driving inclusive economic growth across all provinces · 2015-02-26 · driving inclusive economic...

Driving Inclusive Economic Growth

Across all Provinces Presented to Select Committee on Trade & International Relations,

25 Feb. 2015, 10:00 - 13:00, Parliament of the Republic of S.A.

Presenters

1. Ms Philisiwe Mthethwa Chief Executive Officer

2. Mr Setlakalane Molepo Divisional Executive: Rural & Community Development

3. Mr Mziwabantu Dayimani General Counsel

4. Ms Zama Khanyile Head: uMnotho Fund

2

3

Contents

3

Section Slide 1 About the NEF 4

2 Growing Black Industrialists 9

3 Provincial Dynamics 17

4 Investment Philosophy and Achievements

27

5 Administrative & bureaucratic impediments which delay, obstruct and may destroy black business

31

6 Appendices 35

7 Investee Stories 63

About the NEF

4

NEF Mandate…

5

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 NEF is an agency of the dti and is the only DFI exclusively mandated to grow

B-BBEE

5

Our Pledge to the People

As a member of the NEF family, I hereby solemnly pledge to remain faithful to the values and ethos of the NEF, because as an instrument in the quest for inclusive growth, I recognise that the economic dreams and aspirations of black people depend on my willingness to serve with truth in my heart. In taking the hopes of black economic freedom to greater heights, and growth itself to the skies, I hereby undertake that as a patriot I will perform my call to duty with integrity and honour, with empathy and dedication to excellence, inspired by the vision of a growing and inclusive economy. This is my oath, my vocation, my contract with the nation

“ ” 6

Pledge taken by all NEF staff, management and Trustees.

Strategic Need for B-BBEE

Who Owns Whom (30 June 2014)

As a consequence of the apartheid legacy, BEE equity control on the JSE’s average market cap of R11.9 trillion as at 30 June 2014 (for Listed Companies), stands at 3%, (R358 billion) for black South Africans.

To reach 25% of black control it requires an additional 22% worth R2.6 trillion at current estimated market cap.

7

Performance Milestones Output Achievements 1 Approvals Benefited over 2000 black entrepreneurs through approval of 600 transactions

worth more than R5.8 billion across the country.

2 Disbursement Approximately R4.1 billion has been disbursed to 429 of these companies.

3 Integrity Secured unqualified external audit opinions for 9 years running.

4 Supporting jobs To date the NEF has supported in excess of 80 000 jobs.

5 Industrialisation 20 strategic and industrial projects worth R30 billion, with the potential to support over 80 000 jobs.

6 A culture of savings & investment

In a transaction worth over R1 billion the NEF Asonge Share Scheme made available more than 12 million MTN shares to over 87 000 investors comprising black individuals and groups. 49% of investors were women.

7 Investor education Reached over 20 000 people in villages and townships through 80 community seminars on how to save and invest, personal financial discipline, shares, dividends, bonds, the property and money markets.

8 Entrepreneurship training / incubation

Business skills training provided to 2 500 potential entrepreneurs who attended 97 seminars from 2012 to date.

9 National footprint Regional offices in all but one province. 30% of the number of approved transactions emanated from the regional offices during Financial Year 2012/13.

10 Collections A total of R1 billion has been repaid by investees. Among others, Ndalo Luxury Ventures has settled its loan obligations in full.

8

9

Growing Black Industrialists

SPF Mandate

10

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

Development and Economic Impact

• Creation of new manufacturing and industrial capacity

• Creation of new jobs as opposed replacement capital finance

• Investment of new fixed capital into economically depressed areas or poverty nodes

• Creation of 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

11

Creating Black Industrialists

Strategic Industrial Sectors

RENEWABLE ENERGY

MINERAL BENEFICIATION

AGRO- PROCESSING

INFORMATION & COMMUNICATIONS

TECHNOLOGY INFRASTRUCTURE TOURISM

Biofuels Biomass Biogas Solar Wind Hydro

Mining & Mineral

Beneficiation

Chemicals Agriculture

Telecoms Broadcasting

Roads Dams and Bridges

Sewer and Bulk Services

B&Bs Hotels Guest

Houses (Women-owned)

Real Estate

Together with local & international partners the NEF has developed 20 strategic and industrial projects worth R30bn, with the potential to support over 80 000 jobs.

The NEF’s future equity rights will total R4.2bn at financial close.

12

What is a Black Industrialist? A black industrialist is an entrepreneur or enterprise that has a substantial equity and operational interest in the long-term ownership and control of a medium to large enterprise in a key sector of the economy as defined in IPAP, with a high job-creation potential, and making a meaningful contribution to growth and development. These black-owned companies may increase South Africa’s export-earning potential and reduce import dependency by growing the country’s economic capacity through primary (retrieval and production of raw materials), secondary (processing or beneficiation) or tertiary industries. As a patriotic corporate citizen the black industrialist is motivated both by the quest for personal success and the sustainable growth of the South African and African economies, and pursues his or her endeavours with irreproachable integrity. In accordance with legislation and for the purpose of eligibility for funding from the National Empowerment Fund (NEF), a black person is an African, Coloured or Indian natural person who is a citizen of the Republic of South Africa by birth or by descent as well as a natural person who acquired citizenship by naturalisation prior to 27 April 1994.

