WEL WELCOME COME TO National Empowerment Fund KZN REGIONAL OFFICE - - PowerPoint PPT Presentation

WEL WELCOME COME

TO

National Empowerment Fund

KZN REGIONAL OFFICE

Presenter

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• Mr. Phakamile Madonsela

Regional Manager - KwaZulu-Natal

History

• Established through the National Empowerment

Fund Act No 105 of 1998

• Government Agency under the Department of Trade

and Industry

• Capitalised by government in 2005 with R2.4billion
• Is represented in 8 Provinces (Gauteng, KZN, EC,

MP, NW, LP, WC, FS)

• Largest SME Funder in South Africa with more than

R5.1 billion worth of assets under management as

• f 31 March 2013

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NEF Mandate…

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“…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

SME Market Failures

The NEF seeks to address the following market failures:

• Lack of access to finance
• Lack of access to markets
• Lack of specific industry-knowledge and/or management experience
• Limited or no equity contribution
• SMEs have low bargaining power with suppliers and customers (they are price-takers)
• SMEs compete with well-established businesses
• They are often undercapitalized and have low asset base
• SMEs are characterised by lack of accurate and reliable information, and lack of

business-planning skills

• Lack of management depth – small and multifunctional, and often lack a range of

business-management skills

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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

R250 000 – R75 million

• Start-up
• Expansion
• Equity Acquisition

NEF Funding

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Suite of Products to Facilitate Business Growth

Start Start-

• Up

Up   CC & (Pty) Ltd CC & (Pty) Ltd   Acquire assets Acquire assets   Working capital Working capital   Bridging finance Bridging finance   Debt and Equity Debt and Equity   Black >75% Black >75%   Max. 7years

• Max. 7years

Expansion Expansion   CC & (Pty) Ltd CC & (Pty) Ltd   Debt & Equity Debt & Equity   Black >51% Black >51%   Max. 7years

• Max. 7years

Acquisition Finance   MBOs MBOs & Leveraged & Leveraged finance finance   Management buy Management buy-

• ins

ins   EST EST   Unlisted entities Unlisted entities   Debt & Equity Debt & Equity   Black >26% Black >26%   Max 7years Max 7years Liquidity & Warehousing Liquidity & Warehousing   Create sustainable BEE Create sustainable BEE

• wnership
• wnership

  Refinancing existing BEE Refinancing existing BEE structures structures   Capital Markets Capital Markets   Facilitate new Facilitate new entrants into JSE entrants into JSE & Alt & Altx

x

  Black >26% Black >26%  Max. 2years

Start-Up Expansion Maturity/Decline High Risk Low Risk Preferential Procurement

Preferential Preferential Procurement Procurement   CC & (Pty) Ltd CC & (Pty) Ltd   Acquire assets Acquire assets   Working capital Working capital   Bridging finance Bridging finance   Debt Debt   Black >75% Black >75%   Max. 7years

• Max. 7years

Start Start-

• Up

Up   CC & (Pty) Ltd CC & (Pty) Ltd   Acquire assets Acquire assets   Working capital Working capital   Bridging finance Bridging finance   Debt and Equity Debt and Equity   Black >75% Black >75%   Max. 7years

• Max. 7years

Expansion Expansion   CC & (Pty) Ltd CC & (Pty) Ltd   Debt & Equity Debt & Equity   Black >51% Black >51%   Max. 7years

• Max. 7years

  MBOs MBOs & Leveraged & Leveraged finance finance   Management buy Management buy-

• ins

ins   EST EST   Unlisted entities Unlisted entities   Debt & Equity Debt & Equity   Black >26% Black >26%   Max 7years Max 7years Liquidity & Warehousing Liquidity & Warehousing   Create sustainable BEE Create sustainable BEE

• wnership
• wnership

  Refinancing existing BEE Refinancing existing BEE structures structures   Capital Markets Capital Markets   Facilitate new Facilitate new entrants into JSE entrants into JSE & Alt & Altx

x

  Black >26% Black >26%

Start-Up Expansion Maturity/Decline High Risk Low Risk Preferential Procurement

Preferential Preferential Procurement Procurement   CC & (Pty) Ltd CC & (Pty) Ltd   Acquire assets Acquire assets   Working capital Working capital   Bridging finance Bridging finance   Debt Debt   Black >75% Black >75%   Max. 7years

• Max. 7years

NEF Funding Criteria

Each application is assessed in terms of the following criteria:

• Commercial Viability of the business
• Broad Based Black Economic Empowerment
• Black Women Empowerment,
• Black Managerial and Operational Involvement,
• Risk Sharing with Entreprenuer
• 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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Doc Requirement - Oil and Petroleum Applications

• Feasibility Study & Traffic Count / Due Diligence and Valuation Report
• Purchase and Sale Agreement
• DoE Site Licence and Retail Licence
• Business Plan and 5 Year Financial Projections
• 3 year Signed Annual Past Financial Statements
• Detail of Sales Volume and Value (Fuel, Convenience Shop and Other)
• Approval as a Franchisee (Letter)
• Proof of Successful Completion of Retail Training
• Copy of Franchise Agreement
• Copy of Lease Agreement
• Business Registration Documents and Tax Clearance
• Compliance Documents (EIA ROD & Municipality Approvals)

FICA Documents (Certified Copies of ID, Proof of Physical Address etc)

• Funding Requirements Breakdown and Quotations

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Imbewu Fund Product Offering

Procurement Finance Solutions Entreprenurial Finance Solutions Franchise Franchise Solutions Instruments

• Debt only
• Debt only
• Debt only

Degree of customisation

• Very Low
• Medium
• Very Low

Products

• Receivables finance
• Asset/lease finance
• Working capital
• Bridging finance
• Contract finance
• Working capital
• Factoring
• Asset/lease finance
• Franchise Finance backed

by co-operative agreements

• Other Franchises

Advantage for iMbewu

• Rapid turnaround
• Caters for volumes
• Mix of speed and

customization.

