Presentation to the Parliamentary Portfolio Committee on Trade … · 2015. 1. 27. · founding legislation, The National Empowerment Act 105 of 1998 (NEF Act), Broad Based Black

Presentation to the Parliamentary

Portfolio Committee on Trade and Industry

Annual Report 2013 Crafting Sustainable Entrepreneurs

NEF Delegation

1. Mr Thando Mhlambiso

Chairman: Board of Trustees

2. Ms Philisiwe Mthethwa

Chief Executive Officer

3. Mr Selvan Naicker

Acting Chief Financial Officer

2

Contents

Section Slide

1 Corporate Governance 5

2 NEF Annual Report 2013 11

3 About the NEF 15

4 Performance Report as at 31 March 2013 34

5 Key Challenges & Way Forward 48

6 NEF Products & Services 52

7 Enterprise Development Fund 60

8 Annual Financial Statements 63

9 Capitalizing the NEF 68

10 Investee Stories 75

11 Appendices 88

3

Key Messages of this presentation

4

1. Together with other developers, the NEF has built a portfolio of manufacturing

and industrial capacity in strategic economic sectors, which will potentially add

1% to South Africa’s GDP, if fully capitalised to the tune of R5,5 billion.

2. Over the next three years, South Africa could witness history in the making

through the real emergence of brand new black industrialists, supported by the

NEF.

3. These black-owned companies will lead to the creation of more than 100 000

decent jobs, and real investment in poverty nodes.

4. These black-owned companies will drive beneficiation, increase South Africa’s

export-earning potential and reduce import dependency.

5. 10 years after the Codes, this is the critical momentum which B-BBEE now

requires, in order to drive inclusive growth.

6. We urge the Portfolio Committee to proactively support the recapitalisation of

the NEF as follows:

Per Annum over 5 years Black Industrialists

R2 billion for 200 black SMEs R5,5 billion grows to R33 billion value

Corporate Governance

5

The NEF has a demonstrable commitment to

integrity, accountability and transparency.

Applicable Laws and Policies

In discharging its mandate The NEF is guided by its

founding legislation, The National Empowerment Act

105 of 1998 (NEF Act), Broad Based Black Economic

Act: 2003, The Public Finance Management Act

(PFMA) and other applicable legislation

On Corporate Governance the NEF is guided by the

King III report, Governments Macro Economic policies,

as well as by a range of internal policy instruments

which include Investment Governance Framework,

Code of Conduct and the policy on conflict of interest.

6

NEF Investment Governance Framework

Fund Management

Investment Committee

Authorised to approve

transactions with value up

to R5m and to recommend

transactions with larger

value to Executive

Committee for approval.

Executive Investment

Committee

Authorised approve transactions

with value up to R15m and to

recommend transactions with

larger value to Board Investment

Committee for approval.

Board Investment

Committee


transactions with value up to

R50m and to recommend

transactions with larger

value to Board of Trustees

for approval.

Board of Trustees


transactions with value up to

R75m

Credit Committee

Subcommittee of Fund

Management Investment

Committee, authorised to

approve IMbewu contract

finance transactions with

value up to R1.5m

The Investment Governance Framework is guided by the

Delegation of Authority and the Charters of the respective

committees.

All committee members are required to declare specific

interests at meetings and general interests annually

Due diligence – minimum 3 professionals per transaction

7

Checks and Balances The authorization of transactions and the release of funds typically

pass several layers of decision-making, including by individuals and institutions both within and outside the NEF.

We conduct robust checks-and-balances involving the following entities that review all activities for compliance with corporate governance, conflicts of interest and internal control laws and policies :

internal risk

internal audit, the post-investment and legal teams

Finance

the board investment, audit and risk committees (each of which include experienced, independent professionals) and

external, highly regarded audit firms.

Since our inception, the NEF has received unqualified audit opinions from PwC and SizweNtsalubaGobodo.

8

NEF ANNUAL

REPORT 2013

9

Parliamentary Brief to the NEF

10

1. Present 2012/13 AR focusing on service delivery, financial

and non-financial performance. This should clearly link

spending and performance with targets and outcomes

explaining any deviations from what was planned. The

presentation should also include a response to the audited

outcomes.

2. Present on expenditure for 2013/14 as well as performance

information for the first half of 2013/14. Indicate any

challenges experienced in these first two quarters and their

potential impact on service delivery.

3. Present on requested adjustments for the 2013/14 financial

year.

4. Present well motivated forward funding requirements or

realignments for 2014/15 and the 2014/15 MTEF.

10

NEF has delivered on Government’s

promise to drive B-BBEE…

NEF has evolved steadily into a leading, distinctive and effective DFI

Approved over R5 billion into B-BBEE transactions Strategic Projects Fund has the potential to create 150,000-200,000 new jobs within 3 years

Financed and nurtured 391 black South African ventures (55% women-owned)

Enabled entrepreneurs to start their own businesses, to buy into and to expand established

firms, to build community, rural-based entities, and to develop infrastructure projects

Facilitated 87,000 black South Africans to become owners of MTN through NEF’s R1.3

billion Asonge Share Scheme

Enabled 200,000 black South Africans to become owners of Sasol through Sasol’s

R5.8 billion BEE Scheme

Developed a team of 168 experienced, mostly black South Africa investment and

business professionals; operate in all 9 provinces (offices in 8)

Well-managed: Built asset base from R171 million to almost R6 billion; ~55% cost-to-

income ratio

11

But just when our country

demands faster and deeper impact,

other DFIs have exited Despite the NEF’s diverse achievements since

operational inception in 2004, many black South

Africans remain locked out of the economic mainstream.

IDC, DBSA and PIC are no longer significant financiers

of B-BBEE.

NEF is now the only major DFI that is positioned to

finance aspirant black South African entrepreneurs.

Together with other developers, the NEF has built a

portfolio of manufacturing / industrial capacity which will

potentially add 1% to South Africa’s GDP, if fully

capitalised to the tune of R5,5 billion.

12

About the NEF

13

NEF Mandate…

14

Established by the National

Empowerment Fund Act No. 105

of 1998, the NEF is a driver and

a thought-leader in promoting and

facilitating black economic participation

through the provision of financial and

non-financial support to black empowered

businesses, as well as by promoting

a culture of savings and investment

among black people.

The only DFI exclusively mandated to grow B-BBEE

14

Key Strategic Objectives…

Promote and support business ventures pioneered and

run by black people;

Promote the understanding of equity ownership among

black people;

Provide black people with direct and indirect

opportunities to acquire share interests in State Owned

and private business enterprises;

Encourage and promote investments, savings and

meaningful economic participation among black people.

15

Broad Based Black Economic Empowerment

The Codes of Good Practice

16 16

The Strategic

Planning Framework…

NE

F A

ct:

Ob

jecti

ve

s

Th

e d

ti

Ob

jecti

ve

s

Government Priorities:

1) Acceleration of economic growth and

transformation, creating decent work and

sustainable livelihoods;

2) Infrastructure development to achieve social

and economic goals and rural development;

3) Skills and human resource development;

4) Build a developmental state and improve

public service.

Sectors

NEF

• Tourism; Biofuels; Construction;

Agro-processing; Manufacturing; Clothing

& Textiles; Transport; ICT & Media;

Mining services; Franchising

Industrial Policy Action Plan:

• Automotives, components, medium and

heavy commercial vehicles

• Clothing, Textiles, Leather & Footwear,

• Plastics, pharmaceuticals and chemicals

• Biofuels

• Agro-processing,

• Strengthening linkages between cultural

industries and tourism

• Metal Fabrication, Capital and Transport

• Equipment,

• Business process servicing

• Green industries

NEF Sectors in line with national industrial objectives

Organizational Structure …

Executive (member of Exco)

Senior manager

Manager

STRATEGY & PLANNING

SYSTEMS & IT

CHIEF FINANCIAL OFFICER

FINANCE

SUPPLY CHAIN MANAGEMENT

COMPLIANCE & RISK

INTERNAL AUDIT

SECRETARIAT

CHAIRMAN

BOARD OF TRUSTEES

AUDIT COMMITTEE

RISK MANAGEMENT COMMITTEE

HUMAN CAPITAL & REMUNERATION COMMITTEE

BOARD INVESTMENT COMMITTEE

CHIEF EXECUTIVE OFFICER CHIEF EXECUTIVE OFFICER

LEGAL SERVICES

ASSET MANAGEMENT

DIV EXEC SMEs and Rural Development

iMBEWU FUND

PRE-INVESTMENT BUSINESS SUPPORT

EXEC CORPORATE SERVICES

HUMAN RESOURCES

FACILITIES MANAGEMENT

MARKETING & COMMS POST-INVESTMENT BUSINESS SUPPORT RURAL & COMMUNITY DEV.