13

SPF Project Development Stages

14

SPF Portfolio – NEF Equity Rights

15

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 85% 6 000 000 500 000 000 212 500 000 African 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 Busamed Hospitals Healthcare 49% 260 000 000 1 600 000 000 - Milk for Life Agro-processing 49% 2 000 000 50 000 000 - Link Africa Infrastructure 30% 100 000 000 1 000 000 000 300 000 000

Radisson Blu Kruger resort Tourism 40% - 250 000 000 - TFST Renewable Energy 6% 5 313 210 1 800 000 000 46 080 000 Biomass to Bioethanol Renewable Energy 49% 10 000 000 800 000 000 196 000 000 Tyre Energy Extraction Renewable Energy 49% 8 000 000 50 000 000 12 250 000 KC Energy Renewable Energy 40% 48 000 000 150 000 000 - Tyre Manufacturing Research Manufacturing 100% 1 590 000 335 000 000 167 500 000 FIS Biodiesel Renewable Energy 30% 10 000 000 800 000 000 120 000 000 MIBT Manufacturing 35% 18 600 000 30 000 000 5 250 000

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

Paediatric Dental Facility Infrastructure 49% - - - Auto Disable Syringes Manufacturing 49% 7 156 600 200 000 000 49 000 000 Mabele Fuels Renewable Energy 12% 40 000 000 2 232 000 000 31 750 000 Totals 582 159 810 29 997 000 000 4 122 330 000

SPF Achievements Since Inception

16

High risk investments - NEF only DFI with fully Venture Capital (VC) capability and offering focused on participation of black people in project development;

Equity investments - typically with 7-10 years investment horizon;

Circa R600mn disbursed in past 7 years (R85mn p.a. on average), which has leveraged R3.8bn in external funding;

79% of the approved funds have been disbursed (87% excl. Richards Bay wind farm);

74% of projects at pilot, financial close, construction or operation stage; and

80,000 direct and downstream jobs to be created by the SPF Portfolio

Provincial Dynamics

17

Striving for growth across all provinces

Invested growth across all provinces

18

1. As a national Development Finance institution (DFI) the NEF is committed to ensuring that its products and services reach the entire nation.

2. Since the launch of the NEF Asonge Share Scheme in July 2007 the NEF has implemented various measures and interventions to strive towards an even, representative and equitable distribution of its services across the country.

3. As a result, the NEF’s invested presence in Gauteng has come down from above 60% of total disbursed funds in 2006, to 50% by September 2014.

4. This is not as a result of a reduction of funding in Gauteng, but is a direct consequence of planned, targeted and increased funding in the other 8 provinces because they are integral to South Africa's economy, comprising 76% of the population.

Reasons for growth across all provinces

19

Year Intervention Outcome

1 2006 - 2015

Local community & stakeholder workshops

Every year present & exhibit in a growing number of local community workshops hosted by national, provincial and municipal governments, as well as various business and civic stakeholders.

2 2007 – 2014 Investor Education Visited over 100 villages, townships and cities countrywide (12 destinations

per province), and reached over 21 000 participants.

3 2007 NEF Asonge Share Scheme

Atrracted 87 000 investors (47% in GP, 16% in KZN, 9% in WC, 7% in LP, 6% each in NW & MPu, 4% each in EC & FS, and 1% in NC).

4 2007 Strategic Projects Fund Venture capital fund responsible for driving the NEF’s contribution to industrialisation by increasing participation of black people in early-stage projects, especially in poverty nodes.

5 2008 Rural & Community Development Fund

Proactively source transactions in rural areas in order to unlock underlying economic value.

6 2007 - 2015

Advertising & media coverage

Placement of adverts and stories in local, regional and national media countrywide.

7 2009 Business Plan & Mentorship launch

Workshops in every province raising awareness on the online solution for developing own business plans with financial projections. Over 20 000 registered users have accessed the tool.

8 2009 – 2010 Eyethu Sonke Le BEE!

4 destinations in each province promoting understanding of B-BBEE, funding & access to government & private-sector procurement & enterprise development opportunities.

9 2009 - 2015 Regional offices Opened regional offices countrywide. NC office space presently being

identified.

10 2011 – 2015

Incubation & entrepreneurial training

Business skills training provided to over 2 500 beneficiaries who attended 97 seminars from 2011 to date, countrywide.

