National Empowerment Fund

Presentation

28 August 2014

Mr. Bongani Qokose

Regional Manager: Mpumalanga

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Presenter

Mr Bongani Qokose Regional Manager : Mpumalanga

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NEF Mandate …

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

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NEF Mandate Grow black economic participation

Fund Management 1. Fund black-empowered

businesses

2. Business plan toolkit

3. Mentorship support

4. Early-stage investments

Asset Management 1. Investor Education

2. Public Share Offers

3. Enterprise Development

4. BEE Repository

Unpacking the NEF Mandate …

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Culture of savings & investment Financial & non-financial support

Challenges / Market Failures

facing black business

• 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, and

• Lack of access to local international markets.

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R250 000 – R75 million

Start-up

Expansion

Equity Acquisition

NEF Funding

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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

*Project 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 (*) be low:

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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,

specific product criteria,

job creation,

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.

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Performance

Reporting

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NEF Approved and Disbursed Deals

by value

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NEF Approved and Disbursed Deals

by number

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NEF Portfolio by Value

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Business Planning?

www.nefbusinessplanner.co.za

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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

No. Heading Description

1 Executive Summary Brief description of the business?

2 Purpose of funding What do you need the money for?

3 Valuation of business If buying a business, how was its value calculated?

4 Products & Services What is the business going to sell?

5 Industry Analysis Trends, developments , opportunities, laws, outlook etc

6 Target Market Who are your customers?

7 Competitor Analysis How are you going to do better than your competitors?

8 Supplier Analysis Do you have the best suppliers, eg cost, delivery, quality etc

9 Operational Analysis Technology, quality-control, safety, costs & processes etc

10 Management & HR Experience, qualifications, number and race of employees etc

11 Internal & External Risks Do you have plans to address possible risks & problem areas?

12 Social-economic benefits What does your business offer to society, eg jobs, skills etc

13 Financial Analysis History & projections: Income & exp, balance sheet, cash-flow

Details of a Business Plan

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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

SAVINGS AND INVESTMENT

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Investor Education

National campaign and booklet to

promote public understanding of:

How to save & invest

Tips on investing

Personal financial discipline

What are shares & dividends

What are bonds

Investing in property

The money-market

Terms & concepts

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Enterprise Development …

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.

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Enterprise Development

Enterprise

Development Fund

NEF

Returns Mandate BEE

Facilitator Co -

Funding

Measured Entity

Returns Proper

appropriation

of funds Risk sharing BEE points Free from

legislative

restraint Free from

operating risk

Contribution

Beneficiaries ( NEF Investees & Beneficiaries

from Measured Entities Supply

Chain )

Returns Financial

Independence Sustainability Increased

quality / skills Guaranteed

off - take Vested equity

40 %

60 %

Co - funding

Fund Manager

Benefits of NEF as

FM Highly regulated

Public Entity e . g .

PFMA Governance Reporting

Quasi Equity

Equity

Non Financial Support

• Are you black?

• Do you have a viable business idea and a

business plan?

• Does it have financial projections?

• Do you need funding of between R250 000

and R75 million?

• Have you registered a company?

• Do you have a valid RSA ID?

• Will you be directly, operationally involved?

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Come to the NEF today

Examples of

NEF Funding

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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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R14.8m R19.4m

CCT NEF IDC Technical Partner

AMAJUBA

R37m

60 HA raspberry farm in Amajuba district, KZN

Farm established on land secured through restitution

process

Supply local and export markets (70% of production)

Tap into growing popularity of raspberries

Supplies berries to Europe

Supplies berries to Woolworths

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A Sweet Deal for the People!

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Masiza Mussel Farm

(R9.9 million, Western Cape)

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• The commercialisation and an expansion of The Masiza Mussel Farm Pilot Project

• Masiza produces 739 tons p.a. of black mussels in Saldanha Bay, Western Cape

• Has a 100% off-take agreement with LaVie Seafood (the only processor of mussels in RSA)

Pre - NEF Investment

• Masiza Trust (6 farmers) & Blue Bay Aqua Farm

Pre - NEF Investment

• Masiza Trust, Blue Bay Aqua Farm, LaVie and

Blue Bay Workers Trust, Technical Partner

(Mentor) and NEF

• NEF 7 year Senior Loan of R4.95 million @ 8%

interest with a 1 year interest and capital

moratorium

• NEF 7 year Shareholders Loan of R4.95 million

@ 8% interest with a 1 year interest and capital

moratorium

• The NEF is targeting a minimum IRR of 8%

Shareholders

Funding Structure

Project Description

Investment

Rationale

• 62% owned by BEE and Located in poverty stricken area

• Supports economically sustainable and globally competitive marine aquaculture

sector

• Retention of 6 jobs and creation of 10 new jobs at primary farming level & 90 new

jobs at processing plant

Masiza Mussel Farm…

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Qumbu Shopping Center t/a Aduma Trading (Pty)Ltd -

Eastern Cape (R34 million)

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Project Salient Features

• Area: Eastern Cape, Qumbu

• Sector: Retail Property

• Deal type: Start-up

• Community shareholding: Aduma Trading (Pty) Ltd :

44% Qumbu Community Trust :

37% NEF: 19% (warehoused by

NEF) • NEF investment: 34 million

• Numbers of jobs created: 99

permanent and 151 temporary

iMbewu Fund deal summaries

1. Sale’s Hire is a Cape Town based

company that specialises in the hire of

builder’s equipment and other related tools.