STRATEGIC PROJECTS

FUND

UMNOTHO FUND

DIV EXEC :Venture Capital and

Corporate Finance GENERAL COUNSEL

REGIONAL OFFICES

SOCIO-ECONOMIC DEVELOPMENT UNIT

SOCIAL AND ETHICS COMMITTEE

17

There are 167 permanent employees and 4 Trainees who have been

appointed in Human Resource, Marketing & Communications & in Information

Systems Technology.

A breakdown of the EE levels, race and gender is presented in the tables and charts below:

18

Level of Employee No. % Permanent Contract

1 Top Management 6 3.5% 6

2 Senior Management 26 15.2% 26

3 Middle Management 19 11.1% 19

4 Professional 80 46.8% 80

5 Clerical 40 23.4% 36 4

GRAND TOTAL 171 100% 167 3

NEF EE Report

White

7%

Colored

3%

Indian

7%

African

83%

Female

59%

Male

41%

NEF EE Report

Overview – HR Capital

18

19

• The NEF sees B-BBEE as a cross-cutting

strategic solution to the historical and systematic

exclusion of black people from the economic

mainstream.

• It is our assertion that black enterprises should

not be confined to the periphery of the economy.

• In response to market demand, the NEF supports

both SMEs and industrial / manufacturing capacity

(Emerging Entrepreneurs, Established

Entrepreneurs & Black Industrialists).

Are Black people good enough

only for small businesses?

20 20

SEDA to provide NFS to co-ops

Land Bank – Agri focused

Sefa – Overlap R250k to R5 million

Other DFI’s & banks as above

Sefa – Overlap R250k to R5 million

SETA’s

Department of Labour

As above

IDC – Higher value threshold

Sefa – Lower value threshold

DBSA – Infrastructure focused

Land Bank – Agri focused

Banks – Security focused

OTHER DFI’s & BANKS

Rural & Community Development Funding

- “Contribution Beneficiaries”

Start up and Expansion Capital establishes

“Beneficiary Entity”

Start up and Expansion Capital:

Procurement Contracts Funding

Indirect: All products via approval process

Indirect: All products via approval process

Acquisition Finance

Indirect: Capital Markets; Start up;

Expansion Capital

Acquisition Finance

Capital Markets Fund

Liquidity and Warehousing Fund

Strategic Projects Fund

Indirect: Start up; Expansion Capital

NEF FUNDING PRODUCT

Socio-Economic Dev.

Weighting 5%

Enterprise Development

Weighting 15%

Preferential Procurement

Weighting 20%

Skills Development

Weighting 15%

Employment Equity

Weighting 15%

Management Control

Weighting 10%

Ownership

Weighting 20%

CODE OF GOOD PRACTICE

NEF Positioning

as a B-BBEE Funder… “The NEF provides the funding solutions for the implementation of the B-BBEE Codes

of Good Practice.”

20

Fund Focus Threshold

1 iMbewu Fund

SME Fund providing

Entrepreneurship, Procurement &

Franchise Finance

R250 000 –

R10 million

2

Rural &

Community

Development

Fund

Supporting rural economic

development through New

Ventures, Acquisition, Expansion

& Greenfields Finance

R1 million –

R50 million

3 uMnotho Fund

Funding of New Ventures,

Acquisition, Project Finance,

Expansion, Capital Markets,

Liquidity & Warehousing

R2 million –

R75 million

4 Strategic Projects

Fund

Early-stage investment in

industrial / manufacturing

transactions

Up to R75 million

NEF Funds Across the Economic Spectrum

21

Not Empowering the Empowered

1. The NEF provides funding of between R250 000 and R75 million to

black entrepreneurs for start-up, expansion and equity acquisition

purposes in order to transform South Africa’s economy, where black

people control only 3,9%.

2. The NEF’s product range encompasses the following segments of

the target market: 2.1 Black individuals and groups with significant operational experience, an extensive

investment portfolio and accumulated capital (Tier 1).

2.2 Black individuals and groups with operational experience which could include having concluded a limited number of BEE transactions. This sector typically has limited accumulated capital with existing

investments still encumbered / “not in the money yet” (Tier 2).

2.3 Black individuals and groups with limited business or entrepreneurial

experience (Tier 3).

3. Over 60% of NEF approvals have gone to SMEs in support of rural and community development, enterprise development, preferential procurement, franchising and the transformation of all sectors and across the different levels of the South African economy.

23

Industrialisation & Economic Impact

23

Create new manufacturing and industrial capacity

Create new jobs as opposed replacement capital

finance

Invest in new fixed capital into economically

depressed areas or poverty nodes

Create an inclusive economy by increasing South

African participation

Increase RSA export-earning potential and reduce

import dependency

Increase co-investment and linkage with foreign

direct investment

24

SPF Sectors

RENEWABLE

ENERGY

MINERAL

BENEFICIATION

AGRO-

PROCESSING

BUSINESS

PROCESS

OUTSOURCING

INFRASTRUCTURE TOURISM

Biofuels

Biomass

Biogas

Solar

Wind

Hydro

Exploration

Mining

Beneficiation

Chemicals

Food Sector

Textiles

Manufacturing

Call Centers

Telecoms

Roads

Airports

Dam and Bridges

Sewer and Services

Stadiums

Sky Towers

NEF Equity Rights

Project Sector

Current

NEF Equity Total Invested Total Project Size

NEF Future

Equity Rights

RMI Mineral Beneficiation 30% 13 500 000 15 000 000 000 2 250 000 000

SA Metals Mineral Beneficiation 29% 40 000 000 1 950 000 000 282 750 000

Coking Coal Mineral Beneficiation 75% 3 000 000 847 000 000 207 515 000

Silica Mineral Beneficiation 49% 7 000 000 1 500 000 000 367 500 000

Coconut Water Agro-Processing 49% 5 000 000 50 000 000 12 250 000

Busa Hospitals Infrastructure 49% 110 000 000 1 600 000 000 392 000 000

Hluhluwe Wind Farm Renewable Energy 30% 62 700 000 1 240 000 000 -

Milk 4 Life Agro-Processing 49% 2 000 000 50 000 000 12 250 000

Maluti Trans Frontier Tourism Route Tourism 45% 3 000 000 350 000 000 85 750 000

Link Africa Infrastructure 30% 150 000 000 -

Radisson Blu Kruger resort Infrastructure 60% 10 000 000 260 700 000 110 000 000

Waste Plastics to energy Renewable Energy 20% 4 000 000 60 000 000 6 000 000

TFST Renewable Energy 8% 37 000 000 1 600 000 000 64 000 000

Biomass to Bioethanol Renewable Energy 49% 10 000 000 800 000 000 196 000 000

Waste Tyre recycling Renewable Energy 49% 8 000 000 50 000 000 12 250 000

Renu Renewable Energy 55% 36 000 000 - -

Karbochem Renewable Energy 40% 48 000 000 150 000 000 -

Tyre Manufacturing Research Manufacturing 60% 12 500 000 5 500 000 000 1 347 500 000

