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1
Southern African-German Chamber of
Commerce and Industry
Enterprise and Supplier Development
Fund
2
3
FUND MANAGEMENT
1. Fund black business
2. Pre-Investment Support
3. Post Investment Mentorship
ASSET MANAGEMENT
1. Investor Education
2. BEE Repository
3. Public Share Offers
4. Enterprise Development
Financial & non-financial support Culture of savings & investment
NEF MANDATE
Grow black economic participation
4 4 4
Alignment of Mandate to Government
Objectives Broad Based Black Economic Empowerment
The Codes of Good Practice
NEF Sectors in line with national industrial objectives
NE
F A
ct:
Ob
ject
ives
Th
e d
ti
Ob
ject
ives
Government Apex Priorities:
1) Acceleration of economic growth and development
2) Infrastructure development to achieve social and
economic goals
3) Effective second economy interventions and
eradication of poverty
4) Enhanced impact in areas of education and training
5) Strengthening the capacity and machinery of
government
6) Enhancing focus on international relations
The NEF’s priority sectors are set in terms of the alignment of the NEF’s strategy to that of the dti, NDP and
IPAP, which have identified arts and culture, rural development agro-processing, and labour intensive sectors.
Also constituting a key focus for the NEF is the area of construction, which is in line with the government’s
national infrastructure development plans
Sectors
NEF
• BPOs; Tourism; Biofuels; Construction;
Agri-processing; Transport; ICT &
Media;
Mining services; Franchising
Industrial Policy Action Plan:
• Automotives, components, medium and
heavy commercial vehicles
• Plastics, pharmaceuticals and
chemicals
• Clothing, textiles, footwear and leather
• Biofuels
• Forestry, paper, pulp and furniture
• Strengthening linkages between
cultural
industries and tourism
• Business process servicing
5
Element Weighting Points
(Amended Codes)
Weighting Points (Current Codes)
Ownership 25 20 plus 3 bonus points
Management control 15 plus 4 bonus points Management control - 10 plus 1 bonus
point
Employment equity – 15 plus 3 bonus
points
Skills development 20 plus 5 bonus points Skills development – 15
Enterprise and
supplier development
40 plus 4 bonus points Preferential procurement – 20
Enterprise and Supplier Development
– 15
Socio-economic
development
5 5
Total 118 107
6
Asset Management Department
Through the Asset Management Division, NEF:
provides black people with direct and indirect opportunities to acquire shares in State Owned and private business enterprises. A prime example of this is the NEF Asonge share scheme;
promotes the understanding of equity ownership among black people;
encourages and promote investments, savings and meaningful economic participation amongst black people; and
Performs a B-BEE advisory role.
7
NEF BEE Facilitator Status……
NEF is a facilitator of the Codes of Good Practice of the Broad-Based Black
Economic Empowerment Act, 2003 (“Codes”);
This means if NEF buys equity in a Company, the company is allowed to claim
BEE points on the following:
100% Black ownership;
40% Black Women; and
10% Designated Group,
without any acquisition of debts
This will be verified pro-rata according to NEF’s shareholding in that company.
8
NEF Funding Products
Rural & Community Development
Franchising
Procurement
Entrepreneurship
Expansion
Acquisition
Empowerment Dividend
Broad Based Black Economic Empowerment:
Ownership, Management Control, Skills
Development, preferential Procurement, Enterprise
and Supplier Development;
Black Women Participation;
Geographic Spread across all provinces;
Job Creation;
Entrenchment of BEE rights in early stages of
projects aligned to the NDP and IPAP strategy; and
Investment Return.
9
NEF Invested Process Report
10
NEF Investment by Sector
11
NEF investment by province
12
EC 8%
FS 1%
GP 50%
KN 22%
LP 5%
MP 3%
NC 1%
NW 1%
WC 9%
NEF Invested Portfolio by province by value for since inception - 31 March 2013
13
SAGCC Enterprise and Supplier
Development Initiative
Initiative aimed at assisting German Multinational
Companies integrate seamlessly with the current
B-BBEE dispensation, in relation to Enterprise and
Supplier development and contribute towards the
development and growth of South African SMME’s.