20

Geographic spread of investments

GDP Source: StatsSA (November 2014); Gross Domestic Product, Third quarter 2013 (The GDP contribution by province has been updated with the most recent available

statistics from Statistics South Africa, in order to be able to match the performance to the most current available statistics.

EC R339m

9%

FS R72m

2%

GP R1,8m

50%

KZN R751m

20%

LP R184m

5%

MP R135m

4%

NC R57m

1%

NW R39m

1%

WC R297m

8%

WC

NW

NC

MP

LP

KZN

GP

FS

EC 7.7

5.1

33.8

16.0

7.3

7.6

2.0

6.8

13.7

NEF Invested Portfolio by region by value (inception - 31 Dec ‘14

21

Geographic spread of Strategic Projects Fund (SPF)

SPF Investment Spread by Province

Province No of deals

% by number of deals R’000s

% by value

Limpopo 2 8% 12 000 2%

Mpumalanga 3 13% 60 000 9%

Gauteng 6 25% 109 800 16%

North West 1 4% 500 0% KwaZulu-

Natal 3 13% 177 190 27%

Free State 2 8% 121 750 18% Northern

Cape 0 0% - 0% Eastern

Cape 3 13% 32 156 5% Western

Cape 4 16% 154 813 23%

Total 24 100% 668 209 100%

Western Cape 23%

Northern Cape 0%

KwaZulu Natal 27% Eastern Cape

5% North West 0%

Limpopo 2%

Free State 18%

Mpumalanga 9%

Gauteng 16%

Portfolio by value - per province

The SPF portfolio by value is spread almost evenly in KZN, WC, FS and GP. The NEF is making progress in increasing funding in other provinces with more projects as indicated by the portfolio by number in Mpumalanga. Regional offices are working extensively in increasing participation in other provinces.

22

Limpopo 6%

Mpumalanga 8%

Gauteng 11% North West

3%

KwaZulu-Natal 45%

Free State 2%

Northern Cape 1%

Eastern Cape 21%

Western Cape 3%

Geographical Spread of Investment by RCDF up to 30 December 2014

RCDF Investment Spread by Province

Province No of deals R000s %

Limpopo 3 26 403 6.5%

Mpumalanga 4 32 565 8.1%

Gauteng 3 43 425 10.8%

North West 2 12 684 3.1%

KwaZulu-Natal 8 179 836 44.6%

Free State 1 8 495 2.1%

Northern Cape 1 3 612 0.9%

Eastern Cape 6 84 786 21.0%

Western Cape 2 11 328 2.8%

Total 30 403 134 100%

Geographic spread of Rural & Community Development Fund (RCDF)

Widely represented in all the Provinces, though still low in FS and NC, but evenly concentrated in other provinces, with KZN and EC predominantly sharing a significant % of businesses funded, principally because of tourism in KZN, with agro-processing (dairy & feedlot) and shopping complexes comprising the bulk of transactions in the WC .

Gauteng, 7 Mpumalanga,

13

North West, 10

Limpopo, 12

Northern Cape, 8

Free State, 16

Western Cape, 4

Eastern Cape, 12

KZN, 15

23

Geographic spread of Incubation & Entrepreneurship Training

Entrepreneurial Training Seminars from April 2011 to date

Province Number of Training Seminars Conducted

Gauteng 7 Mpumalanga 13 North West 10

Limpopo 12 Northern Cape 8

Free State 16 Western Cape 4 Eastern Cape 12

KZN 15 Total 97

The NEF currently has working relationships with 10 business incubation centres across the country, which provide in-depth business support, training and in some instances assistance with access to markets, across

various sectors of the economy. To date over 2500 businesses have been referred for incubation and entrepreneurship training to help take them to operational stage. At least 75% of the seminars were held in rural and township areas. These incubation centres were mainly established or supported through direct Government

support, and their partnership with the NEF helps to maximise the impact that can be achieved through Government spending.

24

Regional Offices 1. The NEF has regional office presence in all

provinces but the Northern Cape, where the organisation is in the process of identifying office space.

2. This national presence ensures that the NEF reaches every area of the country including the remotest rural areas, where the poorest of the poor mostly reside.

3. The NEF always takes part in national (the dti, DED & DSBD), provincial and local government roadshows, as well as various other stakeholder events, to take its message to the people.

4. It is as a result of this that the NEF has successfully funded business ventures through its Rural and Community Development Fund, whose objective is to unlock value in rural and township communities.