FIS Biofuels Renewable Energy 30% 10 000 000 600 000 000 90 000 000

Underground Property Ventures Infrastructure 50% 3 500 000 50 000 000 12 500 000

MiBT Manufacturing 20% 10 000 000 35 000 000 35 000 000

Paediatric Dental Facility Infrastructure 49% 600 000 100 000 000 24 500 000

Prepaid Fuel Budgeting Solutions Infrastructure 40% 1 000 000 - -

Richards Bay Wind Farm Renewable Energy 17% 69 500 000 1 700 000 000 -

Totals 656 300 000 33 492 700 000 5 507 765 000

25

Busamed (Pty) Ltd

(NEF Invested R135 million)

Sector Infrastructure

Competitive advantage Centres of excellence with national coverage

Strategic driver number 1 Increasing pressure on healthcare services, with public

hospitals not coping with demand for healthcare provision

Strategic driver number 2

Increasing access or affordability for quality healthcare and

supporting the proposed National Health Insurance

scheme

Strategic driver number 3 Medical technology advancement and lowering cost of

treatment

Project location

National (South Africa), with Longlake (Gauteng: 250-bed

hospital), Strand (Western Cape: 100-bed), Bloemfontein

and Harrismith (Free State: both 230-bed) coming on

stream in the next four years

Investment opportunity Net Asset Value R1.2 billion (NEF Invested R135 million)

New jobs 1 200 jobs (nursing, doctors and general staff)

26

SA Metals (Pty) Ltd


27

Sector Mineral beneficiation

Core business Production of pig iron from waste dumps generated from

historical mining activities, using the AusIron™

technology

Competitive advantage Environmental rehabilitation of waste dumps; increasing

industrial capacity in the country; increasing BEE

participation in mineral beneficiation; and local

manufacturing of steel within the country

Strategic driver number 1 Production of pig iron

Strategic driver number 2 Industrialisation

Strategic driver number 3 Environmental rehabilitation

Project location Two options are being investigated, one in Witbank

(Emalahleni) and the other in Rustenburg

Investment opportunity Net Asset Value (R1.9 billion) (NEF Invested R40

million)

New jobs 592 direct jobs

Thin Film Solar Technology

(Pty) Ltd (NEF Invested R5,3million)

28

Sector Renewable energy (solar)

Core business Manufacturing of CIGS-based thin film solar panels,

measured at equivalent annual installed power capacity

of 70 MWp

Competitive advantage Locally developed and proven CIGS technology

Strategic driver number 1 Technology efficiency greater than 14% and better long-

term value than silicon-based technologies

Strategic driver number 2 Technology of composite materials in copper, indium,

gallium and sulphur selenide cheaper than silicon-based

composites

Strategic driver number 3 South Africa’s drive to increase power generation from

cleaner energy sources

Project location Paarl, Western Cape

Investment opportunity Net Asset Value R1.1 billion (NEF Invested R5,3

million)

New jobs 550 jobs (150 direct jobs, 150 construction, 250 indirect)

Manhize Coking Coal


29


Core business Producing coking coal (carbon reductant) from

metallurgical coal

Competitive advantage This will be the first coking coal facility in the country

that will service the ferroalloy industry. This is a

competitive advantage against imports that are currently

being utilised.

Strategic driver number 1 Production of coking coal


Strategic driver number 3 Local manufacturing

Project location Northern Limpopo (North of Polokwane)

Investment opportunity Net Asset Value R1.4 billion (NEF Invested R6 million)


Finesse Energy (Pty) Ltd (R15 million)

30

Sector Petroleum

Core business The entity holds a fuel wholesale license from DME and

specialises in the supply of fuel

Competitive advantage 100% black ownership, with 85% youth-owned

Strategic driver number 1 This business empowers three black entrepreneurs

Strategic driver number 2 With the approval of its Environmental Impact

Assessment (EIA), the business plans to erect a diesel

depot in Zebediela

Project location Zebediela, Limpopo

Investment opportunity R15 million

New jobs Job creation: two jobs will be maintained

Not all procurement transactions are labour-intensive. Finesse is an

early-stage business which has the potential to expand across the

value-chain, and thereby to increase the number of jobs in the future.

31

Sector Engineering

Core business Refrigeration; mechanical; electrical services and

manufacturing; supply and fitting of pre-fabricated

chromadek panels that can be used as classrooms; cold

and freezer rooms

Competitive advantage RIC’s competitive edge over its major competitors is that it is

a 100% black- and 50% women-owned company that offers

a turnkey operation for mobile classroom units. All the steel

works and small parts are done in-house by the company’s

engineers whilst their competitors outsource this function

Strategic driver number 1 50% women-owned company in the engineering sector

Strategic driver number 2 All 88 staff members are black

Project location Cape Town harbour, Western Cape

Investment opportunity R4.2 million

New jobs None, but 88 jobs were maintained. In the absence of

NEF funding, the jobs would have been placed in

jeopardy as the owner would not have had the

resources to execute contracts at hand.

Rodger Ian Cater (RIC)Technical Services CC

(R4.2 million)

Performance Report as at

31 March 2013

32

33

“The Empowerment Dividend”

Broad Based Black Economic Empowerment Ownership, management control, employment equity etc.

Black Women Empowerment

Job Creation

Growth Sectors

Geographic Spread

Investment Return

The assessment of impact is not driven only by financial

returns but by measurement in terms of “The Empowerment

Dividend” made up as follows:

NEF’s Performance

and Investment Criteria…

Overview of Performance

The NEF has met or exceeded 74% of the targets

for year.

The NEF has increased funding activity, thereby:

o supporting the development of 135 black owned

businesses during the year, and

o committing to creating and maintaining over 15 000 jobs

which are projected by investees at funding approval

stage.

Areas for improvement include:

o encouraging a higher level of black female ownership of

the invested portfolio, and

o managing the level of impairments and resultant ROI.

34

NEF Invested Process

35

NEF Approvals & Disbursements

by Value

36 36

R5,05bn

R3,6 bn

0

1000

2000

3000

4000

5000

6000

Apr -01 -Mar 02

Apr-02 -Mar 03

Apr-03 -Mar - 04

Apr-04 -Mar -05

Apr-05 -Mar -06

Apr-06 -Mar -07

Apr-07 -Mar -08

Apr -08 -Mar-09:

Apr-09 -Mar-10:

Apr- 10 – Mar-11:

Apr-11 -Mar-12

Apr-12 -Mar-13

NEF approved & disbursed deals by value since inception to 31 March 2013

Value approved Disbursed facility value Draw down value

R3,15 bn Appointment of

Ms Mthethwa in July 2005.

NEF had approved 16 deals

worth R35 million, having

disbursed 10 deals worth

R25 million

37

NEF Approvals & Disbursements

by Number

519

417

0

100

200

300

400

500

600

Apr -01 -Mar 02

Apr-02 -Mar 03

Apr-03 -Mar - 04

Apr-04 -Mar -05

Apr-05 -Mar -06

Apr-06 -Mar -07

Apr-07 -Mar -08

Apr -08 -Mar-09:

Apr-09 -Mar-10:

Apr- 10 – Mar-11:

Apr-11 -Mar-12

Apr-12 -Mar-13

NEF approved and disbursed deals by number since inception to 31 March 2013

Approvals Disbursed facility

Appointment of

Ms Mthethwa in July 2005.

NEF had approved 16 deals

worth R35 million, having

disbursed 10 deals worth

R25 million

38

NEF Investment by sector and

percentage of total value

39

Geographic spread of investments

Performance Highlights –

31 March 2013

Outputs Highlights

Funding Approvals To date, approved 519 black-empowered businesses to the value of R5.05 billion. During

the financial year, approved 135 deals worth R1.33 billion (2012: 98 deals worth R1.16

billion. 2011: 62 deals worth R749 million).

Creating Jobs

From inception to date, the NEF has supported more than 40 000 jobs, including more

than 24 000 new jobs which it has created. The NEF supported 15 555 jobs for the

2012/13 financial year, of which 11 408 were new jobs created. Job support targets were

exceeded as a result transactions supporting a higher number of jobs.

