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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
25
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 Investment to date R40 million
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
Project Development Stage Financial Close
NEF Investment to date R260 million
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
Project Development Stage Financial Close
NEF Investment to date R100 million
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.
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:
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
R1 million – R50 million
4 uMnotho Fund
Funding of New Ventures, Acquisition, Project Finance, Expansion, Capital Markets, Liquidity & Warehousing
R2 million – R75 million
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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Investee Stories Building the Economy, Sharing the Wealth
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.
Building the Economy, Sharing the Wealth
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
Building the Economy, Sharing the Wealth
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.
Building the Economy, Sharing the Wealth
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Investee Stories
Linen Tech (R10 million)
Building the Economy, Sharing the Wealth
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
Building the Economy, Sharing the Wealth
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
Building the Economy, Sharing the Wealth
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.
Building the Economy, Sharing the Wealth
Afripotego IT & Construction (Pty) Ltd R2.75 million
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Investee Stories Building the Economy, Sharing the Wealth
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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Investee Stories Building the Economy, Sharing the Wealth
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