EXECUTIVE SUMMARY

Iperekeleng Business Enterprise is a mother and son run and black owned company with its place of business at 728 De La Rey farm, Thabo Mofutsanyane District
in the Free State. The Farm is Government owned and leased on a 30 year contract to Iperekeleng Business Enterprise through Mrs. Carpede who is one of the
directors of the company. Over the years Iperekeleng has through the assistance of the Department of Agriculture tried to raise funds to start projects on the farm
with no success due to the funds being allocated to different projects that had higher priority to the department.

The department of Agriculture has been helpful in determining what type of a business venture would be most successful on the farm and a mix of livestock and
crop farming has been rated to be the most promising. Iperekeleng aims to be an important role player in the development of black economic participation in
agriculture and the establishment of an economically viable environment for black farmers and agriculture as a whole.

MISSION

To encourage and support a vital and viable agricultural industry in the Free State by offering a collective voice, peer to peer information sharing and leadership of
agricultural initiatives. To supports local farming communities by providing them with a market for their livestock and as a voice for the local agricultural sector
become catalyst for projects that better the industry and local business.

PURPOSE OF REQUIRED FUNDING

This business plan has been developed to present to the Investors to assist IPEREKELENG BUSINESS ENTERPRISE in raising capital for the establishment of an
abattoir and feedlot to supply the abattoir with stock as stock availability has proven to be one of the most important driving forces for the success of abattoirs.
Iperekeleng through one of the shareholders Mrs. Carpede has access to 342ha of land, the farm was a dairy farm and has infrastructure that needs to be upgraded
and modified for slaughtering purposes. The area surrounding the existing infrastructure is enough to house up to 3000 head of cattle in kraals and holding pens
this makes the establishment of the feedlots attainable.

An abattoir with a daily throughput of 25 head of cattle and/or 100 sheep will require R12 000 000 for a fully functional facility. The feedlot will be producing 500
cattle per month, slaughtering 25 daily apart from the stock that will be coming from other local producers. With the abattoir slaughtering 25 cattle daily there is
revenue of R500 000 off the 5th quarter at R1000 per cow slaughtered. To stock a feedlot for 3 month will require 1500 cattle bought at R7 500 will require a capital
investment of R 11 250 000. R 5 250 000 is required for the housing both for animals & farm residents and to plant 300ha of maize & pastures. Total Capital
investment of R 28 500 000 is required the get the project started and fully operational. The plan allows all local producers, consumers and other businesses to
have access to local provincially inspected red meat for direct sale to local markets and for other value added services. The original scope called for a business plan
to operate this facility as a regional service to increase the agricultural sector; this proposal/plan goes beyond the business impact on the Abattoir and the Feedlot
alone and evaluates the regional business and economic impacts.

PRODUCTS AND SERVICES

ABATTOIR CLASSIFICATION AND GRADING

Abattoirs are registered in terms of the MSA (Meat Safety Act). The design drawings of such a facility must be submitted to the provincial executive officer for
evaluation and approval. All abattoirs then undergo a grading process and are bound to comply with statutory grading requirements. The grading of abattoirs is
based on the throughput units, which is the amount of animals that can be hygienically processed in a specified time, in addition to structural requirements. A unit
in relation to a quantity standard for determining throughput for abattoirs.

Abattoirs are then graded according to the structural requirements as well as the maximum throughput as specified in the Regulations promulgated under the MSA:
 Abattoirs
 Low throughput abattoirs
 High throughput abattoirs

Products and by-products

Carcasses can be kept in the fridge or freezer for very long periods depending on the maturity of meat required, in our case we don’t keep meat in the fridges for
more than 24hrs because that would affect the slaughter cycle negatively due to the fact that cold and warm carcasses may not be put in the same fridge. The Edible
offal can be kept in the freezer for periods of up to 6months but we prefer to sell it and have it offsite within 24hrs. Hides can stay up to a week on site because they
are preserved with salt. The rest of the condemned material along with manure are removed on a daily base and used for fertilisation of veldts or burned in the case
of meat by products.