Strategic Projects

Fund (SPF)

The NEF’s Strategic Projects Fund (SPF) was established with a mandate to increase the

participation of black people in early stage projects that are aligned to national

Government policy targeted sectors. A total of 28 projects have been approved: 1 has

been written off, 3 have been cancelled and 24 are active, together amounting to a

pipeline in excess of R33 billion, with an employment-creation potential of over 100 000

new jobs over the next three years. SPF projects have the potential to attract meaningful

foreign direct investment into South Africa

Fund a Woman,

Fund a Nation

From inception to date, 21% of the NEF’s funded portfolio has comprised businesses that

are owned and managed by black women.

Socio-Economic

Development

Mandated to facilitate proper establishment of Workers’ Trusts, Community Trusts and

Co-operatives.

40


31 March 2013

Outputs Highlights

National Footprint The NEF has opened seven regional offices in order to ensure a national

footprint. These are in Eastern Cape, KwaZulu-Natal, Mpumalanga,

Limpopo, Free State, the Western Cape, and the North West.

Investor Education / NEF

Imbizo Campaign

To launch the Investor Education 2 Campaign in 2013. the NEF has

previously visited all nine provinces, reaching more than 17 000 people who

attended 74 seminars (average 8 towns, villages and cities per province).

They were educated in how to save and invest, personal financial discipline,

shares, dividends, bonds and the property and money markets.

Enterprise Development

Fund

An MOU with UK Trade and Investment where a partnership is being

developed to target UK-owned subsidiaries in South Africa to develop, new

black-owned enterprises that are able to become new South African

suppliers in the value chains of these multinationals. Other participants are

Bakwena Ba Mokgopa, Western Cape Dept. of Economic Development and

Tourism, Evraz Highveld Steel, the Laser Group, BP, Chrysler and

Transalloys.

41


31 March 2013

Outputs Highlights

Mentorship Support Now 6 years old, Post Investment department provided mentorship to the

tune of R3.3 million to investees where the investees needed to improve on

their general management or technical skills during 2012/13:

• Tabled 181 formal investee progress reports

• Conducted 345 site visits over this period

• Facilitated 10 exits totalling R71.1 million on the investment portfolio

Entrepreneurship

Development

127 entrepreneurs were referred by the NEF for incubator training.

Business skills training was also provided through the NEF’s Pre-

Investment department for 1 460 potential entrepreneurs, who attended a

total of 46 training sessions at different centres across the country.

Financial Sustainability In parallel with meeting the mandated performance targets, the NEF has

maintained financial discipline and prudence with an unqualified audit

opinion on its financial reporting, for eight successive years. Financial

sustainability has been upheld, with the NEF being able to report an overall

annual portfolio return of 9% before impairment provisioning and

write-offs.

42

Women Empowerment

43

Key Performance Area

• Contribute to the participation of black women in the economy

Annual Targets/Outputs to be achieved by 31 March 2013

• Maximise women’s participation in transactions to at least 40%.

Comments

•NEF continues to vigorously target women in its campaigns and 21% of

the NEF’s funded portfolio has comprised businesses that are owned and

managed by black women.

Fund a Woman, Fund a Nation

Investors 86 000

Amount R1,3 billion

Women by number 49%

Women by value 43%

31 March 2009 31 March 2010 31 March 2011 31 March 2012 31 March 2013

31% 41% 47% 21,5% 21.1%

Job-Creation

31 March 2011

25 500 jobs

31 March 2012

29 000 jobs

31 March 2013

44 000 jobs

100 000 jobs

Over the next three years

Industrial projects valued at R33 billion

Job-Creation Projections

44

Reasons for increased pipeline

Performance

• High

Performing

Organisation

• Improved

internal

processes

• Industry

leader

Industrialise

• IDC has exited

funding for black

SMEs to grow

its focus on

industrialisation

• Black

entrepreneurs

have migrated

to the NEF

Regional Offices

• 7 NEF Regional

Offices

countrywide

• Direct local

focus

• Better

accessibility

• Deal-flow up by

30%

Empower

• Increased Brand

Awareness

• Products and

services better

understood

• Growing

reputation

45

Key Challenges

and

Way Forward

46

Key Challenges

Re-capitalisation risk:

The risk that the NEF will not be able to follow

through on equity options secured in early

stage projects,

The NEF not having sufficient capital to

continue its Strategic initiative.

Sustainability risk: The risk that the NEF

will not be able to sustain itself over the

strategic planning period based on current

capital and internally generated cash

flows.

47

Way Forward

As is best practice within both the public and

private sector, the cash reserves should be used

as the initial consideration when determining the

level of commitments that can be incurred.

In evaluating the extent to which the NEF can incur

commitments it is advised that a detailed analysis

of cash flow projections in the near to short term be

performed against projected approvals as per deal

pipeline.

Thereafter the legal applicability of paragraph 66 of

the PFMA should be considered in so far as the

NEF as a schedule 3A entity is permitted to incur

commitments that bind the National Revenue

Fund.

48

Way Forward (Continued)

The previous points should be considered within

the context of the following matters that are

currently in progress:

The possibility of the NEF being capitalised

further via the MTEF process.

The possibility of IDC funding worth R1 billion

49

NEF Products & Services

50

Market Failures confronting black business

The NEF seeks to address the following market failures:

Lack of access to finance

Lack of access to markets

Lack of specific industry-knowledge and/or management

experience

Limited or no equity contribution

SMEs have low bargaining power with suppliers and

customers (they are price-takers)

SMEs compete with well-established businesses

They are often undercapitalized and have low asset base

SMEs are characterised by lack of accurate and reliable

information, and lack of business-planning skills

Lack of management depth – small and multifunctional,

and often lack a range of business-management skills

51

91% of formal business

entities in South Africa are

SMEs

SMEs contribute between

52% and 57% to GDP

61% contribution to

employment by SMEs

Importance of SMEs

52

NEF Funding Criteria

Each application is assessed in terms of the following criteria:

minimum percentage of black ownership or interest,

black women empowerment,

black managerial and operational involvement,

commercial viability of the business,

job creation,

specific product criteria,

geographic location of the business (rural/urban/disadvantaged areas),

community involvement,

compliance with all the relevant laws and regulations,

return on investment, and

the possibility of co-funding with another public or private sector

institution.

53

Product / Fund Description Funding amounts

Entrepreneurship

Finance For starting a new business R250 000 – R10 million

Procurement Finance For tenders and contracts R250 000 – R10 million

Franchise Finance For pre-approved franchise licenses R250 000 – R10 million

Acquisition Finance For black investors acquiring a stake in medium to large

companies R2 million – R75 million

Expansion Capital For growing an existing business R250 000 – R75 million

*New Ventures Finance Participation in green-field projects R5 million – R75 million

Capital Markets Listing on the JSE or its junior Altx markets R2 million – R75 million

Liquidity and

Warehousing

The NEF has Black Facilitator status, which can help black

shareholders and companies wishing to sell a stake while

keeping the shareholding black

R2 million – R75 million

*Rural and Community

Development Fund

for agri-processing, tourism, mining & beneficiation,

manufacturing etc R1 million – R50 million

*Strategic Projects Fund

Venture-capital fund investing in early-stage projects for the

purpose of developing strategic industrial capacity in

poverty nodes, in renewable energy, business process

outsourcing, tourism, manufacturing, mining and mineral

beneficiation etc.

R1 million – R75 million

NEF Funding Products in detail On average, the NEF’s business loans are repayable over 4 to 7 years, and up to

10 years where marked with an asterisk (*) below:

54

Business Planning?

www.nefbusinessplanner.co.za

Simple to use

Free to the public

Step by step question & answer

process

Helps with financial projections

Formats into a Word document

Confidential (password-protected)

Download and print

Submit to any funder

55

Mentorship

Globally, 30% of start-ups fail in the first 2 years,

Less than 50% survive beyond 4 years,

Mentors deployed across the country to help

businesses,

Expert advice on strategy and operations,

Improve the chances of the business

succeeding,

Provided for free to NEF investees.