Geographic Spread – Investor Education Investor Education campaign has been rolled out in the Eastern Cape, Northern Cape, Free State,

Limpopo, Western Cape, North West, KZN, Mpumalanga and Gauteng with 8 seminars per

province. Attendees: over 21 000 participants.

z

NORTHERN CAPE

FREE STATE

LIMPOPO

KZN

EASTERN CAPE

MPUMA LANGA

NORTH WEST

GP

WESTERN CAPE

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Mahikeng, Lichtenburg, Rustenburg,

Hammanskraal, Vryburg, Taung

Klerksdorp, Potchefstroom

Kimberley, Prieska,Kakamas, Keimoes,Upinton,

Kathu, Barkley West, Kuruman

Saldanha, Langa, Bellville Nyanga, Mannenburg / Gugulethu, Worcester, Caledon, Cornville –

George, Kwanonqaba-Mossel Bay

Port Elizabeth, East London, King Williams Town, Mount Frere, Butterworth, Umtata,

Fort Beaufort, Grahamstown

Bloemfontein, Botshabelo, Welkom, Thaba Nchu, Qwaqwa,

Kroonstad, Ladybrand, Bethlehem

Seshego, Lebowakgomo,

Lephalale, Bela-Bela, Thohoyandou, Giyani, Phalaborwa, Tzaneen

Newcastle, Dundee, Ladysmith, Estcourt,

Pietermaritzburg, Port Shepstone, Newlands

East, Chatsworth, Umlazi. Kwa Mashu, Ulundi, Richards Bay

Springs, Alexander Soweto, Diepsloot Ext 2, Soshanguve,

Mamelodi West, Krugersdorp Kagiso

2, Sebokeng

Delmas Botleng, Secunda,

Ermelo, Piet Retief Emalahleni, Middleburg, Mbombela, Hazyview

NEF booklet on how to save and invest

Media coverage & advertising Province /

area Northern

Cape North West Limpopo Mpumalanga Free

State Eastern Cape

KwaZulu Natal

Western Cape

Gauteng & National

Mass Media

DFA,

Gemsbok,

Noordkaap,

Kalahari Bulletin,

Northern Cape Express,

Stellelander

Radio

Motsweding FM,

RSG,

Radio Kaboesna,

Radio Riverside,

Radio Teemaneng,

Kuru FM

Rustenburg Herald,

Klerksdrop Record,

Mafikeng Mail,

Stellalander,

Radio

Motsweding FM,

Radio Mafisa,

Radio Modiri,

Mafikeng FM,

Star FM,

Aganang,

North West FM

Polokwane Express,

Limpopo Mirror,

Capricorn Voice,

Radio

Radio Phalaborwa,

Radio Sekhukhune,

Lebowakgomo,

Thobela FM,

Mungana Lonene FM,

Phalaphala FM

Mpumalanga News,

Mpumalanga Mirror,

Witbank News,

Cosmos Gazette,

Highvelder,

Middleburg Observer

Radio

Ligwalagwala FM,

Ikwekwezi FM,

Capricon FM

Free State Sun,

The Weekly,

Free State Times,

Free state Express

Radio

Lesedi FM

Daily Dispatch,

Herald,

Algoa Sun

Radio

uMhlobo Wenene,

Algoa FM

Ilanga,

Mercury,

Isolezwe,

Radio

Ukhosi FM

Gagasi FM,

Lotus FM

Die Son,

Cape Argus,

Cape Times

Radio

uMhlobo Wenene,

True FM

City Press,

Sowetan

Business Report,

Business Day,

Sunday Times,

Financial Mail,

Mail and Guadian,

Daily Sun

The New Age

Radio

SAFM,

Metro FM,

Power FM,

Kaya FM

Talk Radio 702

Radio 2000

The NEF strives to reach all communities across the country by placing adverts and stories in public, community

& privately-owned media in all provinces.

26

27

NEF Investment Philosophy & Achievements

28

“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…

Invested Sector Breakdown

29

Agro Processing, 6%

Chemicals & Pharmaceuticals,

4%

Construction and Materials, 14%

Distributors, Dispatchers and Processors, 1%

Energy, 7%

Engineering, 6%

Financial Services, 1% Food and

Beverage, 4%

ICT, 3% Manufacturing, 9%

Media, 6%

Mining Industry, 3%

Motor Industry, 1%

Printing and Publishing

Services, 1%

Property, 3%

Retail, 5%

Services, 14%

Textiles, 1%

Tourism and Entertainment, 3%

Transportation, 7%

NEF Invested Portfolio by sector by value since inception - 31 December 2014

-

50 000 000

100 000 000

150 000 000

200 000 000

250 000 000

300 000 000

350 000 000

400 000 000

2010 2011 2012 2013 2014 YTD 2015

Receipts Amount

2010

2011

2012

2013

2014

YTD 2015

Cash Collected

30

Over R1 billion collected cumulatively from loans disbursed across the country, in black-owned and managed businesses across virtually all sectors of the economy.

Receipts to Dec 2014 at R310 million are 88% of

full financial year 2014

Administrative & bureaucratic impediments which delay, obstruct

and may destroy black business

31

Administrative & bureaucratic impediments (1)

1. Reluctance by national and provincial Government departments to give NEF direct cession of proceeds from contracts.

2. Late payments by Governments to SMEs after services have been delivered, straining the cash flows of SMEs. This is a major contributing factor to the demise of SMEs.