The abattoirs sell the carcasses as forequarters and hindquarters with some having processing units and deboning plants. The selling of the carcass in that form has
proven to be a great selling point because the butcher that buys it like that can get to utilise the whole carcass and take advantage of the off cuts for making wors
and mince.

Export will only be a viable option once we have established ourselves as a self-sustaining business in the local markets. There is a great appetite for export but as
smaller role players it is our responsibility to maintain our local markets because there is a great gap in the local market created by exports.

INDUSTRY ANALYSIS

DESCRIPTION OF THE INDUSTRY

The livestock sector is one of the best growing parts of the agricultural economy, driven by income growth and supported technological and structural change. This
sector contributes 40 percent of global value of agricultural output and supports the livelihoods and food security of almost billion people. Beyond their role in
generating food and income, livestock are a valuable asset, serving as a store of wealth, collateral for credit an essential security net during calamitous times.
Globally, livestock contribute 15 percent of total food energy and 25 percent of dietary protein.
In South Africa, stock farming is the only viable agricultural activity in a large part of the country. Approximately 69% of South African agricultural land is used for
extensive grazing. Cattle production have increased by nearly 1 million heads from 12.6 million in 1994 to 13.5 million in 2004 and areas for grazing declined
owing to expanding human settlements and other activities such as mining, crops, forestry and conservation. Beef cattle producers vary from highly sophisticated
commercial (who rely on high technology) to communal subsistence producers (who rely on indigenous knowledge and appropriate technology). Three major
groups of beef cattle farmers co-exist in South Africa.

The commercial beef producer (mostly white farmers) where production is relatively high and comparable to developed countries. Their production is generally
based on synthetic breeds and/or crossbreeding, using Indicus / Sanga types and their crosses as dams. The emerging black beef cattle farmer who own or lease
land (LRAD beneficiaries). Their cattle generally consist of indigenous crossbred or exotic type of animals. The communal beef cattle farmer who farm on
communal grazing land. Their cattle are mostly of indigenous types. 60% of the 14.1 million cattle available in South Africa are owned by commercial farmers and
40% by emerging and communal farmers. The gross value of beef production is dependent on the number of cattle slaughtered and the prices received by
producers from abattoirs.

Production Areas
Beef is produced throughout South Africa. The amount of beef produced depends on the infrastructure such as feedlots and abattoirs, not necessarily by the
number of cattle available in those areas. South Africa has highly developed transport infrastructure that allows movement of cattle and calves from one area to
another, even from other countries such as Namibia. For these reasons, Mpumalanga commands the greatest share of beef production in South Africa accounting for
22% of the beef produced followed by Free State, Gauteng and North West accounting for 19%, 13% and 12% respectively.
Production Trends
South Africa has approximately 495 abattoirs. Approximately 40% of all slaughtering are performed by abattoirs that may slaughter an unlimited number of
animals (Class A) and approximately 60% of cattle are slaughtered by highly regulated abattoirs (Class A & B). Most of these abattoirs have linkages with feedlots.
Over the past ten years the number of cattle slaughtered has significantly increased by 26% leading to 59% increase in beef production. This may be due to
increasing demand.

MARKET
The chart shows that 77% of the beef market share is in the hands of 8 suppliers. The remaining 23% is owned by small, medium and micro enterprises. Karan Beef
is the largest supplier commanding 25% of the total market share and Bull Brand is second with 12% market share. It is estimated that there are approximately 50
000 commercial farmers currently farming with livestock. This includes producers that keep livestock as their main enterprise and those that keep livestock as a
secondary enterprise.
They own around 8.2 million cattle. There are 240 000 small-scale farmers and 3 million subsistence farmers that own around 5.69 million cattle. The beef supply
chain has become increasingly vertically integrated. This integration is mainly fuelled by the feedlot industry where most of the large feedlots own their own
abattoirs, or at least have some business interest in certain abattoirs. In addition, some feedlots have integrated further down the value chain and sell directly to
consumers through their own retail outlets. Some abattoirs have also started to integrate vertically towards the wholesale level. Under the previous marketing
regime, wholesalers mostly bought carcasses through the auction system. Currently, many wholesalers source live slaughter animals (not weaners) directly from
farmers or feedlots on a bid and offer basis, i.e. they take ownership of the animal before the animal is slaughtered. The animal is then slaughtered at an abattoir of
the wholesaler’s choice, where after the carcass is distributed to retailers. In some instances, the public can also buy carcasses directly from wholesalers.