56

On-going mentorship support across the country

57

Key Insights Gained …

and Lessons Learnt

Fronting in the forms of contract management agencies

Effective equity interest in conglomerate group structures equally weighted to direct equity interests

Finance leveraging experiences with banks who have an aversion for equity/ quasi-equity without an understanding of cash flow financing

SME challenges: equity contributions; management skills; access to new markets; business planning

Ongoing passive investment applications without direct operational involvement

The need for close post investment monitoring

High quality management information reporting systems

The role of the NEF as an advisor

The growing importance of the Tier 4 target market (white business owners and managers)

57

Enterprise Development Fund

Broad – Based Black Economic Empowerment Codes of Good Practice –

Section 9(1) Series 600 provides that companies make monetary or non

monetary contributions either recoverable or non recoverable for development,

sustainability and financial and operational independence of beneficiaries.

58

Why Enterprise Development?

Limited management time to spend on non-core business

Insufficient knowledge of BEE ED requirements

Insufficient resources and skills to support BEE start-ups, which require significant skills injection to achieve economic viability

Poor economies of scale achieved based on number of initiatives

Lack of time and resources to identify sustainable Beneficiaries;

Lack of a business model to maximise recognition of contribution;

Lack of a process to monitor progress on projects and to introduce corrective measures, where necessary;

Delaying implementation until the right partner comes along; and

Reservation of spending lump sum due to fear that money will be wasted or misused.

59

Examples of ED Fund Successes

Bakwena Ba Makgopa

International Council of

Swedish Industry (NIR)

60

Annual Financial

Statements

For the financial year ending 31 March 2013

61

Headline Financial Results:

For the year ending 31 March 2013

Net asset value R5.4 billion (2012:

R5.3 billion; 2011: R5.3 billion)

Cash balances R1.6 billion (2012:

R2.2 billion; 2011: R2.6 billion)

Surplus for the year R114 million

(2012:-R6 million; 2011:

R75 million)

Accumulated surplus R 2.9 billion

(2012: R1.5 billion; 2011:

R1.5 billion)

62

0

1

2

3

4

5

6

2009 2010 2011 2012 2013

R b

illio

ns

Financial year

NAV Cash Acc Surp

Headline Financial Results

for the year ending 31 March 2013: Contribution to Net Asset Value

63

0

1 000

2 000

3 000

4 000

5 000

6 000

2008 2009 2010 2011 2012 2013

R m

illi

on

s

Financial year

Accum. Surplus

Fair value NDR

Trust Capital

2013 2012 2011

R m's R m's R m's

Trust Capital 2 468 2 468 2 468

Fair value NDR - 1 281 1 297

Accum. Surplus 2 904 1 509 1 515

- Operations (194) (187) (153)

- Financing 57 230 181

- Equity 251 (49) 47

- NDR transfer to

Surplus 1 281 - -

- Surplus b/f 1 509 1 515 1 440

NAV 5 372 5 258 5 280

Headline Financial Results

for the year ending 31 March 2013 Loan/ Preference Share Impairments

Loan draw downs: R600 million (2012: R429 million; 2011: R194 million)

Preference share draw downs: R 6 million ( 2012: R15 million; 2011: R50 million)

Impairment provision increase: R193 million (2012: R80 million; 2011: R103 million)

Write-offs: R 4 million – 0.2% (2012: R119 million – 8%; 2011: R94 million – 6.8%)

0%

5%

10%

15%

20%

25%

30%

0

500

1000

1500

2000

2500

2008 2009 2010 2011 2012 2013

R m

illi

on

s

Financial year

Pref Shares Loans

Impairments Impairments+write-offs %

64

Financial Results

Against Budget

Actuals Budget

For the year –

March 2013

For the year –

March 2013

Operations R’000s R,000s

Income – Operating/Investments 370 566 388,361

Operating Expenses (204,164) (219,811)

Other projects (14,382) (14,300)

Investment Impairments (289,837) (109,980)

Loss on Disposal of Investments - -

Fair Value Adjustments 251,394

Net (Deficit)/Surplus 113,577 44,270

Headcount – staff numbers 168 195

Facility Drawdown’s 946,500 920,000

65

Capitalising

the NEF

66

NEF Capitalisation

1. R2,4 billion in 2005.

2. Self-sustained through dividends, interest on

investments and the NEF Asonge Share Scheme.

3. Many historic achievements.

4. Patient-capital lender.

5. Consistently secured an unqualified external audit

opinion.

6. Overwhelming demand for financial support from

black entrepreneurs.

67

Temporary Funding Moratorium

Temporary suspension of new approvals.

R5,05 billion approved for 519 enterprises.

R3,6 billion disbursed to 417 investees.

R1,45 billion to be disbursed.

NEF Investment Associates to provide

supplementary mentorship support.

Commercialise strategic industrial projects

Moratorium to be lifted as soon as recapitalisation

is concluded.

Ideally the NEF requires R2 billion per annum to

fund the growing volumes of black entrepreneurs.

68

69

Capital Raising Initiatives:

1. Capital raising via MTEF

application with the dti/NT

2. Re-classification from

Schedule 3A to Schedule 2

3. Loan Funding application

with the IDC

4. ED Funding initiatives.

Key Messages of this presentation

70

1. Together with other developers, the NEF has built a portfolio of manufacturing

and industrial capacity in strategic economic sectors, which will potentially add

1% to South Africa’s GDP, if fully capitalised to the tune of R5,5 billion.

2. Over the next three years, South Africa could witness history in the making

through the real emergence of brand new black industrialists, supported by the

NEF.

3. These black-owned companies will lead to the creation of more than 100 000

decent jobs, and real investment in poverty nodes.

4. These black-owned companies will drive beneficiation, increase South Africa’s

export-earning potential and reduce import dependency.

5. 10 years after the Codes, this is the critical momentum which B-BBEE now

requires, in order to drive inclusive growth.

6. We urge the Portfolio Committee to proactively support the recapitalisation of

the NEF as follows:

Per Annum over 5 years Black Industrialists

R2 billion for 200 black SMEs R5,5 billion grows to R33 billion value

NEF Equity Rights

Project Sector

Current

NEF Equity Total Invested Total Project Size

NEF Future

Equity Rights

RMI Mineral Beneficiation 30% 13 500 000 15 000 000 000 2 250 000 000

SA Metals Mineral Beneficiation 29% 40 000 000 1 950 000 000 282 750 000

Coking Coal Mineral Beneficiation 75% 3 000 000 847 000 000 207 515 000

Silica Mineral Beneficiation 49% 7 000 000 1 500 000 000 367 500 000

Coconut Water Agro-Processing 49% 5 000 000 50 000 000 12 250 000

Busa Hospitals Infrastructure 49% 110 000 000 1 600 000 000 392 000 000

Hluhluwe Wind Farm Renewable Energy 30% 62 700 000 1 240 000 000 -

Milk 4 Life Agro-Processing 49% 2 000 000 50 000 000 12 250 000

Maluti Trans Frontier Tourism Route Tourism 45% 3 000 000 350 000 000 85 750 000

Link Africa Infrastructure 30% 150 000 000 -

Radisson Blu Kruger resort Infrastructure 60% 10 000 000 260 700 000 110 000 000

Waste Plastics to energy Renewable Energy 20% 4 000 000 60 000 000 6 000 000

TFST Renewable Energy 8% 37 000 000 1 600 000 000 64 000 000

Biomass to Bioethanol Renewable Energy 49% 10 000 000 800 000 000 196 000 000

Waste Tyre recycling Renewable Energy 49% 8 000 000 50 000 000 12 250 000

Renu Renewable Energy 55% 36 000 000 - -

Karbochem Renewable Energy 40% 48 000 000 150 000 000 -

Tyre Manufacturing Research Manufacturing 60% 12 500 000 5 500 000 000 1 347 500 000

