Bedryfsekonomiese evaluasie van Noordwes Koöperasie se produksiekredietbeleid

Abstract

1. INTRODUCTION The autogenous risk of the agricultural industry resulted in production credit financing, provided by co-operatives, having become an indispensable part of the farmer's floating capital requirements. This is underlined by the extent of short term loans which are put at the disposal of co-operatives by the Land Bank for the financing of production commodities. In view of the fact that funds for short term loans via the Land Bank are authorised by the Treasury, the Boards of Directors and Manangements of co-operatives are burdened with a major responsibility to ensure that production credit loans are administered effectively. This necessitates sound financing and business principles in the process of granting production credit to members. Notwithstanding this responsibility towards the Land Bank, cooperatives have an additional responsibility towards their members regarding the allocation of production credit to their members in a responsible manner - the reason being the fact that members are jointly and separately responsible for repayment of loans. This responsibility demands the formulation of a production credit policy which must comply with certain conditions, to wit: (a) It must be adaptable to the dominant farming activities of its members because it is supposed to finance certain production inputs (production commodities). (b) The granting of credit must be done according to a specific basis in order that the repayment thereof - in view of the precariousness of agricultural production - may be assured. Within this context the granting of production credit therefore demands a credit policy which is based on a scientific formulae. In this study it will be endeavoured to make an industrial economical analysis of the production credit policy of North West Co-operative Limited.

According to the business results of six of North West Co-operative's study groups, there should be a differentiated production credit policy according to which production credit should be allocated based on the production potential of a region and on the production performance of an individual member. This point of view will be judged on the basis of study group results, grain deliveries to North West Co -operative and rainfall statistics. The purpose of the study is, therefore, a motivation to bring about a differentiated production credit policy. 2. PRESENTATION The objectives and motivation for the study are set out in Chapter l. Specific attention is paid to the merits of and intention with production credit financing in Chapter 2. The Goverment's point of view regarding production credit financing, the generally accepted standards according to which production credit should be granted and North West Co-operative' .s own policy regarding production credit financing are further dealt with in this chapter. The business economical evaluation of North West Co-operative's production credit policy is being discussed in Chapter 3. Specific attention is paid to the restraints which were experienced in the appraisal of data as well as the factors influencing production performance. With a view to the business economical evaluation, a comparison is drawn between the approved production credit standards (production credit allocation per hectare cultivatable land) and the business results of the study groups. Grain deliveries as a possible indicator of differentiated production areas is also being analysed. Finally the rainfall patterns in nine of North West Co-operative's areas of its total operating area are being compared with the yield potential in these nine areas. Because the production credit financing of North West Co-operative does not meet the total production credit needs of members, special attention is being paid in Chapter 4 to the nature and extent of external sources of financing, that is other than through North West Co-operative.

Chapter 5 contains the summary and deductions of the study, whilst a few recommendations are being made in Chapter 6. 3. CONCLUSION On account of the business economical analysis which was made of North West Co-operative's production credit policy, the existence of differentiated production potential areas are being confirmed. Maize growing in the differentiated production potential areas accentuates the existence of differentiated production credit requirements. Consequently there is no doubt about the merits for the provision of a differentiated production credit policy in the operating area of North West Co-operative. As a first step towards the implementation of a differentiated production credit policy, different production credit standards for different potential areas should be established. The production credit standards should be within their differing production potential areas, in the same proportion to the estimated production costs of the different areas. Notwithstanding possible differentiated production credit standards, the yield history of individual members and their production performance should be the final criterion for qualifying for a specific production credit standard. In consideration of this, security values must, however, still be maintained throughout. The implementation of a differentiated production credit on the basis of differentiate production potential classifications, should counteract the possibility of injudicious production credit financing for plant production.