The abattoir industry has expanded tremendously in number and in capacity. In this regard, it is important to note that this industry can be divided into those
abattoirs that (i) are linked to the feedlot sector and the wholesale sector, or are owned by municipalities and (ii) those that are mainly owned by farmers and
SMME’s. The former abattoirs are mainly class A and B abattoirs, whereas the latter are usually classified as C, D and E class abattoirs.
The beef industry produces around 808 800 tons of meat and imports around 7 059 tons while exporting 3 537 tons. Per capita consumption is around 20.87 kg
and number of consumers is around 48.6 million.

With the regulatory changes made by the Republic of South Africa, Producers who had previously slaughtered on their farms taken the product to a butcher and
then sold the finished products direct to consumer were now no longer able to do so. The livestock must be killed in a provincially inspected facility such as an
abattoir thus farmers could not sell their products directly to consumers any longer.

Producers lost access to direct customer marketing and either dramatically reduced their herds or sold their products to feedlots at lower prices. Local producers
are in need of a facility to be put in place to allow them back into the local market and to be able to sell their meat products directly to consumers in order to reduce
costs and increase revenues.

Local producers cannot sell their product in a direct or value added capacity without travelling 100-200 km to the nearest abattoir. In addition, if they chose this
option to use the services of the abattoir operator to do the slaughtering and inspection services and to take the product to a different place for sale. Those who
don’t go to abattoirs must travel another hour farther south or sell live animals whole to a third party for processing, typically at a lower profit.

This forces butcheries to buy product from outside the region and import it in order to make products like sausages, biltong and steaks for their customers.

Currently there is a gap in the market because 3 main abattoirs have closed down namely; Frankfort, Warden and Vrede this has created a unique opportunity for
Iperekeleng to close the gap. Most of the farmers that are in surrounding town namely; Balfour, Heidelberg, Grootvlei, Frankfort, Villiers, Cornelia and Vrede are in
need of a slaughter facility.

Potential Clients: Pick N Pay, Checkers, Shoprite, Military Bases, Hospitals and Prisons once a deboning plant has been established.
Having a feedlot will not only secure supply but will also help us buy directly from farmers where we can negotiate price and then also make profit on the meat
itself after fattening the animals to slaughter weight. Over the years there has been a trend developing where you would find a lot of abattoirs not having stock due
to the unreliability in supply, this will not be a problem in our case as there is access to land where a feedlot is to be established to ensure steady supply.

CONSUMER TRENDS

As the average income in South Africa has risen steadily, meat consumption levels in the country have skyrocketed over the past two decades, according
to the Euromonitor International category report of September 2014.

Trends expressed in this article cover the last two years as new data is not yet available as an update. According to Euromonitor’s industry sources, the shifting
nature of the consumer base has allowed for increased trade volumes of meat. Rising income is indeed a key factor underlying changing consumer trends across
many consumer goods industries in South Africa. As incomes rose over the course of 2013, South African consumers were able afford more meat, which is
perceived as a premium protein source and which is commonly associated with numerous health benefits in addition to its appealing flavor. The performance of
fresh meat continued to improve over the course of 2013, with sales growing by 3% in volume terms. From a growth and development perspective, South Africa is a
country with an emerging economy and is widely considered the economic powerhouse of Africa. Even though the country’s economy continues to compress,
consumer income levels are rising, a trend that is driving rapid lifestyle changes and boosting demand for premium fresh food options such as fresh meat. Fresh
meat traditionally carries a higher unit price than other foodstuffs, although over the course of the review period, its increasing affordability amidst improved
economic performance increased its popularity among all segments of South African society. As a result, all meat categories enjoyed sustained and positive growth
during 2013. This market continues to grow year on year.