The company has 20 company owned

outlets in the Western Cape. The company

intends to franchise 9 of their branches to

the current black management in those

branches.

2. Sale hire specialized in hire and sale of

tools and equipment in the construction

industry. Their product offering ranges from

access platforms, breakers , cleaning

equipment , compacting and concrete,

compressors , drills , generators and power

tools etc. These products service both the

DIY and construction industry.

Sale’s Hire

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Franchises Funded to Date Pre-approved Franchise Agreements

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uMnotho Fund Deal Summaries

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1. This is a greenfields project in the broiler industry. Velevutha Agricultural Consultancy’s operations will be in contract growing for chicken processing entities. It has secured a 10 year outgrower contact with Crown Chickens (Pty) Ltd, a subsidiary of the JSE listed Sovereign Foods Limited to grow over 6,3 million chickens per annum. The NEF has approved R44 million new ventures finance to fund the land, infrastructure and equipment required to kick-start the project. Velevutha represents a genuine broad-based BEE initiative including 33% women, 10% Staff and 7.5% Broad-Based BEE ownership as well as the creation of 12 new jobs and transformation of a white, blue-chip dominated industry.

R44 million in the Eastern Cape

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4. LA Crushers (Pty) Ltd is a mining contracting company based in Phalaborwa with operations in Limpopo and Mpumalanga. Having operated for more than 20 years, their client base includes blue chip companies like Phalaborwa Mining, BHP Billiton, Foskor and Exxaro. LAC’s Head Office is in Phalaborwa, and the company employs some 500 personnel. The NEF’s R45 million investment was to enable an acquisition of a 46% by a BEE Consortium, including the surrounding communities as well as for the business’ working capital requirements.

uMnotho Fund Deal Summaries 3. Just On Cosmetics (Pty) Ltd (JOC )is a black-owned

cosmetics retailer whose operations commenced in 1991. To date, the company boasts 38 outlets in the Eastern Cape, Kwa-Zulu Natal and the Free State, 2 warehouses, 36 vehicles more than 50 suppliers and over 600 employees. NEF has committed R50m in funds to the expansion of JOC. This has the potential of creating in excess of 200 jobs in the above mentioned provinces whiles growing a black-owned company.

R45 million in Limpopo

R50 million in the Eastern Cape

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6. The NEF has supported the introduction of a consortium of black women and the Nozala Trust as shareholders in the Ma-Afrika business, and funded the production of 2 films, namely A Million Colours and Winnie. Through this investment the NEF is supporting transformation in a key industry and has assisted in the facilitation of more than 350 jobs for crew and cast positions.

5. Desert Oil is a fuel branded marketing company. Institution of the company comes a result of Chevron divesting in Retailing in the industry in line with the regulation. The company began its operations in March 2010 before securing full funding. The assets acquired include supply agreements for 28 sights, pumps and tanks on all sites, and land and buildings for 4 sites. The entrepreneurs are strong individuals with 40 years experience in the industry indicating firm commitment to the transaction through a R2m contribution and 2 of the three directors moving from the Western Cape to the Northern Cape.

uMnotho Fund Deal Summaries

R7,950,000 in the Northern Cape

R30 000 000 in the Western Cape

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Enterprises Owned and Managed by Women

Investee % of Women

Shareholding

Sector Value

Wassa Trading 100 Retail (Energy) R12 460 000

Nawane Ciao Baby Cucina 100 Food Franchise R 3 900 000

Ranna Pazza Karoo Cattle 100 Food Franchise R 4 400 000

Tawana Business Projects 100 Construction R 2 500 000

Barcelos Mthatha 100 Food Franchise R 1 100 000

Safepak 50 Manufacturing R 4 400 000

Moshitoa Selections 50 HR Services R 3 000 000

Afripotego Business Projects 100 Construction R 2 750 000

Funded portfolio to date = 25%

Target = 40%

Women, be a part of this growth

MPUMALANGA NEF FUNDED PROJECTS YEAR ENDED MARCH

2013

Spar Kildare (Bushbuckridge) – R12, 3m. The store will be officially

launching on the 25th of July 2013.

Sambane Mining and Logistics (Ermelo) – R1.5m. The project is currently

operating.

Badplaas Saw Mill (Badplaas) – R9m. The project is in implementation

stage.

Bafune Construction and Electrical (Matsulu) – R1m. The project is

completed and company is sustainable.

Khwezi Lakusasa Trading (Nelspruit) – R1.4m. Currently operating

Mdokeni Transport and Tours (Waterval Boven) – R1,9m. Currently

operating

Lizin Transport Services (Machadodorp) – R2,1m. Currently operating.

Lo-Mhlangano Private Tours (Nelspruit) – R2,8m. Currently operating