PRESENTATIONTO LAND AND ENVIRONMENTAL AFFAIRS

COMMITTEE01 APRIL 2003

Moeketsi Mofokeng

Khula Enterprise Finance

Main shareholder is DTI

Established in 1996

Independent board of directors; sub committees; internal and external auditors

Wholesale financier not retailer

Facilitates access to finance

Vision

To become a financing partner of first choice in SME finance.

Mission

To facilitate sustainable access to finance, by engaging with the private and public sector, through innovative products in

order to promote SME growth.

General external objectives

Be responsive to the needs of clients and stakeholders

Facilitate mobilisation and flow of resources (public & private sector) for SMME development

Support the promotion of a conducive legislative environment for the SMME sector

Key strategic objectives

To achieve a return on investment that ensures retention of the capital base

To offer sustainable credit and capital through a network of efficient network of distribution intermediaries

To acquire,retain and develop the Human resources to meet the short,medium and long term needs of Khula

To develop and implement an integrated business marketing strategy

Khula offers assistance through

Credit Guarantees – Banks– Must be South African– Owner/ Manager– Business must be in SA– Must be economically viable– Technical skills essential– 10% own contribution recommended

Khula assists throughBusiness Loans – RFI’s & MCO’s

– Capacity Building grants– Low interest loans

Equity Funds– JV, Equity Stakes

Land Reform Credit Facility– Transfer of land PDIs– Significant shareholding– Transfer of skills

Loans Representation in S.A. Limpopo 2 RFI’s; 2MCO’s

North West 1 RFI; 1 MCO

Gauteng 7 RFI’s; 1 MCO

Mpumalanga 3 RFI’s; 5 MCO’s

Freestate 1 RFI; 0 MCO’s

KwaZulu Natal 3 RFI’s; 5 MCO’s

Northern Cape 1 RFI; 0 MCO’s

Eastern Cape 2 RFI’s; 4 MCO’s

Western Cape 2 RFI’s; 0 MCO’s

Mentorship

Mentorship – 8 Regional Offices– BUSINESS PLANS– Loans up to R300 000

Client Contribution 25% Khula 75%– Loans above R300 000 – R5 m

Client Contribution 50% Khula 50%

Free mentorship for up to 3 months after loan is granted

SEGMENTATION OF KHULA PORTFOLIO

Micro-KhulaStarts/RFI’s, Survivalist

Very small-RFI’s /KhulaStarts/Portfolio Guarantees/ Sizabantu

Small (lower end) – Credit Guarantees

Small (upper end) – Equity Funds

Image of Khula or its agentsUnisa Study, 2001

Khula Programs % who would recommend Khula

KhulaStart 88

RFI 94.3

CGS Individuals 84.5

CGS Portfolio 76.8

Thuso Mentorship 80.6

HDE Awareness of organisationsUCT Study, 2002

0

10

20

30

40

50

60

70

Khula Ntsika LBSC DTI BusPartners

HDE Knowledge of assistanceUCT Study 2002

6768697071727374757677

Khula Ntsika LBSC DTI BusPartners

Have been assistedUCT Study

0123456789

10

Khula Ntsika LBSC DTI BusPartners

Problems Faced By Entrepreneurs

Education and training TechnologyInfrastructure and competitionCrimeAccess to markets/ Lack of demandAccess to finance

Obstacles to finance

CollateralRefusal to use own collateralOwn contributionBlacklistingFinancial records & Business PlansHigh risk entrepreneurs

Way Forward

Growth StrategiesMobilise banks for mass or scale delivery.

– Training workshops with bankers and marketing

– Mainstream and roll-out a credible mentorship

To stimulate the provision of venture [start-up] and small scale equity finance.

To research and package innovative products that can mobilise and attract the financial industry participation in Khula mandate.

Build on nation wide communication campaign

Growth Strategies Segment the market and design a suitable product

mix and structure accordingly.– Emerging and matured markets

To support the distribution network in line with market needs.– capacitate and develop to serve the all market

segments [from under-banked to bankable enterprises]– To improve outreach and efficiency of emerging

market network Improve market access through business linkage

initiatives

Growth Strategies

Continue to engage government on issues relating to the mandate of Khula– exploring the retail option

Key Performance Indicators/Targets - Credit Guarantees

2000/01 2001/02 2002/03 2003/04 2004/05 2005/06

R180m R182m R258m R310m R341m R375m

Individual R241m

Portfolio R10m

TTGF R6m

Rehab R0.5m

Key Performance Indicators/Targets Regional Equity Funds

2000/01 2001/02 2002/03 2003/04 2004/05 2005/06

Nil R7mil R14mil R21mil R23mil R27mil

Key Performance Indicators/Targets

Mentorship Programme Targets Number of business plans approved

by banks Not less than 710

Rand value of business plans approved by banks

Not less than R142 million

Number of post loans mentoring visits Not less than 1130

Thank You For Your Support