3. Rigid terms of contracts which do not allow for extension where the timelines to start delivering in terms of the contract are tight and do not give SMEs sufficient time to raise funding.

4. Contracts awarded are in many cases not profitable for black businesses as margins are thin and SMEs are price-takers. In desperation, they end up signing ominous contracts which they cannot deliver on.

5. In some instances, departments still require SMEs to put down performance guarantees, which raise the cost of business capital.

6. Provincial departments seem hesitant in supporting farmers that have already received funding from the NEF because they view them as having already benefited from Government, even though these farmers have received loan funding.

32

7. In franchising, the NEF has observed prejudicial and ethically-questionable practises by some franchisors, where black franchisees are used as guinea pigs to test markets, business models and locations.

8. Delays in obtaining Environmental Impact Assessments Municipalities. These delays have a negative impact on project timelines and business operations.

9. Delays in granting municipal land lease agreements. 10. For petrol stations, it takes time to secure a retail license from

the department of Minerals. It can take more than three months from the date of submitting the application.

11. It takes oil companies even longer to apply for site licenses. This can be worse and cumbersome in instances where the entrepreneur owns the site.

12. Reluctance and delays by local Economic Development agencies in providing equity instruments.

Administrative & bureaucratic impediments (2)

33

34

Thank You

35

Appendices

36

Renewable Energy Projects KC ENERGY

The cogeneration project aims to develop a Combined Heat and Power (CHP) plant producing steam (60 tph) and electrical power (6MWp) for process plant usage and will be based in Newcastle, KwaZulu Natal province. The plant is currently under construction and is expected to come online in July/Aug 2014.

Location Newcastle, KZN

Project Development Stage Construction

NEF Investment to date R48 million

NEF Equity 40%

Project Promoter KC Energy

Total Project Cost c. R184 million

No. of Jobs Created 221

37

Renewable Energy Projects MABELE FUELS

The project intends to develop a circa 154 million litre per annum fuel grade bioethanol plant, in Bothaville, in the Free State Province. The plant feedstock is grain sorghum and the production methodology involves a process utilising grain milling through starch conversion to sucrose as well as fermentation and drying that ultimately culminates in the production of saleable bioethanol.

Location Bothaville, Free State

Project Development Stage Financial Close


NEF Equity 11.76%

Project Promoter Mabele Fuels (Pty) Ltd

Projected Financial Close Requirement R2.5 billion

No. of Jobs Created 636

38

Infrastructure & Manufacturing BUSA MED

Busamed is a black-owned hospital group that is poised to compete with the big three. The vision is to be a consolidator of the fragmented health care market. This will be kick-started with the commercialisation of 4 hospital licenses for 1000 hospital beds, spread over three provinces, namely Gauteng, Western Cape and the Free State. With the first being in the Western Cape, this hospital will be a world class cardiologic centre of excellence. The aim is to develop centres of excellence which will provide world-class services.

Location Cape Town



NEF Equity 49%

Project Promoter Goldenwood (Pty) Ltd

Projected Financial Close Requirement R1.6 billion

No. of Direct Jobs Created 3,000

39

Infrastructure & Manufacturing LINK AFRICA

The project aims to deploy Last Mile Fibre Optic cables across the national landscape of South Africa. Fibre optic infrastructure that is 4 times faster at less than half the cost of normal fibre will be deployed. Licensed patented technology that uses existing sewer and other currently existing infrastructure rather than the normal method of digging up trenches to lay fibre optic cables, will be utilised. An initial capital investment of ZAR300 million will lead to the establishment of a South African Last Mile Fibre Optic Infrastructure Company, i3 Africa.

Location KZN



NEF Equity 30%

Project Promoter Link Africa (Pty) Ltd

Projected Financial Close Requirement R900 million

No. of Direct Jobs Created 200

40

Market Failures & Non-Financial Support

41 41

• Limited own capital; • Access to affordable capital; • Limited management skills, including financial,

marketing and technical expertise; • Lack of accurate and reliable financial information; • Poor quality of business plans; • Lower bargaining power and strong competition from

established businesses with entrenched market dominance;

• Inadequate access to affordable capital; and • Lack of access to local and international markets.

Challenges / Market Failures facing black business

Business Planning? www.nefbusinessplanner.co.za

42

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

42

43

Crafting Entrepreneurs

In response to the market

failures facing emerging black

entrepreneurs, the NEF

facilitates the provision of

incubation support and

entrepreneurship training

across the country.

44

Mentorship

Ongoing mentorship support

across the country

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

Less than 50% survive beyond 4 years Mentors 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

NEF Target Market

45

Target Market Products & Services

1

Black individuals and groups with significant operational experience and an extensive investment portfolio and accumulated capital (Tier 1)

1. New Ventures Finance

2. Expansion Capital 3. Capital Markets 4. Strategic Projects Fund

5. Acquisition Finance

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).