FIS Biofuels Renewable Energy 30% 10 000 000 600 000 000 90 000 000

Underground Property Ventures Infrastructure 50% 3 500 000 50 000 000 12 500 000

MiBT Manufacturing 20% 10 000 000 35 000 000 35 000 000

Paediatric Dental Facility Infrastructure 49% 600 000 100 000 000 24 500 000

Prepaid Fuel Budgeting Solutions Infrastructure 40% 1 000 000 - -

Richards Bay Wind Farm Renewable Energy 17% 69 500 000 1 700 000 000 -

Totals 656 300 000 33 492 700 000 5 507 765 000

71

72

Thank you Contact Details

www.nefcorp.co.za

WHERE TELEPHONE

1 Head Office,

Johannesburg

011 305 8000 or 0861843 633 /

0861 THE NEF

2 Eastern Cape 0861 633 327 / 0861 NEF ECP

3 Free State 0861 633 377 / 0861 NEF FSP

4 KwaZulu Natal 0861 633 596 / 0861 NEF KZN

5 Limpopo 0861 633 546 / 0861 NEF LIM

6 Mpumalanga 0861 633 678 / 0861 NEF MPU

7 Western Cape 0861 633 927 / 0861 NEF WCP

8 North West 0861 633 697 / 0861 NEF NWP

9 Northern Cape 0861 633 627 / 0861 NEF NCP

Investee Stories

73

Khwezi Lakusasa

(R1.4 million)

Sector Telecommunications

Core business Khwezi Lakusasa‘s services include:

• remote site power provision pending utility connection

• refuelling and installation of generators at the base stations

• full remote monitoring of clients’ generators

• automatic refuelling of clients’ generators, including 4x4 delivery vehicles

Competitive

advantage

Khwezi Lakusasa’s location in Nelspruit will enable it to provide prompt, 24-hour

service to Vodacom base stations in the area. Other service providers are not based

in Nelspruit, affecting their response times

Strategic driver 1 This business empowers women and is 100% owned by women

The company has signed an MOU with Vodacom to provide them with generators for

base stations during power outages

Strategic driver 2 The region Khwezi Lakusasa is intending to buy 10 new mobile units which will be

deployed to the sub-regions. The decision on how many will be deployed, and

where, is driven by the power problems in the various locations

Project location The Generators are stationed at Malelane, Mpumalanga

Investment

opportunity

There are numerous base stations in the area. In response to increasing demand for

the services they render to Vodacom, the entrepreneurs want to expand by

purchasing additional mobile generators to be used in current work assignments and

other expected projects

New jobs Seven new jobs, three current jobs to be maintained

74

Conlic Electrical cc.

(R5.9 million)

Sector Energy

Core business The supply and installation of electricity meters for

residential use

Competitive advantage 70% woman ownership and operational involvement

Strategic driver number

1

This business empowers women and is 70% owned by

women

Project location Gauteng

Investment opportunity R5.9 million

New jobs Six new jobs, two current jobs to be maintained

75

Molam’s Farming

(R13.2 million)

Sector Agro-processing

Core business Grain, soybeans and groundnut production

Competitive advantage The company has already secured contracts with key

buyers in the industry

Strategic driver number 1 The deal supports food security and reduces reliance

on imported grain

Strategic driver number 2 This project will help resuscitate the restituted land and

stimulate the immediate economy

Project location Deelpan, North West

Investment opportunity This a first-time entrepreneur who owns a business

that has a R5 million-per-annum revenue potential

New jobs 40

Present visual elements There is a warehousing structure, plus tractors and

equipment. There would be unharvested maize and

sunflower

76

Mohale Agricultural

Co-operative (R13.7 million)

Sector Agro-processing

Core business Vegetable farming and a broiler production unit

Competitive advantage The co-operative has 497 ha of arable land with a

high yield and allows for growth

Strategic driver number 1 The company is run efficiently and productively, with

adequate output capacity

Project location Soekmekaar, Limpopo

Investment opportunity The co-operative is making a meaningful contribution

to the South African poultry sector value chain

New jobs Growth prospects of the land will yield 15 additional

jobs while saving the current 30 permanent jobs

Present visual elements Chicken broilers, unharvested product (cabbages

planted on 30 ha of land). There is also an opportunity

to see informal-market buyers purchasing products

from the investees. Additionally, the owners of the

farm, who are the workers, can be seen harvesting the

product themselves: co-op members in action

77

Qumbu Shopping Centre

(R39 million)

Sector Retail construction

Core business Shopping centre

Competitive advantage The first shopping centre of this scale in the area

Strategic driver number

1

100% of the property already leased, with 96% being

national tenants and 4% local independents

Project location Qumbu, Eastern Cape

Investment opportunity R34 million is to be used for the establishment of a new

mall

New jobs 99 permanent jobs, 151 during construction phase

Present visual elements Newly-built physical structure

78

Rhino Lodge

(R23.7 million)

Sector Tourism

Core business Accommodation and game drives

Competitive advantage The establishment is supported by Ezemvelo KwaZulu-

Natal Wildlife and the KwaZulu-Natal Tourism Authority.

The region is experiencing general growth in the tourism

industry

Strategic driver number 1 The facility will support 34 permanent jobs, with a further

60 during construction

Project location Mpembeni, Northern KwaZulu-Natal

Investment opportunity R20,5 million to be used for the construction of the four

star lodge, with a spa treatment facility

New jobs The establishment supports 34 permanent jobs with

another 60 in the construction phase

Present visual elements Conversion of vacant land into a physical structure

79

Sticks & Licks

(R15 million)

Sector Distribution and Logistics

Core business The entity holds exclusive rights to distribute Ola Ice

Cream throughout Durban North area

Competitive advantage 100% black and youth ownership

Project location KZN Durban

80

Ndalo Luxury Ventures (Pty) Ltd

(R34.1 million)

Sector Retail and Clothing

Core business Clothing store

Competitive advantage Luminance will establish of a local luxury brand of

international appeal

Strategic driver number 1 Increasing black participation in the white-dominated

retail industry

81

Petrocom (Pty) Ltd

(R15million)

Sector Fuel and logistics

Competitive advantage Petrocom (Pty) Ltd’s innovative product offering to the

taxi industry is the designing, constructing fuel depots,

the management of such depots and the supply of fuel to

the associations at wholesale price is the first of its kind

in South Africa. There is no company that offers such

bundle of services to the industry

Project location The depots will be located in the Pretoria CBD and in the

Soshanguve townships

Investment opportunity Petrocom (Pty) Ltd has contracted with the relevant

associations for the purposes of providing such services

which guarantees revenue generation over such

contracted period

New jobs 82 new jobs

82

Reshebile Aviation and

Protection Services (Pty) Ltd (R10 million)

Sector Airport security

Competitive advantage Reshebile Aviation and Protection Services (Pty) has

been in the industry for the past 10 years and is the only

100% black owned aviation security company in South

Africa. It is affiliated to the main regulatory bodies being

IATA, SACCA, NKP, etc

Project location The operations are located through the major South

African airports

Investment opportunity The security services that are provided are on the back of

contracts


83

POWER 98,7FM

(36.2 million)

Sector Media and Entertainment

Core business Talk Radio

Competitive advantage Power 98,7Fm listeners have a genuine interest in the socio-

economic developments of the province and country. The

station is relevant to its listeners’ experiences, informed by their

history and inspired by a South Africa we all hope for.

The majority of South Africans feel that the local discourse,

media, public debate, academia, economy and even politics

are still dominated by an Eurocentric paradigm or perspective.

POWER 98.7 offers the listener an alternative platform

Project location Gauteng

Investment opportunity R36,2 million


Strategic drive number 2 Creating 64 new black permanent jobs

Project location Hyde Park in Gauteng

Investment opportunity R40 million

New jobs 50

84

85

Investee Stories

Some of the Franchises Funded to date

Appendices

86

iMbewu Fund

Small Medium Enterprises

87

iMbewu’s mandate and purpose

NEF mandate (translated):

To increase SA’s SME capacity

In order to secure:

Economic impact

Social impact

National growth and development

By financing and supporting BEE SMEs

Above R250k

Typically up to R10M but could be as high as R50M.