COMPETITION

There is one feedlots and abattoirs in the 100km radius of De La Rey Farm, it is not uncommon to truck over long distances when the volume makes sense for the
transport costs, however, with most local producers going to send no more than 5 animals at one time, these distances provide great costs both in transport and
producer time as they often have to do this themselves because trucking is too expensive for the lower volumes.

Competitor Strengths: Established business, large clientele, lots of experience, monopoly in local market

Competitor Weaknesses: Often booked up, lack of capacity during peak times, some reports of lack of customer service, takes a lot of time for producers as they
must make two trips for each set of animals processed, 100-250 km from producers.

Suppliers: Siesta Feedlot, Devlan, Steven Mahlangu, Klaas Venter, Victor Tandi; these suppliers have large numbers of cattle and the capacity to supply us with
over 500 cattle monthly.
OPERATIONAL ANALTSIS

FEEDLOT OPERATION

Feeding cattle in order to obtain the right amount of fat on and in the muscle, and a higher carcass mass, can be done in many ways. In South Africa the most
common practices include:

1. Grazing on veld. Usually steers have to remain on the veld until they are two years or older before a suitable carcass fat content is reached. Cows are frequently
fattened on good summer veld and achieve good finish in a reasonably short period of time.

2. Planted pastures can be used for fattening and growing out animals and the growth rates achieved are better than on veld. The most common practice is the use
of annual ryegrass, where weaners go on to the pasture at weaning in autumn and are ready for market by Christmas. Although summer pasture e.g. kikuyu can be
used, this practice is often not successful because feeding starts in spring when the price of feeders is relatively high and finished animals are only ready in autumn,
when beef prices are relatively low.

3. The majority of cattle marketed through abattoirs come from feedlots. These include:

1. On-farm feedlots. Many farmers fatten animals in pens or large paddocks, using bought-in or home-grown feeds. The livestock can be home produced or
purchased animals. De La Rey Farm and is capable of carrying out this activity. The pen system will be used. 10ha of land will be set aside for putting pen/kraals in
place and feeding stations. The farm will be housing 1500 head of cattle.

2. Commercial feedlots are probably the major method of finishing livestock. The feedlotter, often a speculator, buys animals for the feedlot. Ownership of the
animal, and therefore the risk associated with feeding, are the responsibility of the feedlot owner. There are also custom feedlots, where the feedlot operator does
not buy animals, but the owner of the animal sends them to be fattened. In the latter case, risk usually remains with the owner of the animal. The pen/kraal
structures that will be established will have the housing capacity of 3000 each so that it can also be used as an alternative for farmers that don’t want to sell their
animals while they are too small. They will pay the feedlot for the weight gained when the animal is slaughtered.

A feedlot with a capacity of 3000 head of cattle will be established on De La Rey and the abattoir will be provided with 500 head of cattle monthly. Iperekeleng
through the Procurement Manager will be purchasing livestock and feed for the feedlot, there is 200ha of arable land on which yellow maize can be planted at De La
Rey Farm. The land has an annual yield of 4,8 tons per hectare with good rainfall the yield can go up to 6 tons per hectare. Taking an average yield of 5500 per
hectare on 200ha can yield 1 100 000 tons of feed. With 1500 cattle in a feedlot, each cow eating 3.5kg of feed daily of which 60% is maize (2.1kg) there will be
enough food for 349 days of the year.
Feedlot Management