1. Business Plan Toolkit 2. Investor Education 3. Rural & Community Development Fund

4. Entrepreneurship Finance 5. Franchise Finance 6. Procurement Finance

7. Expansion Finance 8. Mentorship Support

3

Black individuals and groups with limited business or entrepreneurial experience (Tier 3).

1. Business Plan Toolkit 2. Investor Education 3. Rural & Community Dev. Fund

4. Franchising 5. Procurement Finance 6. Mentorship Support

4

White individuals and groups who own, manage and/or control economic means and are potential partners for, or opponents to, economic transformation (Tier 4).

1. Enterprise Development Fund 2. Equity Acquisition

3. Procurement Finance 4. Strategic Projects Fund

5. Liquidity & Warehousing 6. Mentorship Support

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 agro-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.


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:

46

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.

47

Examples of Enterprise Development Fund Successes

Bakwena Ba Makgopa

48

Corporate Governance and Investment Processes

49

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

Authorised to approve transactions with value up

to R50m and to recommend transactions with larger

value to Board of Trustees for approval.

Board of Trustees

Authorised to approve 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

50

Proactive Marketing (advertising, stakeholder & media relations)

Pre-Investment and Regions -

basic evaluation

Request DD either at Funds or Fund Management Investment Committee (FMIC)

Up to R5m approved by FMIC

Loan Agreements drafted in-house

Clients handed to POIU– Allocated to Post IA

Regular site

visits

Regular risk ratings

Mentorship provided

Collection Monthly Post

Management Committee meetings

Distressed investments transferred to Turnarounds, Workouts & Restructuring

Investment team networks

Detailed screening by Investment Associates (IA’s)

Due Diligence (DD) performed based on nature of deal

Above R5m up to R15m recommended to EXCO IC

Referrals from external stakeholders (e.g. deal originators, business incubators & Govt. agencies

NEF Operating

Manual applied EXCO IC

approves up to R15m

Legal compliance by FMIC Management

Walk-in Clients at Head Office and in Regional Offices

Final Investment

Paper reviewed by FMIC

Credit Risk

Assessment Process

Above R15m to R50m approved by Board IC

Funds disbursed

Above R50m

approved by Board of Trustees

Deal Origination Screening Due

Diligence (DD) Approval

Stage Legal Stage

Post Investment

NEF Investment Process

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The NEF POWER of 3 Our Quest for Excellence

Telephones answered within 3 rings.

Walk-in clients assisted within 3 minutes.

Acknowledgement letter sent within 3 days.

Up to a 3-month process from application to

disbursement…

Return client calls within 3 hours.

Resolve complaints within 3 days

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NEF’s Investment Funds

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NEF Funds – Across the Economic Spectrum Fund Focus Threshold

1 iMbewu Fund SME Fund providing Entrepreneurship, Procurement & Franchise Finance

R250 000 – R10 million

2 Women

Empowerment Fund (WEF)

Achieve minimum 40% of enterprises owned and managed by black women

R250 000 – R75 million

3

Rural & Community

Development Fund

Supporting rural economic development through New Ventures, Acquisition, Expansion & Greenfields Finance


4 uMnotho Fund

Funding of New Ventures, Acquisition, Project Finance, Expansion, Capital Markets, Liquidity & Warehousing


5 Strategic Projects Fund

Early-stage investment in industrial / manufacturing transactions

Up to R75 million

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iMbewu Fund Small Medium Enterprises

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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

Women Empowerment Fund

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NEF Women Empowerment Fund

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Fund a Woman, Fund a Nation

Objective To deliberately facilitate the participation of Black

women in the main stream of the economy Strategy

Leverage existing relationships to drive a pipeline of women lead transactions

Partner with government departments to facilitate opportunities provided by those departments

Project development of opportunities identified from deficiencies in the market highlighted in investment approval processes (e.g. Local manufacturing of beads)

Sponsor identification through women lead businesses and associations, incubator, business schools and funding competitions

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Rural & Community Development Fund (RCDF)

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

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uMnotho Fund Access to BEE Capital

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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

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Investee Stories

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Investee Stories Building the Economy, Sharing the Wealth

Molam’s Farming (R13.2 million)

Molam’s Farming based in Delpan North West is a 100% black owned start–up primary agriculture enterprise focusing on grain (maize and sunfl ower), groundnut and soybeans crop production. Lantek SA (precision farming experts) will provide technical assistance over a 3-year period. NWK (major grain and soybeans buyer) and The New Nut Company (the third largest groundnuts buyer in RSA) will uplift 100% of the produce based on contracts and a signed off-take agreement. Job creation: Total 95 jobs. 20 jobs during development, 15 full-time, 60 seasonal jobs (6-7 months), Resuscitation of restituted land and stimulation of the local economy