What this requires from us:

Ensure Broad-based empowerment

Ensure required impact

Be sustainable

We will therefore become global thought leaders in:

Managing SME risk in developing economies

Designing value propositions for SMEs in developing economies

Sustainability in serving SMEs in developing economies

88

iMbewu Trend Analysis on

Approvals & Disbursements

Approvals have shown an

increasing trend since

2008

CAGR (compounded

annual growth rate) is

35% in terms of value

approved

CAGR is 40% in terms of

volumes approved

Commitments have also

shown steady growth

since 2008


value committed


volumes committed

89

Rural & Community

Development Fund (RCDF)

90

Rural and Community

Development Fund

NEF mandate (translated):

1. Investing in the upliftment and

empowerment of South Africa’s

black rural and community

groups.

2. To secure the participation of

rural black South Africans in

viable community owned

enterprises.

3. Funding threshold ranges from

R1 million to R50 million.

What this requires from us:

1. Unlock the full entrepreneurial capability

& potential of black people in rural

economy.

2. Facilitate structural changes in rural

economic activities & inclusive rural

development activities

3. Increase the extent of participation in

rural enterprises-communities, workers

& co-ops

4. Provide project funding & encourage

Broad Based Black participation in

support of communities

5. Assist with skills development and

social planning

6. Make in roads into the poverty nodes or

outlying provinces

91

RCDF Portfolio disbursement as at 31 March 2013

The graphs below depict an overview of the disbursement trend over the

5 year period as well as approvals VS disbursement sin volumes.

2

3

5 5

4

2

4

8

7

9

(5)

(3)

(1)

1

3

5

7

9

11

Year 1 Year 2 Year 3 Year 4 Year 5

31-Mar-09 31-Mar-10 31-Mar-11 31-Mar-12 31-Mar-13

Disbursed v Approval (Vol)

Disbursed Volume

Approved Volume

(10 000)

10 000

30 000

50 000

70 000

90 000

110 000

Year 1 Year 2 Year 3 Year 4 Year 5

31-Mar-09 31-Mar-10 31-Mar-11 31-Mar-12 31-Mar-13

26 720

90 614

26 534

49 371

129 453

Disbursed Funds - Values (R'm)

92

uMnotho Fund

Access to BEE Capital

93

uMnotho’s Mandate and Purpose

NEF mandate (translated): To provide access to Acquisition

Finance, New Ventures Finance,

Expansion Finance, Capital Markets

and Liquidity and Warehousing.

Overcome market failures

experienced by black enterprises

Provide funding ranging from

R2 million to R75 million to black

entrepreneurs

What this requires from us: Provide capital to black-owned and-

managed enterprises,

Provide funding to black

entrepreneurs who are buying equity

shares in established white-owned

enterprises,

Facilitate access to black businesses

that are or wish

to be listed on the JSE.

Design products that overcome

obstacles to access funding in the

property sector.

Ensure portfolio sustainability

94

uMnotho Fund Pipeline

Deals in due diligence (of R640m) include a total of R261m (7 transactions) that are in the process of

approval

Included in deals brought forward from last year (R69.8m) are partially disbursed deals.

The total amount of R1,253 billion include the following categories:

Approved transactions that have not been disbursed (R72.387m); and

uMnotho Fund’s Deal Activity Report - as at 31 May 2013

uMnotho's Deal Category

Value

(R'000) Volume

Deals approved in previous financial year 69 847 14

(closing balance as at 31

March 2013)

Add: Approved in current financial year

(YTD) 28 500 2

(Including disbursed

deals)

Less: facilities drawndown till YTD * (25 960) 5

Net approved to disburse 72 387 9

Add: Deal in due diligence 640 000 20

Total potential disbursements 712 387 29

95

96

Strategic Projects Fund:

Early-Stage Projects

SPF Mandate

97

Strategic Projects Fund (SPF) A unit of the NEF established with a mandate to

increase the participation of black people in

early-stage projects

Aligned to national Government policy.

Seeks competitive opportunity for the South

African economy and the inclusion of black

participation in opportunities at the outset of

projects, as opposed to doing so during equity

closure

SPF Portfolio

98

Busamed (Pty) Ltd


Sector Infrastructure

Competitive advantage Centres of excellence with national coverage

Strategic drive number 1 Increasing pressure on healthcare services, with public

hospitals not coping with demand for healthcare provision

Strategic driver number 2

Increasing access or affordability for quality healthcare

and supporting the proposed National Health Insurance

scheme

Strategic driver number 3 Medical technology advancement and lowering cost of

treatment

Project location

National (South Africa), with Longlake (Gauteng: 250-bed

hospital), Strand (Western Cape: 100-bed), Bloemfontein

and Harrismith (Free State: both 230-bed) coming on

stream in the next four years

Investment opportunity Net Asset Value R1.2 billion (NEF Invested R135million)

New jobs 1 200 jobs (nursing, doctors and general staff)

99

SA Metals (Pty) Ltd


100


Core business Production of pig iron from waste dumps generated from

historical mining activities, using the AusIron™

technology

Competitive advantage Environmental rehabilitation of waste dumps; increasing

industrial capacity in the country; increasing BEE

participation in mineral beneficiation; and local

manufacturing of steel within the country

Strategic driver number 1 Production of pig iron


Strategic driver number 3 Environmental rehabilitation

Project location Two options are being investigated, one in Witbank

(Emalahleni) and the other in Rustenburg

Investment opportunity Net Asset Value (R1.9 billion) (NEF Invested R40

million)


Performance Results

Output Performance

Measure/ Indicator

Actual

Achievement

2011/12 Planned Target

2012/13

Actual

achievement for

2012/13

Deviation from planned

target to Actual

Achievement for 2012/13

Provide finance

to black

empowered

business by

investing in the

form of loans,

quasi-equity and

equity finance

through funds

and funding

products

targeting black

rural enterprise,

SMEs, corporate

finance, venture

capital and

enterprise

development

contributions

1.1. Number and value

of transaction

facilities disbursed

by UMnotho Fund

Disbursed 15

transaction facilities

worth R253.6 million

Disburse 18

transactions of

facilities worth

R450 million

18 worth

R464.4 million

R14.1 million above target by

value.

The average level of funding

applied for per deal was slightly

higher than projected.


of transaction

facilities disbursed

by Strategic

Projects Fund

Disbursed 12


worth R202.6 million

Disburse 10

transactions of

facilities worth

R200m

7 deals worth

R145.2 million

Below target by 3 deals worth

R54.8 million.

Given the nature of transactions

funded by SPF and the need to

secure additional capital, a

decision was taken to slow down

disbursement activity by SPF.


of transaction

facilities disbursed by

Imbewu Fund

Disbursed 40


worth 104.9 million

Disburse 67

transactions of

facilities worth

R140 million

54 worth

R207.2million

Value of transactions above

target by R67.2 million. Number

of transactions lower than target.


of transaction

facilities disbursed by

Rural & Community

Development Fund

Disbursed 6


worth R59.1 million

Disburse 9

transactions of

facilities worth

R130 million

8 deals worth

R129.7million

Target has been achieved.

Strategic Objective: Provide finance to business ventures established

and managed by black people

101

Performance Results

Output

Performance

Measure/ Indicator

Actual

Achievement

2011/12

Planned Target

2012/13

Actual

achievement for

2012/13


target to Actual


Provide finance to

black empowered

business by

investing in the

form of loans,

quasi-equity and

equity finance

through funds and

funding products

targeting black

rural enterprise,

SMEs, corporate

finance, venture

capital and

enterprise

development

contributions

TOTAL NUMBER of new

disbursement facilities

73 disbursement

facilities

104 87 disbursement

facilities

Disbursed 17 fewer

transactions than planned.

