Khula Strategic Plan for 2008/09

Xola Sithole – Chief Executive OfficerZukile Nomafu – Chief Operating Officer

Portfolio Committee on Trade and Industry5 March 2008

Presentation Outline

• IntroductionIntroduction

• Highlights 2007/08Highlights 2007/08

• Strategic Objectives 2008/09Strategic Objectives 2008/09

• Key InitiativesKey Initiatives

• Corporate Balanced Corporate Balanced

ScorecardScorecard

• Financial Budgets 2008/09Financial Budgets 2008/09

• ConclusionConclusion

Introduction

•The 2007/08 period has been both The 2007/08 period has been both

challenging and excitingchallenging and exciting

•Economic prospectsEconomic prospects have dimmed have dimmed

slightly, presenting challenges to SMEsslightly, presenting challenges to SMEs

•Our focus was on Our focus was on sustaining growthsustaining growth

within acceptable risk parameterswithin acceptable risk parameters

•Focus in 2008/09 will be on Focus in 2008/09 will be on expanding expanding

geographic footprint geographic footprint andand

marketing/communication activitiesmarketing/communication activities

Highlights 2007/08

• Diversified product range, including the launch of a reverse factoring product for SMEs• Network of 13 partnerships, offering at least 25 different financing products to SMEs• Geographic footprint now comprises national network of over 200 branches of intermediaries• Loan book has increased from R383m in 2003 to R598m in 2007• Operating income increased from R32m in 2003 to R103m in 2007 • Recently launched new corporate identity

Strategic Objectives 2008/09

Objective #1 : To grow Khula’s outreach and impact thus fulfilling our mandate as the flagship development finance institution for small business

Objective #2 : To increase awareness of Khula and its products within its target market and achieve high customer satisfaction levels

Strategic Objectives 2008/09

Objective #3 : To build an effective institution that achieves its SME development mandate in a financially sustainable manner

Objective #4 : To invest in the development of our employees to create and retain high performance teams

Objective #5 : To establish effective and efficient processes to support operational activities and manage risk

Key Initiatives 2008/09

• KhulaDirectKhulaDirect

• Restructuring Regional Restructuring Regional

OfficesOffices

• Awareness CampaignAwareness Campaign

• Recapitalisation ProposalRecapitalisation Proposal

Balanced Scorecard (1/5)

Area Target Weight

Approvals (by value) R764 million 5%

Disbursements (by value)

R757 million 10%

Portfolio Growth Net Growth of 10% in Loan Book

5%

New Partnerships Minimum 3 New Partnerships

2.5%

Sub-total: SME Financing Activity 22.5%

Balanced Scorecard (2/5)

Area Target Weight

Number of SMEs Financed

3 905 5%

Expanding Geographic Footprint

Measure still to be finalised

5%

Black SMEs Financed 70% of total SMEs financed (by value)

5%

Women-owned SMEs 45% of total SMEs financed (by value)

5%

Loans below R250 000

40% of total disbursements

5%

Sub-total: Development Impact Measures

25%

Balanced Scorecard (3/5)

Area Target Weight

Net Operating Income R9 million (before provisions)

2.5%

Operating Expenses to Operating Income Ratio

89% 2.5%

Quality of Debtors Book 11% Bad Debt Provision 10%

Quality of Indemnity Book 4% claims paid to book20% claims provisions to

book

2.5%

Return on Surplus Funds Invested

Minimum return in line with industry benchmark

2.5%

Credit Control Less than 5% of loans over 60 days in arrears

2.5%

Sub-total: Financial Sustainability Measures 22.5%

Balanced Scorecard (4/5)

Area Target Weight

Customer Satisfaction Measure based on annual survey results

15%

Human Capital Development

Less than 10% per year staff turnover + achievement of

training plan

10%

Process Optimisation Unqualified Audit Report 5%

Sub-total: Other Measures 30%

Balanced Scorecard (5/5)

Area WeightSME Financing Activity 22.5%

Development Impact 25.0%

Financial Sustainability 22.5%

Customer Satisfaction 15.0%

Human Capital Development 10.0%

Process Optimisation 5.0%

TOTAL 100%

Budgets Highlights

• Budgeting profit before tax of R25 millionBudgeting profit before tax of R25 million

• Income from core operations expected to grow by 39%Income from core operations expected to grow by 39%

• Projecting an operating profit vs operating losses in past yearsProjecting an operating profit vs operating losses in past years

• Operating cost to operating income ratio drops from 103% to 89%Operating cost to operating income ratio drops from 103% to 89%

• Business loans to intermediaries to grow by 45%Business loans to intermediaries to grow by 45%

• Bad debt ratio at 11% - consistent with increase in loan bookBad debt ratio at 11% - consistent with increase in loan book

Concluding Remarks

• Economic prospects present challenge to Economic prospects present challenge to

SMEsSMEs

• Khula has substantially grown outreach and Khula has substantially grown outreach and

impactimpact

• Focus in 2008/09 is on growing geographic Focus in 2008/09 is on growing geographic

footprint further and increasing awarenessfootprint further and increasing awareness

• Key initiatives to be undertaken include Key initiatives to be undertaken include

finalising KhulaDirect and restructuring of finalising KhulaDirect and restructuring of

regional officesregional offices

• Budget structured to support growth Budget structured to support growth

objectives and strategic initiativesobjectives and strategic initiatives

Thank You