrating that
the desire to apply for the Fund is driven by this principle. In other words, they must
be emerging enterprises who are functioning within the value chain at a level that will
allow contributions or services to the enterprise in which they are investing and in the
process, a win-win situation will be created where the established enterprise will be
assisted to fulfil the compliance requirements of the AgriBEE Charter whilst on the
other hand, the small farmers will gain required support such as market access for
their products, access to technology, mentorship, enterprises management capacity,
etc in order to strengthen and sustain their small enterprises towards job creation,
participation and contributions in the economy, etc.
This then means that farmers who are involved in a particular commodity e.g.
livestock, cannot be expected to apply for the Fund to invest in the citrus industries.
Only farmers in the citrus industry may be considered since they have “common
interest” with the enterprise in which they want to invest.
The same principle should apply for agroprocessing projects. The farmers who want
to establish the agroprocessing enterprise must be active producers of the
commodity they wish to process, for example, dairy farmers in a village must own
cattle from which they will be able to supply milk to the dairy for processing.
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2.1.2. What are the expected outcomes of the AgriBEE Fund programme?
(a) Commercially viable and sustainable black-owned agriculture, forestry and
fisheries enterprises;
(b) Accelerated empowerment of black people and farm workers in particular along
the value chain in the agriculture, forestry and fisheries sector;
(c) Added social and environment value;
(d) Contribution to the alleviation of poverty;
(e) Achievement of broad-based black economic empowerment.
The AgriBEE Fund is managed by DAFF through the Land Bank. According to the
MoA between DAFF and the Land Bank, DAFF assumes the responsibility to
oversee the AgriBEE Fund and report on its role and impact towards transforming
agriculture, forestry and fisheries sector.
2.2.
AgriBEE fund products
2.2.1. For equity ownership and interest acquisition, the funds shall be utilised
as follows focussing on Agriculture, Forestry and Fisheries:
(a) New Equity Deals – The empowerment of the designated groups who are
starting new projects which would result in their equity ownership and/or
acquiring other interest in an agricultural business enterprise.
(b) Increasing Equity Ownership and Interest Acquisition – For funding
increased equity share and/or other interest in a Measured Agricultural Entity. In
essence,
the
funds
will
be
available
for
transforming
narrow-based
empowerment into broad-based through increased shareholding and interest
acquisition by black owned entities.
(c) Enterprise Development Initiatives – Funding for support of enterprise
development initiatives as outlined in the AgriBEE Charter/Sector Codes – i.e.
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over and above the contributions of 2% NPAT (3% NPAT) by the measured
enterprise to these EME’s and QSE compliant entities or enterprises.
2.2.2. For Agro Processing projects, the fund will be utilised towards the following
type of projects under enterprise development:
(a) Start-up processing/value-adding businesses

Funding interventions for the new enterprises following any of the three
approaches, cluster, incubators and niche export products support. This does
not exclude any other intervention models that might be applicable on a case
by case basis.
(b) Existing processing/value-adding businesses requiring expansion capital;
The fund may be used to leverage partnerships with other funding institutions, e.g.
NEF, IDC etc. in the following:

Up-scaling operations; these enterprises are successful and doing very well,
however, with some support, they could increase their operations to generate
more output and jobs. (Guaranteed loans may be the intervention needed).

Struggling enterprises: these enterprises needs more support in various areas
of the operation (guarantee loans for appropriate technology, trainings,
marketing, equity etc.)