TOTAL VALUE of new

disbursement facilities

R620.1 million R920 million

Total for 2012-13:

R946.5 million

Disbursed facilities total R26.5

million more than target.

1.5. Total Number of facility

drawdowns by the

portfolio

72 draw downs 62 draw downs 128 draw downs from

84 disbursement

facilities

66 more draw downs than

planned.

1.6. Total Value of facility

drawdowns by the NEF

R562 million R 552 million R628.9 million R76.9 million above target.

1.7. Number of new

Enterprise

Development Fund

contributions secured.

Board approval. Launch

of fund. 26 corporates

engaged. Secured 1

contributor plus 2 are in

the process of signing

up.

Secure at least 5

new contributors

6 Contributors secured

with approximately

R18 million received

Additional contributor secured.

Strategic Objective: Provide finance to business ventures

established and managed by black people

102

Performance Results

Strategic Objective: Invest in black empowered business that have high

employment creating opportunities.

Output

Performance

Measure/ Indicator

Actual

Achievement

2011/12

Planned Target

2012/13

Actual

achievement for

2012/13

Deviation from

planned target to

Actual Achievement

for 2012/13

Source investment

opportunities for the

Funding Programmes

that focus on the

creation of new

employment

opportunities.

2.1. Number of jobs

supported and

expected to be

created

(Based on projected

stats)

3 124 jobs created and

supported on approved

transactions

(2367 new jobs and

757 existing jobs)

Support at least

11 000 new and/or

existing jobs

(based on a job

creation ratio of

R83 200 per job)

Funding approvals

are projected to

supported 15 555

jobs (11 408 new

and 4 147 existing)

4 555 above target.

103

Performance Results

Strategic Objective: Black economic empowerment is advanced

through commercially sustainable enterprise

Output Performance Measure/ Indicator

Actual Achievement 2011/12

Planned Target 2012/13

Actual achievement for 2012/13

Deviation from planned target to Actual Achievement for 2012/13

The provision of

non-financial

support and

training for black-

owned businesses

and entrepreneurs

3.1. Value of mentorship

interventions

R3 million R2.8 million R3.3 million R500 000 more worth of

mentorship provided.

3.2.Number of submitted and

approved site visit reports,

based on site visits

supporting the transfer of

skills/ growth of

businesses

188 reports 156 reports 181 reports.

25 additional reports

completed.

3.3. Percentage of new deals

referred to the funds on

which the entrepreneurial

assessment tool has been

applied.

New project Apply tool on 100%

of deals referred to

the funds

26 assessments

concluded which is

53% of the deals

referred to the funds

47% below target

3.4. Number of Business

Today Training sessions

provided.

New project 18 training sessions

per year.

46 training sessions

provided in all 9

provinces

28 additional training

sessions provided

3.5. Number of entrepreneurs

referred for business

incubation.

New project Refer 15 screened

applications for

incubation per

quarter.

Total of 127

entrepreneurs

referred to incubation

partners.

67 additional

entrepreneurs referred for

business incubation.

104

Performance Results

Strategic Objective: Facilitate investment across all provinces

in South Africa

Output

Performance

Measure/ Indicator

Actual

Achievement

2011/12

Planned Target

2012/13

Actual achievement for

2012/13

Deviation from

planned target to

Actual Achievement

for 2012/13

Increase share of

portfolio in under-

represented

provinces.

4.1. Number of co-

location offices

established

4 new offices

secured (Eastern

Cape, Limpopo,

Mpumalanga, Free

State. New leases

concluded in KZN,

Western Cape)

2 co-location offices

established

North West office launched

Only 1 out of the 2

planned offices launched,

due to recapitalisation

considerations.

4.2. Total increase in

percentage by value

of portfolio invested in

EC, NC, WC, KZ, NW,

Mpumalanga, FS and

Limpopo

Investment by value

in Gauteng reduced

by 6% (from 57% in

2010/11 to 51% as

at 31 March 2012)

Increase value of the

portfolio invested in

EC, NC, WC, KZ,

NW, Mpumalanga,

FS and Limpopo by

5% overall.

The percentage of the

portfolio invested in the target

provinces has increased as

follows during the financial

year:

- KZN (from 20% to 22%)

- FS (from 0.2% to 1%)

- Limpopo (from 3% to 5%)

The percentage of the

portfolio invested in Gauteng

has decreased from 51% to

50% during 2012/13.

Target has been

achieved.

105

Performance Results

Strategic Objective: Establish the NEF in South African economy as

a credible and meaningful development finance institution

Output

Performance

Measure/ Indicator

Actual

Achievement

2011/12

Planned Target

2012/13

Actual achievement

for 2012/13

Deviation from

planned target to

Actual Achievement

for 2012/13

Increase the

positive

brand

awareness of

the NEF

5.1. Value of media

coverage generated

(Advertising Value

Equivalent AVE)

R25.1 million R19.9 million R24.7 million R4.8 million above

target

5.2. Limit complaints to

a percentage of

applications

received

1.39% Complaints to be

limited to 3% of

applications received

2.2% Target has been

achieved.

106

Performance Results

Strategic Objective: Establish the NEF as a sustainable DFI.

Output

Performance

Measure/ Indicator

Actual

Achievement

2011/12

Planned Target

2012/13

Actual achievement

for 2012/13


target to Actual


Obtain an

overall real

return on fund

investments

through equity

returns, interest

on loans and

interest on cash

balances with

minimized

impairments

and write offs.

6.1. Percentage of

portfolio impaired.

Impairment ratio of

12% of the total

portfolio (13% for the

loans/ preference

share portfolio)

15% 19% on the loans

portfolio, and 20% on the

entire disbursed/

invested portfolio.

Target has not been achieved.

The impairment provisioning

has been reset to R383m for

loans, preference shares and

leases, and R505m against the

total disbursed portfolio.

6.2. Percentage ROI

before impairments (to

be reviewed annually)

The annualized

return on investment

on the loans portfolio

before impairments

was 7%

12% - 15% 9% on the loans portfolio

and 10% on the entire

portfolio excluding cash

Return is 3% below target

range. Actual interest raised

on the loan portfolio is below

budget, given that the budget

was based of slightly higher

projected interest.

6.3. Book value of

investments

Valuation exercise

performed as part of

annual audit.

Perform valuation

exercise as part of

annual audit.

Valuation exercise

performed as part of

annual audit.


6.4. Percentage of

collections

97% (73% excluding

additional payments)

70% 123% (98% excluding

catch-up settlements)

Target has been exceeded.

107

Performance Results

Strategic Objective: Establish the NEF as a sustainable DFI.

Output

Performance

Measure/ Indicator

Actual

Achievement

2011/12

Planned Target

2012/13

Actual achievement

for 2012/13


target to Actual


Obtain an

overall real

return on fund

investments

through equity

returns, interest

on loans and

interest on cash

balances with

minimized

impairments and

write offs.

6.5. Manage portfolio risk Exposure by value:

High Risk: 13%;

Medium Risk: 45%;

Low Risk: 27%;

Legal and Workouts:

15%;

Exposure of the

portfolio by value is

as follows:

High risk

clients:<25%

Medium risk clients:

<50%

Low risk clients:

<25%

Current exposure by

value:

High Risk: 24%;

Medium Risk: 33%;

Low Risk: 30%;

Legal and Workouts:

12%;

New Deals: 1%

A higher proportion of clients

are considered to be low risk

given that we have approved a

high number of deals and the

deals are still in the early

stages of financing. However

the proportion of clients

considered to be medium risk

is lower than planned.

6.6. Develop capitalization

strategy for the

sustainability of the

fund

New target Develop and obtain

Board approval for the

capitalization strategy

Capitalisation strategy

approved by the Board of

Trustees.


Various avenues of sourcing

additional capital have been

and continue to be explored.

108

Presentation to the Parliamentary Portfolio Committee on Trade … · 2015. 1. 27. · founding legislation, The National Empowerment Act 105 of 1998 (NEF Act), Broad Based Black

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