The price paid for feedlot cattle or their initial value (cost/kg), is a critical factor affecting the profitability of a feedlot enterprise, especially when a small or
negative feed margin exists. A positive feed margin can only be realized with high mass gains and a relatively low cost of feed. The cost of the feedlot ration relative
to the beef price and live mass gain thus exerts a major influence on the cost of gain. Because of the high proportion of energy required to ensure good feedlot
performance, the cost of carbohydrate, which is usually included in most feedlot rations in the form of maize, hominy chop or one of the other grains, in relation to
the beef price, is a significant factor deciding profitability of a feedlot enterprise. This is usually expressed by the ratio beef: maize price, which experience has
shown must be more than 13:1 for feedlotting to be profitable. Feedlotters can make substantial profits when the beef to feed cost price ratio is favourable. Some of
this profit must be held over to tide the enterprise over in a subsequent period, which is sure to come, when profit margins are negative. Because average daily gain
declines toward the end of the feeding period, where animals are fed for too long a period of time (are over-finished), a negative feed margin resulting in reduced
profit margins is likely. It can therefore be stated that management will have a major influence on the profitability of a feedlot enterprise.

Management aspects that are important include:

1. Ensuring that the right type of animal is bought at the right price and at the right time. In some larger feedlots, feedlot managers rely on the services of
experienced buyers.

2. The feedlot ration must be balanced in respect of nutrient content, must be matched to the type of animal fed and should be the most cost effective ration
available at the time of feeding. In most feedlots the manager achieves these goals by keeping records of animal performance and monitoring results. A nutritionist
is usually employed to do the ration balancing because this is a highly specialized task requiring a great deal of time monitoring feed quality and costs of
ingredients.

3. The daily running of a feedlot is the major task of the feedlot manager. This includes care that feed bins are full all the time, that fresh water is available to the
livestock continuously, that animals are processed and adapted on arrival and that animals are marketed when ready.

4. Diseases can be a problem in a feedlot. The services of a veterinarian to advise on disease prevention and the treatment of sick animals is a cost well justified. The
adage "prevention is better than the cure" is very true in feedlotting.

Type of Animal
Breed
Cattle can be classified according their maturity type. Early maturing types start depositing fat at an earlier age and can be market ready at a live mass of 380 to 400
kg. Late maturing types can reach market readiness at a live mass of 500kg or more.
As a general rule, dual purpose breeds are late maturing types with high growth rates and require a longer feeding period. The British beef breeds, excluding the
Sussex which is medium to late maturing, are generally early maturing and although their growth rates are relatively lower, they need a shorter feeding period to
reach a good carcass finish. Indicus cattle can do well in feedlots, but temperament and problems with laminitis can occur.
A problem encountered in practice is that, especially in Natal, most cattle entering feedlots are crossbreeds and maturity type does not always follow as a mean of
the breeds crossed. In addition, there has been a trend to breed larger cattle, resulting in late maturing types within breeds traditionally known as early maturing.
Fortunately, experienced stockmen can judge maturity type with reasonable accuracy.
Sex
Females are earlier maturing than steers and steers in turn are earlier maturing than bulls. Bulls can do well in feedlots, but often cause problems by fighting.
Females can do well in feedlots, but often have poor growth rates partly because they reach carcass finish at an earlier age and there is a tendency to be tardy in
sending them for slaughter. Disruptions caused by females coming on heat could be a contributory factor.
Age
Animals can be placed in the feedlot at any age, usually after weaning. In practice animals tend to arrive at feedlots shortly after weaning (7 to 9 months of age), as
yearlings (12 to 18 months of age) or at two and a half years of age. In most feedlots there is no differentiation in feeding regime between animals of different ages
and it has been found that irrespective of the age, animals tend to gain about 150 kg and are then ready for slaughter. Cattle placed on high energy rations at an
early age tend to deposit fat more rapidly than if they are kept on low energy diets for a time before being placed on a high energy ration.
In cases of emergency caused by food shortages e.g. drought, a question often asked is whether cows and calves should be separated before entry to the feedlot. The
best practice is to place the cow in the feedlot with her calf. As the cow reaches carcass finish, the calf will have started eating concentrate. The dam can be removed
from the feedlot and the calf remains until it in turn is ready for slaughter. Irrespective of breed, sex or age, a proportion of animals (usually about 10%) do not
adapt to feedlotting. It is best to cull these animals as soon as possible. They can be identified by their poor performance in the initial stages of feeding.