Quick-wins projects: these are the enterprises that may need little support to
revamp their operations.
This includes CASP funded agro processing projects requiring support as per criteria
set above.
2.2.3. Pre-requisites for funding
The pre-requisites for funding shall include the following:
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a) Applicant (individuals/ group/ entity) must:
i) Be South African citizens with valid identity documents;
ii) If married or divorced, must produce a marriage or divorce certificate,
whichever is applicable;
iii) In an instance where a loan is/will be sourced to cover own contribution, an
indication of repayment ability should be evident,
b) The cash flow projections must be realistic and positive.
c) Viability studies need to be conducted by the Land Bank as part of the Due
Diligence process. In this regard, the report of such studies shall form part of the
evaluation.
d) Agricultural Economic Study (AES) reports are required.
e) The applicant must have a clean credit record and be credit-worthy.
f) FICA verification documents required.
g) NCA documents need to be submitted/ completed where necessary.
h) Where applicable, salary slips/proof of farming/ non-farming income must be
submitted;
i) Risk mitigation: Insurances including life or crop insurance policies as well as
other form of security shall, where necessary, be taken as security for the loan to
cover own contribution;
j) The applicant must have a market partner or identified market, market plan in
order and signed contract/ undertaking/off-taker agreement/s, preferably a longterm off-taker agreement from partners to qualify for funding.
k) The applicant must be registered/it must be a legal entity.
l) The applicant must have skills on the intended business operation it plans to buy
into ~ to furnish proof thereof when required (in a form and substance acceptable
to the Land Bank).
m) Proposals must be tied to the elements of the AgriBEE Charter and the entity
must comply with BEE-rating and verification processes.
n) The applicant must be able to contribute to the deal with some form of minimum
capital as more fully set out in 8(h) below.
o) Utilise a proposed management model to ensure that the equity deal and/or
interest acquisition is secured over the longer-term.
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2.2.4. Criteria for funding
a) The applicant must be black and the project 100% black owned.
b) The applicant must be a legal entity (Certificate for registration/ incorporation).
c) Business plan with a clear indication of sustainability for a long term.
d) Government employees, Land Bank employees and politicians will not be eligible
for the grant and/ or support from the AgriBEE Fund.
e) Constitutional and / or founding documents must be provided.
f) The applicant must make a presentation of his or her business plan to the Land
Bank.
g) Preference will be given to the project applicant whose membership consist
mostly of black women, black youth, black people with disabilities and black farm
workers, and whose proposal is linked to a commodity strategy of a specific
commodity group.
h) A minimum own contribution of 10 percent from applicants is required for
AgriBEE funding proposals up to the value of R5 million. For proposals larger
than R5 million, a minimum own contribution of 20 percent is required. This will
enhance the level of commitment from successful applicants. Beneficiaries to
ensure sustainability of the deals / initiatives during the implementation phase.
2.2.5. Conditions for funding
a) In the event that the applicant is a newly formed entity or the applicant acquires
full ownership of a business as a going concern, the applicant must indicate the
management structure of its business which includes the empowerment of
designated
groups,
management
skills
and
qualifications,
roles
and
responsibilities of key personnel and role players as well as succession planning.
b) The management of the applicant entity must be skilled in financial management
and project management before they can start to utilize the funds and
authorization to start utilizing the funds should be obtained from DAFF and in
writing.
c) The applicant must source the portion required as own contribution from any
funding source of their choice and furnish DAFF with supporting evidence
(e.g.
signed loan agreement)
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d) The security of the loan shall be in accordance with Land Bank's valuation policy.
e) The applicant must supply the Land Bank with reports, which include financial
reports (Statement of Income and Expenditure, Bank Reconciliation
f) Statements), status reports (progress in regard to production), where applicable,
the Balance Sheet, and all other reports requested by the Land
g) Bank in a loan agreement in a format and within the time frames set out in the
loan agreement.
h) The funds must only be utilised for the purpose for which they are advanced.
2.2.6. Exclusions from the Fund
2.2.6.1.

In terms of equity:
Purchasing of farms and farming/ fishing / forestry infrastructure at primary
level (the Fund supports post production activities such as agroprocessing
and value-addition).

100% acquisition of a business at initial investment by the applicant. New
applicants must hold at least 49% in the initial period.

Applicants who are not involved in the sector in terms of farming, fishing and
forestry activities will be excluded (passive investors).