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Richmond Opkomende Boere Co-operative (R3.6 million)

Richmond Opkomende Boere Co-operative is a start-up primary agriculture entity based in the Northern Cape which will focus on free range merino sheep farming for the purposes of lamb and wool production. The business is a start-up and will create 7 permanent jobs, and it is a co-operatives which consists of 48 members

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Investee Stories Some of the Franchises Funded to date

This is a R50 million project

The NEF invested R28,3 million

The Trust represents 22000

beneficiaries in the Jozini area

(Northern Kwa-Zulu Natal)

Overlooks the third largest lake

in South Africa

The hotel has 60 rooms

Accommodates 144 guests

The community owns this 4-Star hotel!

Turning Villagers into Shareholders

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Investee Story

Long Walk to Freedom (Pty) Ltd (LWTF) is a company incorporated for the production of a film based on President Nelson Mandela’s autobiography, Long Walk to Freedom. In 1996, the coveted film rights were awarded to Anant Singh, a South African film producer who has a successful track record in the production of local and international films. The film will be a full-length epic motion picture, and it will be the only movie that will span President Mandela’s life from childhood to his presidency. More than 12, 000 jobs will be created over a 2-year period during production of the film, and skills will be transferred from international sources in all aspects of the film production process. The company will ensure that where possible, goods and service are procured from BEE companies

Long Walk To Freedom (R50 million)

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Investee Stories The entity’s core business is the blending of top quality cement that is supplied to the infrastructure development sector and others. The invested R35 million will enable the company to own the property, plant and equipment they are currently renting as well as create 50 fulltime jobs in the process. The company is black owned and blends, produces and sells cement to a wide range of customers across the country, and has a strong pipeline of customers interested in their products including in the SADC region. Value Cement is a prime example of broad based black empowerment with a significant percentage of directors and management being female. Value Cement has the necessary muscle and ability to compete in a highly controlled, protected and competitive industry while further ensuring that the enterprise is sustainable and creates meaningful employment. The funding of Value Cement was facilitated through Umnotho Fund, a funding vehicle within the organisation that is designed to increase access to BEE capital. Value Cement plant is one of the most modern blending plants in South Africa and has sufficient capacity to service most of the provinces as well as export markets. The plant is designed in such a way that the current capacity can be tripled without a large capital expenditure and is ready to supply the market with an excellent product for the next 20 to 30 years.

Building the Economy, Sharing the Wealth

Value Cement (R35 million)

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Investee Stories

The transaction was a culmination of the Enterprise Development (ED) Fund established by NEF to encourage large enterprises to find an innovative way through which to meet their B-BBEE targets. The first transaction concluded through the ED Fund was in collaboration with Chrysler SA for Vigor Swift Connectors (Pty) Ltd, a 100% black owned company, to provide Customer Relations Management “CRM”, Warranty and Maintenance Adjudication Solutions and Roadside Assistance Services in the Automotive industry. This transaction will also lead to the creation of five new jobs.


Vigor Swift Connectors (Pty) Ltd. (R400 000)

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Investee Stories

Sales Hire (established in 1990) is a Cape Town-based company that specialises in the hire of building equipment and other related tools. The transaction was enterprising in that existing managers in the business (each with at least 5 years’ experience) were selected to acquire and own the respective outlets that the managed. The chosen outlets have previously been profitable and the NEF was, through the iMbewu investment team. Through the NEF’s assistance nine manages were able to become owners through a franchising agreement with Sales Hire


Sales Hire (R22.5 million)

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Investee Stories

The NEF through iMbewu Fund has allocated R50million in affordable loan facility towards Black entrepreneurs that are interested in acquiring an ENGEN retail service station throughout any of our 9 provinces. It is envisaged that this will lead to an increase in Black owned service stations from the current 39% to the targeted 45% Black ownership by 2016. Allowing for further penetration and increase in the provinces that are still lagging behind such as Mpumalanga, Limpopo and the Eastern Cape. It is within the context of the Liquid Fuels Charter and the Petroleum Products Amendment Act (PPAA) which integrates into law the requirements of promoting BEE that the relationship between the NEF and ENGEN is founded. It is the common vision of promoting the advancement of Black South Africans in several tangible forms, including shareholdings of existing and future oil companies operating in South Africa, the need to gradually increase the allocation of procurement budgets to BEE suppliers as well as increasing Black owned and operated retail sites or dealerships in the country. The first of the new 100 % black owned NEF-financed ENGEN franchises is now open in City Deep in Johannesburg. Black potential entrepreneurs are required to put up between 10% and 20% of the purchase price, and the NEF provides financing for the balance. ENGEN also stands surety for half of the average R5 million purchase price, and covers training, evaluation and business support costs. Commonly ENGEN requires that entrepreneurs put up 60% of the purchase price, however lowering the level of own contribution required for these deals is aimed at making service station ownership more accessible for black entrepreneurs.