Feeding System
Many feedlotters mix their own ration, usually a complete feed, using the most readily available ingredients at the best price they can bargain for. Where home-
produced feeds are available at low cost e.g. silage, the profitability of a feedlot can be improved.
Other feeding systems include:

1. Buying in a complete feed. If large volumes of feed are bought, a better price can be negotiated. This option must always be investigated, especially when beef
prices are good and ingredients are difficult to obtain. Cost of transport often offsets gains made on the feed price.

2. Cafeteria feeding systems have been developed and have the advantage that the animal selects an increasingly concentrated diet over time, which leads to
greater efficiency of feed utilization. The two cafeteria systems commonly used are the finisher feed system and the PRAM (protein-roughage-additive-mineral)
system.

To ensure profitability, many feedlots employ a nutritionist who reformulates the ration or feeding system continuously. Taking care that adaptation to new feeds
is not a problem, a nutritionist can buy in ingredients and formulate the cheapest ration in relation to animal performance by monitoring markets continuously.
Adaptation and Processing: Ruminants must always be adapted to a new feeding regime. Adaptation allows the microflora in the rumen to adapt to the new
substrate they must grow on. This usually takes up to three weeks. When adapting livestock to high concentrate diets, this process is best done by a gradual
increase in energy content of a diet. This is called an adaptation ration. With modern additives, such as the ionophores, the adaptation period is not as critical as it
used to be. However, although most feedlotters no longer make use of an adaptation ration, a good practice is to place animals on hay for a day or two before
supplying the high energy ration. Initially the intake of the concentrate is best limited to 1 to 2 kg per day before animals are allowed free access. This also assists
animals to overcome the stress related to transportation to the feedlot.

On arrival at the feedlot animals must be processed. Processing varies from feedlot to feedlot, but usually includes:

1. Dose and dip. Dipping is essential, but many people question the need to de-worm animals arriving at a feedlot. A positive response to dosing is often not seen,
possibly because many farmers dose their animals before selling them.

2. Vaccinate all animals against botulism, anthrax, quarter evil, IBR and any other diseases the veterinarian considers essential in the area where the feedlot is
situated.

3. Administer growth promotents. These have been shown to be highly cost effective. Injecting Vitamin A is usually worth the nominal cost involved.

4. Identify and number the animals for record keeping purposes.

5. On arrival at a feedlot it is good practice to group animals according to size and sex. Large animals tend to bully smaller animals and keep them away from feed
troughs.

6. The initial weight of animals should be recorded, preferably after 7 to 10 days in the feedlot. At this time, careful observation can identify poor performers and
these can, at a next weighing which ideally takes place two to three weeks later, be culled if the mass gains confirm the earlier observations.

7. Horned animals are a problem. Dehorning sets an animal back a great deal. Leaving animals with horns can lead to severe losses resulting from damage to other
animals and bruising. It is best to refrain from buying in animals that have not been properly dehorned.

Filling the Feedlot

Feedlot managers must be aware of the fact that keeping a feedlot enterprise running, a continuous income is needed. The only way this can be achieved is by
having livestock to sell all the time. This is a difficult part of feedlotting, because animals remain in a feedlot for 90 to 120 days. The feedlotter must therefore
predict market demand, and consequently predict selling price at least three months ahead. A continuous source of feeders is needed, but not always available.
Livestock can be obtained directly from farmers or be bought by private treaty through an agent or at livestock auctions. Where a buy-in feedlot system is used,
buyers must be experienced in evaluating the potential for fattening of different types of animal (maturity type, age, gender) in relation to the market demand
(price) of different grades of carcass. Funds to buy in animals must be available at all times. A lack of funds to buy in animals when prices are favourable could lose
an opportunity to make a profit.
Transport Feedlot owners obtain a large proportion of income from cattle transport as well as speculation.
Size of Feedlot There is not an optimal size for a feedlot. Even a farmer feeding a single animal can make a profit. However, feedlotting often runs at a loss and a
small operator cannot absorb such losses for any length of time. On the other hand, in the case of a large enterprise where its sole source of income is the feedlot,
the feedlot must be large enough to pay for running costs such as salaries, transport, cost of equipment and so on. At present costs and salaries, a feedlot producing
less than 1000 head of cattle per month (i.e. has 3000 to 4000 head of cattle in the feedlot at any time), cannot produce enough money to cover overhead costs.
Having an Abattoir helps with this problem as the money will be made off the by products.

