Refocusing a parastatal financier : a case study of the Mpumalanga Agricultural Development Corporation

Abstract

The approach to development finance and sound financial policies are crucial aspects that impact on the success of any development finance institution (DFI). The success of a DFI is measured on the basis of its ability to operate with as little financial dependency on external sources or none at all. Other key factors are the ability to carry out its mandate and objectives, as well as to meet expectations of the community it is supposed to serve. International best practices in rural finance are known to ensure sustainability of organisations. Institutions that have proved to be successful have become reference points in terms of best practice. The legacy of such institutions and the examples they have set can be useful in developing frameworks for restructuring DFIs. Through reference to literature on the justification for restructuring a DFI, it can be determined and confirmed whether it is indeed necessary for any institution to undergo restructuring. The restructuring framework and the international best practices can be used to perform a gap analysis for the purpose of identifying the shortfalls in the restructuring of an institution. Given the context within which an institution operates, that is, the environment, socio-economic aspects and the historical background, a gap analysis can be performed as a way of benchmarking the targeted institution with best practice institutions. In the event that the synthesis of the gap analysis reveals that the current restructuring processes within an institution need tightening, completely new strategies need to put in place. Recommendations can be based on the strategies of best practice institutions and the policies of the new approach to development finance, as well as Kotter’s (1995) guidelines on transformation, as quoted by Coetzee (2002). This study will contribute to the restructuring and transformation of DFIs by proposing strategies that the Mpumalanga Agricultural Development Corporation (MADC) can use to achieve its objective of becoming a self-sufficient institution. Where restructuring has already begun in the MADC, this study attempts to identify those areas with gaps and recommend strategies that can be put in place. In its endeavour to asses the gaps in MADC’s approach to development finance, it was found that the MADC had weak strategies with regards to products and services offered, capitalization, governance, measurement and reporting as well as human resources. In order to close the gaps identified, recommendations to make up for the specific gaps were made based on what proved to work for best practise institutions. By accepting the findings of this study and implementing the proposals outlined here, it is envisaged that the MADC will be able to review the strategies that were established and implemented after embarking on a restructuring process.