Mentorship
14
SAGCC Opportunity
14
SAGCC
Enterprise and
Supplier
Development
Fund
SAGCC
Measured
Entities
German
Multinationals
NEF
(Fund
Facilitator)
Joint
Steer
Co
SA German
Training
Services
SME’s •NEF Applicants
•Measured Entity
value chain
•Setting up of local
suppliers
•German Training
Services
Supply /
Offtake
Agreement
Preferential
Procurement
15
Enterprise and Supplier Development …
Paragraph 9.1.2.3 of Statement 400, Amended Code Series
400 – states that payments made by the Measured Entity to
suitably qualified and experienced third parties to perform
Enterprise and Supplier Development and Supplier
Development on the Measured Entity’s behalf.
Annexure 400(B) of Statement 400, Amended Code Series
400 – states that grant contributions made by a Measured
Entity receive 100% recognition on the benefit factor matrix.
15
16
Does the GCOCI ESD Fund comply with Code
400 stipulations? Code 400 stipulations NEF ESD Fund characteristic
Companies can pay their ED (1%
NPAT) contributions to a suitably
qualified and experienced third
party to perform Enterprise
Development on its behalf; and
Companies can pay their SD (2%
NPAT) contributions to a suitably
qualified and experienced third
party to perform Supplier
Development on its behalf.
Utilise E&SD contributions to
provide financial and non-
financial support to beneficiaries
over time;
NEF enters into agreements with
Measured Entity for this purpose
thus enabling Measured Entity
full recognition for E&SD upon
receipt by the beneficiary of the
financial or non-financial support;
Contributions shall be monetary
and non-recoverable against the
NEF, which shall in turn act as a
conduit to the beneficiaries.
17
Does the GCOCI ESD Fund comply with Code
400 stipulations?
17
Code 400 Stipulations SAGCC ESD Fund Characteristics
Paragraph 3.7 of Statement 400,
Amended Code Series 400 –
states that E&SD beneficiaries
are EME’s or QSE’s which are at
least either 51% black-owned or
51% black women owned.
Provides funding to beneficiaries
who meet the minimum criteria of
the NEF Act and B-BBEE Act.
The existing database of Imbewu
(SME’s) and RCF (agriculture) as
dictated to by the NEF mandate
demonstrates black ownership
levels of in excess of 50%.
18
Product / Fund Description Funding amounts
Entrepreneurship Finance For starting a new business R 250 000 – R 10 million
Procurement Finance For tenders and contracts R 250 000 – R 10 million
Franchise Finance For pre-approved franchise licenses R 250 000 – R 10 million
Acquisition Finance For black investors acquiring a stake in medium to
large companies R 2 million – R 50 million
Expansion Capital For growing an existing business R 250 000 – R 50 million
Project Finance * Participation in green-field projects R 5 million – R 50 million
Capital Markets Listing on the JSE or its junior Altx markets R 2 million – R 50 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
R 2 million – R 50 million
Rural and Community Development
Fund *
for agri-processing, tourism, mining & beneficiation,
manufacturing etc R 1 million – R 50 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 etc...
R 1 million – R 50 million
On average, business loans are repayable over 4 to 7 years, and up to 15 years where marked with an asterisk (*) below:
Funding Products in Detail
19
Qualifying Monetary Contributions
as per Code 400
Contribution Type Benefit Factor Tax Benefits to Measured Entity
Grant Contributions (100%) Contribution to NEF is tax
deductible
Interest Free Loans (70%) No donations tax deduction
Lower interest rate loans Prime rate – Actual rate None - interest is taxable
Standard loan to Black owned EME
and QSE
(50%) None - interest is taxable
20
Investment Proposal
Grant funding from Measured Entity (100% recognition);
Investment as risk capital through existing NEF products
within Imbewu, uMnotho and Rural & Community Funds;
Investments will utilise debt and quasi equity instruments;
40% of beneficiary funding will flow from ESD Funds and
60% from NEF funds;
ESD funds are priced at a fixed rate of 5% while the NEF
funds are priced using a matrix which incorporates all
elements of the Empowerment Dividend;
Key driver is joint investment with ESD Fund leveraging up
on NEF funding.