Deaths and Condemnations Although deaths occur in feedlots, where losses exceed 2% prompt action must be taken to find and eliminate the cause(s) of the
mortalities in order to minimize losses.

Slurry Disposal Slurry disposal is a major issue in most feedlots and warrants attention. Waste can be wet or solid and, if not properly taken care of, can result in a
fly and insect problem. Flies and insects must be combated in a feedlot because they worry animals and increase stress. Stress has a negative effect on growth rate.

Disease A feature of crowded accommodation is the rapid spread of disease. Apart from the better known cattle diseases that can appear in feedlots, there are a
number of diseases associated with feedlotting. These are better studied in more detailed publications or are left to the veterinary profession to manage. A feedlot
manager needs to be aware of the potential danger of these diseases, especially infective diseases such as IBR which can spread through a feedlot at a very rapid
rate and even if mortalities are relatively low, profits are eroded by depressed animal performance.

Management and Human Resource

Thate Michael Modiroa has 10 years banking experience, 2 years construction and Operational Management experience with Villiers abattoir. He is also a Certified
Project Manager and a member of Project Management South Africa. Post the funding Thate’s member interest in the business will be 51%. Along with his mother
they are co-partners in Iperekeleng Business Enterprise and have secured 342ha of land on a 30 years long term lease from the department of Agriculture with Mrs.
Carpede as the Lessee she will have 49%.

SOCIO-ECONOMIC BENEFITS

Employment
Commercial farmers are estimated at 50 000, emerging farmers at 240 000 and communal farmers 3 million. There are approximately 70 feedlots in South Africa
and 495 abattoirs. Beef industry is a major employer with 500 000 people employed and 2 125 000 dependent on the livestock industry for their livelihood.

IPEREKELENG will provide all local producers and butcheries with access to provincially inspected meat products. This will create equal opportunity for all
producers and allow local producers to get back into the retail market they were shut out of when the regulations changed. This project creates a regional economic
opportunity to a diverse sector of our region: from hobby farmers to larger scale commercial farmers, from home butchers to fully operating retail facilities and
restaurant chefs. The abattoir will also make product available to entrepreneurs needing local licensed inspected product (raw materials) for various other value
added activities such as pet food or prepared meal production.

In a feedlot, in order to ensure proper animal husbandry the cattle to human ratio should be 50:1 so there will be an additional 30 jobs created to ensure the
welfare of the animals.

Advantages

Farmers can keep their herd local or increase their herd to meet local demand. Cash Flows can be managed better as farmers can trickle feed their animals into the
Feedlot rather than having to send a “truck load” at a time out of province. A local abattoir “available to all” can also spin off educational opportunities and other
agricultural improvements such as value added food processing businesses. It can be a seed for revitalization of the Agricultural Sector.

REGIONAL ECONOMIC DEVELOPMENT

IPEREKELENG intends on setting up a feedlot, realizing that there is a tremendous positive effect on the economy from making this community service available. At
least 30 jobs would be created immediately as a result of the feedlot and even more would be created if spin-off businesses started up such as fertiliser
manufacturing. In addition to job creation, farmers will see higher margin sales in their businesses which will increase economic wealth in the region. For example,
a producer can realize double the profit on a single animal if they have it butchered into value-added local meat than if they send the animal to an auction with no
value added step.

