IDFC IDFC PRESENTATION TOPRESENTATION TO

SMALL BUSINESS DEVELOPMENTSMALL BUSINESS DEVELOPMENT

PORTFOLIO COMMITTEEPORTFOLIO COMMITTEE

IDFC IDFC PRESENTATION TOPRESENTATION TO

SMALL BUSINESS DEVELOPMENTSMALL BUSINESS DEVELOPMENT

PORTFOLIO COMMITTEEPORTFOLIO COMMITTEE

IDFC LEGISLATIVEIDFC LEGISLATIVE

Provincial Development Finance

Institution;

Established through an act of the KZN

Provincial Legislature, i.e. Ithala

Development Finance Corporation Act,

Act No. 5 of 2013;

Wholly owned by the KZN Provincial

Government and reports to the

Department of Economic

Development, Tourism and

Environmental Affairs;

Been in existence for over 50 years having assumed various names;

Headquartered in Umlazi, a township located South of Durban next to the old airport

MANDATE, MISSION & VISION MANDATE, MISSION & VISION

Mission:

“To drive economic

development and

empowerment, whilst

remaining financially

sustainable”

Mandate:

“Promote, support and

facilitate social and

economic growth in the

province of Kwazulu-

Natal”

Vision:

“To be the catalyst for

growth, economic

development and

empowerment”

IDFC STRUCTUREIDFC STRUCTURE

OBJECTIVE OF INSTITUTIONOBJECTIVE OF INSTITUTION

REPOSITIONING STRATEGY – THE BACKGROUND REPOSITIONING STRATEGY – THE BACKGROUND

IDFC REPOSITIONED THE ORGANISATION TO

ADDRESS THE FOLLOWING:

Financial sustainability

A lack of funding to drive investments

Limited number of Ithala-initiated economic

development projects

Weak business support services reflected in

the high failure rates of funded SMME’s and

Co-operatives

Lack of alignment with government

programmes, especially on rural economic

development and agricultural revolution

REPOSITIONING STRATEGY – THE BACKGROUND REPOSITIONING STRATEGY – THE BACKGROUND

OBJECTIVES OF THE

REPOSITIONING STRATEGY ARE

TO ENSURE THAT ITHALA:

Delivers effectively and

efficiently on its mandate in a

dynamic and challenging

environment

Aligns its core business

activities to the Provincial

Growth and Development

Strategy (PGDS)

Reclaims its historical relevance and position itself as the premier development agency in the Province

Becomes financially sustainable and less reliant on government funding to drive its investment programmes

REPOSITIONING STRATEGY - PHASES REPOSITIONING STRATEGY - PHASES

• The overarching corporate strategy consists of 3-phases over a 5-year time horizon.

• Phase 1 seeks to remediate the business;

• Phase 2 builds on the revised business platform;

• Phase 3 extends Ithala’s focus and widens its set of activities.

IDFC STRUCTUREIDFC STRUCTURE

IDFC has three Strategic

Business Units (SBU’s)

Business Finance Business Finance – provides

financial and non-financial

support to SMME’s and Co-

operatives

PropertiesProperties – provides

physical infrastructure to

retail, light industrial, heavy

industrial and SMME

businesses

Ithala Limited Ithala Limited – is a ‘ring-fenced’ institution, wholly owned by IDFC that provides financial services

to the retail market.

BUSINESS FINANCE – MODEL OF OPERATIONBUSINESS FINANCE – MODEL OF OPERATION

•Financial support•Non-financial support•Financial support•Non-financial support

Value PropositionValue Proposition Delivery ModelDelivery Model•Business Centres located in 5 out of 11 districts in KZN

•Business Centres located in 5 out of 11 districts in KZN

Target CustomersTarget Customers

•SMME’s•Co-operatives•SMME’s•Co-operatives

PartnersPartners

•Provincial Government•Service providers•Provincial Government•Service providers

Core ActivitiesCore Activities•Origination•Technical evaluation•Post Investment Management•Business support

•Origination•Technical evaluation•Post Investment Management•Business support

Cost StructureCost Structure

65% - 55 employees15% - professional services20% - other

65% - 55 employees15% - professional services20% - other

FundingFunding•Interest Income•Interest Income •Service charges•Service charges •Government Grants•Government Grants

BUSINESS FINANCE – KEY INFORMATIONBUSINESS FINANCE – KEY INFORMATION

Footprint:

Business centres located in Umlazi,

Durban, Pietermaritzburg,

Richards Bay, Newcastle and Port

Shepstone;

Financing Products:

• Micro-Finance

• Procurement Finance

• Agri-Finance

• Asset Finance

• Franchise Finance

• Commercial Property Finance

• Structured/Project Finance

Financial and Investment Performance• Profitability: Turnaround from R76m loss in FY 2012/13 to R16m profit in 2013/14.• Investment: Book size is +/-R900m and Non-Performing Loans have been reduced from 61% in 2012/13 to 20% in 2013/14.