Preference shall be given to applicants who want to acquire equity in viable
entities that operate within their line of commodity.
2.2.6.2.

In terms of Agro processing and value addition:
Projects must indicate clustering of primary producers organised around a
specific commodity
2.2.7. Roles and Responsibilities
Enterprise (initiates the process), Provinces (formulate and support the enterprise for
readiness to access the Fund), DAFF (receives proposals, verifies qualification in
terms of set criteria) and Land Bank (conducts due diligence) then evaluation
committee which must meet on a monthly basis or as when required based on
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urgency of the deal; approves and/or disapproves (evaluate all contributions made
by the role players and decide).
2.2.7.1.
Funding Process flow
The operationalisation of the Fund is based on specific activities that may include
among others the following: pre-business plan compilation activities and postbusiness plan activities.

Pre-business plan activities
Beneficiaries (enterprise) that are interested in accessing the Fund should approach
the provinces within which their enterprises are located with their proposals.
Provinces are expected to help in assisting beneficiaries in drafting “bankable”
AgriBEE Enterprise proposals that supports the development of sector enterprises.
The objective is to encourage participation of designated groups and generate
sustainable jobs. The provinces must ensure that access to support intervention
provided is made available to beneficiaries to ensure that the AgriBEE Fund is
implemented effectively. DAFF personnel can also be requested to assist.

Post-business plan activities
All business plans or proposals must be sent to DAFF (D: CED) who will create a
register in which all business plans will be recorded. D: CED must also check if the
business plans submitted meet the requirements as set out in the Operational
Manual. Once D:CED is satisfied that the business plans are in line with the set
criteria, applications shall be sent to the Land Bank for due diligence to be
conducted.
Once the due diligence is completed, a joint committee consisting of DAFF and Land
Bank personnel should meet and evaluate the business proposals guided by the
results of the due diligence report as well as collective inputs from role players. The
decisions of the joint committee will lead to the approval or disapproval of the
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application being considered. The composition of the joint committee is suggested
below.
3.
Monitoring and evaluation of the Fund

Processes of Monitoring and Evaluation will be carried out at all levels
focusing at areas of responsibilities;

At Project level, performance outcomes should be reported on by project
members;

At provincial level, the reports should concentrate on project support,
performance outcomes in terms of strategic outputs like the sustainability and
health of the project, jobs created, markets penetrated, the number of
designated groups taking strategic roles in sector enterprises, designated
beneficiaries with opportunities to play meaningful roles in sector enterprises,
etc;

The Land Bank is to report on the outcomes of managing the fund and the
impact achieved, the types of enterprises and the types of needs per sector,
the ability of the intervention in closing racial disparities in participation within
sector enterprising and challenges encountered in processes of funding within
the set products and criteria.

DAFF is to consolidate the reports received and provide a comprehensive
report to the Minister with the performance, impact and outcomes with the
necessary recommendations.
4.
Conclusion
The AgriBEE Fund is aimed to support emerging sector mainstreaming into the
formal economy. Programs such as CASP, MAFISA, Land Reform funding options,
etc are to still serve the purposes for which they were originally intended for as well
as assisting enterprises supported under AgriBEE Funding program. The success of
this program is viewed or measured in terms of its ability towards transformation of
the sector business ownership profile, job creation, income generation and
contributions to zero hunger initiatives.
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As much as business contributions are an obligation from sector established players,
government has to be seen to be contributing in creating an enabling environment
for transformation to unfold. It has been determined from national and international
trends and lessons that the concept of partnerships where knowledge and business
intelligence is shared is a proven approach in strengthening emerging economic
sectors. Promotion of this approach is therefore advanced in encouraging
transformation. Given this background, the fund is intended as a tool to support
previously disadvantaged beneficiaries to afford them opportunities to negotiate
partnerships that will give them exposure and entry into formal business.
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