21
Benefits to Measured Entity
If sector focused, Measured Entity to assist with
pipeline through establishment of a Fund Steering
Committee;
Tax deduction of contribution to NEF;
High Impact development finance transactions in
advancement of B-BEE;
Ability of SAGCC with NEF as a suitably qualified
and experienced third parties to advance the
financial or non-financial support to identified
beneficiaries within the verification window period
(12 months).
22
Tax Effects
NEF is exempt from tax payment in terms of
s10(1)(cA) of the Income Tax Act 1962;
All grant contributions to NEF (donations) will not
attract donations tax (s56(1)(h)) and are tax
deductible (s18A deduction – limited to 10% of
taxable income before donation) in the hands of
the Measured Entity;
However donations may be subject to VAT if
there's a direct valuable benefit to the Measured
Entity.
23
Next Steps for SAGCC
1. Identify Measured Entities for E&SD support and focus;
2. Develop these opportunities in partnership with the
SAGCC and NEF;
3. Calculate E&SD contributions as a Measured Entity; and
4. Enter into MOU and/or Participation Agreement.
Modular Innovative Building Technologies (MIBT)
Project Description
MIBT is constructing a 400 panels per shift (2 shifts per day) full-scale manufacturing plant in
Lyttleton, Pretoria, which will produce Modular Innovative (“MI”) panels used in the construction
of energy efficient and environmentally friendly “green” buildings. The pilot phase will enable
MIBT to commission the plant, which will operate at up to 50% capacity, and will reach COD* in
January 2013. MIBT will pioneer the “green” building materials manufacturing industry in
Southern Africa
Empowerment Dividend
188 jobs (60 direct jobs / 128 indirect jobs)
Pioneering the Southern Africa alternative construction industry
Supporting a BEE project promoter (SME to industrialist advancement)
Project Size R35 million
NEF Investment
BFS: R15 million (35% JV participation interest, to be maintained at Financial Close)
Financial Close: R20 million debt funding (to be raised on successful completion of pilot)
Project Stage Pilot phase (proof of concept and off-take expansion)
Province Gauteng (Pretoria)
* COD – Commercial Operation Date
KC
ENERGY
KC Energy (Pty) Ltd
Project Description
KC Energy is constructing a Combined Heat and Power (CHP) plant in Newcastle with a
production capacity of 60 tph (steam) and 6 MW (electricity), which outputs will be sold to
Karbochem, a synthetic rubber manufacturer. The project will break ground in December 2012
and reach COD in September 2013. The project benefits include; (a) technology and production
processes that are environmentally friendly, (b) easing of Eskom’s grid capacity constraints, and
(c) discard coal dump alleviation and a closed loop production process with the cementitious
waste ash used to produce bricks via an integrated brick manufacturing plant
Empowerment Dividend
221 jobs (47 direct jobs / 174 indirect jobs)
Pioneering the South African cogeneration industry
Creating new industrial capacity by establishing a BEE KC Energy plant O&M company and an
integrated BEE-owned brick manufacturing plant
Project Size R150 million
NEF Investment
Equity (NEF): R48 million (R12 million for 40% ordinary equity / R36 million shareholder loan)
Debt (IDC): R102 million senior debt (excl. cost overrun facility)
Project Stage Construction (COD: September 2013)
Province KwaZulu Natal (Newcastle)
* tph – tonnes per hour
* O&M – Operation and Maintenance
* COD – Commercial Operation Date
Jozini Tiger Lodge and Spa 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; and
Accommodates 144 guests.
The community owns this 4-Star hotel!
Jozini Tiger Lodge
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Development of a black owned and operated hospital group;
Black partner successfully awarded 4 licenses to build 480 beds
nationally;
Project Partners have extensive experience in building &
hospitals from Greenfield's level;
NEF has secured 40% equity in the project vehicle from
inception. To date NEF has invested R84 million while Standard
Bank have approved a facility of R1 billion
http://www.standardbank.com/Article.aspx?id=-305&src=; and
To date BUSA has established one hospital in Western Cape
(Strand) while construction is underway on the hospital in
Gauteng.
BUSA Hospital Group
29
Ma-Afrika Films
Provid ED Funding of R30 million
for the production of “A million
Colours” and “Winnie”
Ma-Afrika Films main business is
the acquisition of film rights and
production.
Ma-Afrika Films vision is to
develop local stories that are of
international quality and which
can be marketed internationally.
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THANK YOU