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Investee Stories

Linen Tech (R10 million)


Linen Tech is a 100% black owned and managed company, which also has 34% black woman ownership. The company manufacturers household linen and distributes towels for institutions and the hospitality industry. Linen Tech is based in Central Business District of Johannesburg Due to a closure of local manufacturers of raw materials Linen Tech was forced to source raw materials from Pakistan to maintain its competitiveness and process locally and add value. The NEF provided R10 million funding to Linen Tech and in the process 120 jobs were retained in a currently troubled textiles industry to assist to retaining manufacturing capabilities, skills and the know-how in the country through Linen Tech

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Investee Stories

Colliery Dust Control (Pty) Ltd. develops and manufactures the components for integrated dust suppression systems used on continuous mining in underground coal mines. Colliery Dust Control is a South African based business and focuses on the design, manufacturing and supply of integrated dust-suppression systems for various underground mining applications. The NEF provided funding to Business Venture Investment towards the full acquisition of the business. The main BEE partners are two black women, Ms Thembi Chagonda and Ms Babalwa Geza. Ms Chagonda is an HR specialist and her role is to drive CDC’s Transformational Agenda, whilst Ms Geza has an engineering background and has taken over the role of Deputy Managing Director. The company supports 24 fulltime jobs


Colliery Dust Control (Pty)Ltd. (R41 million)

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Investee Stories Wassa is a 100% women-owned business operating in the energy sector. The entrepreneurs are Ms Nokwanele Qonde, a 60% shareholder, and Ms Thandekile Sibisi who holds a 40% stake. The business has been operational since 2008 and is based in Kya-Sands, Randburg. The core business of Wassa is to wholesale liquid petroleum gas (LPG) to Industrial and Commercials retailers. The company buys directly from SASOL Oil, SASOL Nitro, BP and Petro SA. LPG is usually used for domestic, industrial and commercial cooking and heating purposes. The company currently supplies across Gauteng, and has a long-term goal to distribute to other provinces. The company supports a total of 14 fulltime jobs


Finishing Touch Trading (Pty) Ltd t/a Wassa (R12.5 million)

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Investee Stories Afripotego IT and Construction (Pty) Ltd. previously trading as Ekurhuleni Women and Youth Empowerment (Pty) Ltd. Is the brainchild of Ms Tsakani Mudau, and was established in 2004 to empower women in the IT and Construction industries.. She was invited on board by WDB Investment Holdings (WDBIH), which believes in investing in women for their self-sustainability. Afripotego IT and Construction (Pty) Ltd. is one of the eleven Regional Field Service Centres (RFSC’s) servicing Gidani Lottery Machines. The company has supported TM Afrika Kopanang Business Enterprise since 2005 in supplying building material to Cashbuild clients, Women for Housing Project in Orange Farm, RDP houses in Bramfischer and Orlando East, as well as Hardware Stores in Soweto. In the process of supporting TM Afrika Kopanang, Afripotego IT and Construction (Pty) Ltd. also decided to diversify after seeing a gap or business opportunity in construction, transportation and the supply of building material, as a women organization. Afripotego IT and Construction (Pty) Ltd. and TM Afrika Kopanang work jointly in projects that need greater capacities especially in supplying building material, transportation and any other logistical opportunities. The company supports 37 fulltime jobs.


Afripotego IT & Construction (Pty) Ltd R2.75 million

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Mohale Agricultural Cooperative (R13.7 million)

Mohale Agricultural Co-operative based in Limpopo has approached the NEF for funding assistance totalling R13.7 million for the purchase of Poultry and vegetable farm. The product line includes chickens, cabbages and maize. The identified farm is located in Soekmekaar, Limpopo Province. Supporting operationally involved entrepreneurship, the growth prospects of the land will yield 15 additional jobs, and saving 30 current permanent jobs, offering significant job creation prospects, the farm is based in Limpopo Province- one of the less economic active provinces

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Nyonende Poultry Cooperative t/a Nyonende Investments (PTY) LTD (R9.6 million)

Nyonende Poultry Cooperative based in Kwa Zulu Natal is a 100% black owned and who’s business is that of a Poultry Hatchery. The entity hatches eggs commercially for National Chicks, under a term contract, the facility was financed by the NEF for R9.6 million. The NEF came in to acquire the farm and its assets on behalf of the Cooperative. The project will save 18 existing jobs, create 17 new jobs directly and many more downstream, the NEF funding will assist in the transformation of an industry dominated by large, vertically integrated, white-controlled, listed groups and finally women empowerment will be achieved through an effective 40% black female shareholding

driving inclusive economic growth across all provinces · 2015-02-26 · driving inclusive economic...

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