PROPERTIES – MODEL OF OPERATIONPROPERTIES – MODEL OF OPERATION

•Premises•Implementing Agent•Premises•Implementing Agent

Value PropositionValue Proposition Delivery ModelDelivery Model• Property development• Property portfolio

(retail, industrial and SMME)

• Property development• Property portfolio

(retail, industrial and SMME)

Target CustomersTarget Customers• Retailers• Industrialists• SMME’s• Government Departments

• Retailers• Industrialists• SMME’s• Government Departments

PartnersPartners•Eskom•Municipalities•Provincial Government

•Eskom•Municipalities•Provincial Government

Core ActivitiesCore Activities• Leasing• Bulk services• Project management

• Leasing• Bulk services• Project management

Cost StructureCost Structure15% - 210 employees40% - Bulk services,20% - Rates & Taxes10% - Maintenance

15% - 210 employees40% - Bulk services,20% - Rates & Taxes10% - Maintenance

FundingFunding•Rental Income•Rental Income •Service recoveries•Service recoveries •Management Fees•Management Fees

PROPERTIES – KEY INFORMATIONPROPERTIES – KEY INFORMATION

Footprint:

• Twenty one (21) shopping centres located in

rural and peri-urban towns

• Three (3) industrial estates located in

Mandeni (KZN-North), Ladysmith and

Newcastle

• Eight (8) light industrial parks seven (7)

located in Durban and one (1) in Richards

Bay;• Forty (40) SMME parks, eight (8) located in

Midlands, thirteen (13) located in Northern

region and nineteen (19) located in

Southern and Central region

Property Portfolio (Size – GLA):

• Total portfolio – 1,176,279 GLA

• Retail – 138,443k GLA

• Industrial Estates – 847,988 GLA

• Light Industrial Parks – 132,930 GLA

• SMME Parks – 56,918 GLA

Financial:• Profitability: Profit of

R126m in 2013/14.

• Investment: The property portfolio is valued at approximately R1.8 billion and yields approximately 5% on average per annum

ITHALA SOC LIMITED – MODEL OF OPERATIONITHALA SOC LIMITED – MODEL OF OPERATION

•Deposits•Personal Loans•Home Loans•Insurance

•Deposits•Personal Loans•Home Loans•Insurance

Value PropositionValue Proposition Delivery ModelDelivery Model

• Branch network• Branch network

Target CustomersTarget Customers

• Retail market• Retail market

PartnersPartners

•Service providers•Insurance Underwriters•Service providers•Insurance Underwriters

Core ActivitiesCore Activities• Deposit taking• Lending• Insurance

• Deposit taking• Lending• Insurance

Cost StructureCost Structure

• 50% - 444 employees• 30% - 49 Branches• 20% - Other

• 50% - 444 employees• 30% - 49 Branches• 20% - Other

FundingFunding•Interest Income•Interest Income •Service fees•Service fees •Deposits•Deposits

ITHALA SOC LIMITED – KEY INFORMATIONITHALA SOC LIMITED – KEY INFORMATION

Footprint:

Forty-nine branches spread across the

length and breath of KZN and

predominantly in rural and peri-

urban towns;

Financing Products:

• Deposits

• Personal Loans

• Home Loans

• Insurance – Short and Long term

• Vehicle and Taxi Finance

• Financial and Investment Performance• Profitability: Loss of R68 million in FY 2013/14 • Investment: Book size is +/- R2.15

billion• Deposits: Customer size is +/- R1.98 billion

SMME & COOPERATIVESSMME & COOPERATIVES

IMPACT ON IMPACT ON SMME & SMME &

COOPERATIVECOOPERATIVESS

2013-14 CLOSE-OUT SUMMARY2013-14 CLOSE-OUT SUMMARY

Business Type R'000 Gender R'000 Age Sector R'000

SMME 795,125 Male 587,373 Adult 614,251 Manufacturing 123,659

Co-operatives 19,525 Female 141,926 Youth 200,400 Agriculture 112,867

Both 85,261 Trade & Services 183,712

Construction & Tourism 374,887

Co-operatives 19,525

Total 814,650 814,650

Business Type R'000 Gender R'000 Age Sector R'000

SMME 428,734 Male 258,900 Adult 302,061 Manufacturing 46,466

Co-operatives 2,781 Female 129,455 Youth 129,454 Agriculture 109,328

Both 43,152 Trade & Services 95,407

Construction & Tourism 176,095

Co-operative 4,219

Total 431,515 431,515

Appr

oval

sAp

prov

als

Adva

nces

Adva

nces

Districts:Ethekwini, Ugu, Umgungundlovu, UThukela, UMzinyathi, Amajuba, Zululand, UMkhanyakude, UThungulu, ILembe, Sisonke

2013-14 CLOSE-OUT SUMMARY2013-14 CLOSE-OUT SUMMARY

Districts:Ethekwini, Ugu, Umgungundlovu, UThukela, UMzinyathi, Amajuba, Zululand, UMkhanyakude, UThungulu, ILembe, Sisonke

Business Type Gender Age Sector

SMME 209 Male 115 Adult 147 Manufacturing 12

Co-operatives 17 Female 80 Youth 79 Agriculture 31

Both 34 Trade & Services 21

Construction & Tourism 65

Total 226 226 128

Business Type Gender Age Sector

SMME 4,339 Male 2,914 Adult 3,530 Manufacturing 144

Co-operatives 73 Female 1,262 Youth 882 Agriculture 991

Both 236 Trade & Services 437

Construction & Tourism 2,767

Co-operatives 73

Total 4,412

4,412 4,412

No.

of B

usin

ess

Fina

nced

No.

of B

usin

ess

Fina

nced

No.

of J

obs

Faci

litat

ed

No.

of J

obs

Faci

litat

ed

SMME PORTFOLIO – MIDLANDS REGIONSMME PORTFOLIO – MIDLANDS REGION

SMME PORTFOLIO – NORTHERN REGIONSMME PORTFOLIO – NORTHERN REGION

SMME PORTFOLIO – SOUTHERN & CENTRAL REGIONSMME PORTFOLIO – SOUTHERN & CENTRAL REGION

SMME PORTFOLIO – SUMMARY SMME PORTFOLIO – SUMMARY

473 of the 595 units were occupied as at the end of July 2014.

Thankyou