Direct and Indirect Economic Benefits

• Butcheries = Cut and Wrap.

• Local Non butchery value added includes any business using abattoir outputs outside of butchery, including but not limited to: pet food manufacturing and
tanneries.

• There may be crossover in the links. For example butchery may purchase a live animal from the producer and interact with abattoir directly. Or a producer may
take the carcass to butchery and then pick it up to sell to a restaurant.

• Direct Benefits affect the vitality and viability of the Agricultural Sector and improve profitability for producers.

• Most Job creation will come from 2nd level benefits.

Local Producers

• Increased production

• Increased profitability per animal

• Increased independence

• Increased marketing Educational Institutions (High School and College)

• Increased vocational opportunities

• Better education about food security and where our food comes from

• Increased profitability

• Increased employment (both new and growth of existing) Local non butchery Valued Added

• Increased profitability

• Increased employment (both new and growth of existing) Transport Companies

• Increased employment for Restaurants

• Increased marketing

• Increased security of supply for Grocery Stores

• Increased security of supply for Residents

• Increased food security

• Increased employment opportunities

• Ability to sell farm-gate or farmers market or direct to consumer.

FINANCIAL/CASH FLOW ANALYSIS

 Please see attached documents for cash flow projections, Income Statements and Balance sheet.

Profit Margins in Feedlotting

 Factors affecting the profit margin of a feedlot operation include the price margin, feed margin, management, cost of feed, buying price of feeders and
selling price, which is usually quoted as a carcass price.

Price margin

 The profit or loss which the feedlotter makes as a result of an increase or decrease in price from the time the animal is bought (the cost price) to the time
the animal is sold (sale price), is called the price margin and is calculated as follows:
 Price margin = Initial live mass X (sale price/kg - cost price/kg)
 Price margin includes the difference between purchase price and selling price resulting from beef price fluctuations as well as improvement in carcass
quality due to feeding. The feedlotter cannot control price fluctuations and must therefore rely on a prediction of what prices will be when stock are sold at a future
date. Making use of a positive price margin is what is commonly called speculation. Although profits are potentially high, risk is high and people lacking experience
often lose money with speculation.
 When buying livestock, most feedlotters make use of the price per kg live mass for their calculations. They must therefore know the dressing percentage of
the animal. Dressing percentage varies and feedlotters base the value they use on experience and knowledge of the type of animal and its body condition. Lean
animals have a dressing percentage of 49%, which increases to as much as 60% at a high level of finish. However, at a fat score of 2 to 3, the mean dressing
percentage varies from 54 to 56%.

Feed margin

 The profit or loss a feedlotter makes as a result of live mass gain in relation to cost of feed consumed, is called the feed margin and is calculated as follows:
 Feed margin = Live mass gain X (sale price/kg - cost/kg gained)
 A feedlotter can influence feed margin by ensuring, through good management, that optimal growth rates are achieved and by taking steps to obtain the
best feed at the best price.

Other expenses

 Other expenses incurred by feedlotting include the following:

agents commission, slaughtering costs, carcass condemnations, transport, interest on capital, salaries of management and labour, machinery costs, mortalities and
veterinary costs (disease control, medicines, vaccinations, veterinarian) and pretreatment (growth stimulants, dipping, dosing, vaccination).
 Feedlotters can improve production profit by manipulating some expenses, but others, e.g. agent's commission, are fixed. Mortalities must be monitored
carefully to ensure that a high loss rate does not severely limit profits. A mortality rate of 1% to 2% is accepted as normal.
Feedlot profit

 The feedlot profit margin is a function of price margin, feed margin and other expenses. Adding these three together, indicates profit or loss for the period
of time over which the calculation is made. Feedlot managers need to keep a close watch on feedlot profit, which is a very sensitive measure of the efficiency of
management.

Document Prepared by:

Thate Michael Modiroa

Iperekeleng Business Enterprise

072 391 1800