• Lowered risk
• Pre-approved Finance
• Rapid turnaround
• Caters for volumes

Amounts & invested period

• R250k< and <R10M
• 3 mths to 5 yrs
• R250K< and <R10M
• 3 to 7 yrs
• R250k< and <R10M
• Up to 7 yrs

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Franchises Funded to Date

Pre-approved Franchise Agreements

Shell Ultra City Estcourt (Pty) Ltd KZN Flagship BEE Petroleum Deal

Shell Ultra City Estcourt (Pty) Ltd KZN Flagship BEE Petroleum Deal

Umnotho Fund Products

Acquisition Finance Project Finance Expansion Capital Size of Investment

R5m to R75m R5m to R25m R5m to R75m

Principal goal

 To cater for BEE groups seeking to buy equity in existing businesses  To assist BEE with equity contribution to greenfields projects  To provide funding to entities that are already empowered but seek expansion capital.

Types of companies/projects

 Focus on medium to large companies  Partnerships between NEF, BEE, Management and

• ther investors

 Medium sized greenfield projects with total funding requirements of between R10m and R200m.  Already empowered companies.

Types of instruments

 Debt  Subordinated debt  Preference shares  Ordinary equity  Equity and quasi-equity instruments to support BEE.  Term loans  Equity  Quasi-equity

Black equity thresholds

Minimum of 25.1% Minimum of 25.1%. Minimum of 25.1%

Term of Investments /

• ther terms

 5 to 7 years  Clear exit strategy  LBO’s and SPV’s  Up to 10 years  Total project equity ≥ 40%  NEF exposure ≤ 50% of project costs  Proven management experience  Up to 5 years

Expected pricing



• Min. of 15%, nominal pre-tax

 NEF IRR – min of 18% pre tax  Linked to overdraft prime rate (debt)  Equity priced at target IRR

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R14.9million Ngwavuma Quarry

Quarry supplying crushed stones for road construction

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Comhealth develops healthcare infrastructure in black areas by offering comprehensive ambulatory healthcare. The first healthcare centre is in Chatsworth and it employs 12 support staff and partners 11 black healthcare providers from various disciplines, including general practitioners already practicing in the area. Mageba Projects CC KZN This is a 100% women owned civil construction business that further provides project management services. The NEF approved an investment of R12 million Senior Debt instrument. The business currently has a staff complement of 45

• employees. The NEF funding will result with 30

additional jobs. The company has managed and completed projects worth over R591,9million. Healthcare for the people R12 million Civil Construction

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Other Examples of NEF funding

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Enterprise Development Fund

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.

ED Fund Successes

Bakwena Ba Makgopa International Council of Swedish Industry (NIR)

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Current Partners…

• Multinationals
• BP; Shell, Chrysler,…
• State Owned Enterprises
• Transnet
• Communities
• Bakwena Ba Mokgopa, Bakgatla,…
• Listed Entities
• JSE Listed companies – Sappi, Meresky etc..
• Provincial Bodies
• Western Cape DEDAT,....
• International Partners
• UK, Germany, French, Swedish Companies in South Africa
• Franchisors
• Engen, BP, Famous Brands, McDonalds, Spur…etc

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SPF Mandate 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

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SPF Sectors

RENEWABLE ENERGY MINERAL BENEFICIATION AGRO- PROCESSING BUSINESS PROCESS OUTSOURCING INFRASTRUCTURE TOURISM Biofuels Biomass Biogas Solar Wind Hydro Exploration Mining Beneficiation Chemicals Food Sector Textiles Manufacturing Call Centres Telecoms Roads Airports Dam and Bridges Sewer and Services Stadiums Sky Towers

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Industrialise through infrastructure

R3,2 trillion

RCDF Product Offering

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Acquisition Finance New Venture Expansion Capital Investment Threshold R1m to R50m R1m to R50m R1m to R50m Trigger for RDCF participation Co-operative, community groupings arranged as a Trust or any legal entity, and workers trust Co-operative, community groupings arranged as a Trust or any legal entity, and workers trust Co-operative, community groupings arranged as a Trust or any legal entity, and workers trust Principal goal To cater for rural entrepreneurs or communities seeking to buy equity in existing rural & community enterprises. To assist rural entrepreneur's and communities with equity contribution towards establishment of sustainable new ventures in agri-sector. To facilitate involvement and

• wnership by communities in projects

promoting social upliftment. Types of companies/projects Focus on small to large ventures where Partnerships between NEF, BEE party or community entity, and technical Partner is involved. Medium sized new venture projects with total funding requirements of between R1m and R50m. Rural and community projects using entities such as Coops and private companies. Types of instruments Debt, Equity, quasi-equity and Preference Shares Debt, equity, quasi-equity Debt, equity, quasi-equity and preference shares Black equity thresholds Minimum of 50.1% Interest Rate Prime (+/-) Empowerment Dividend or Development impact influenced Term of Investments /

• ther terms

 5 to 10 years  Clear exit strategy  Up to 10 years  Total project equity ≥ 40%  NEF exposure ≤ 50% of project costs Up to 10 years

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KZN NEF Community Projects

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A Sweet Deal!

 60 HA raspberry farm in Amajuba district, KZN  Farm established on land secured through restitution process  Community beneficiaries with CCT governed by 11 trustees  Project taps into 482 000ha worldwide market  SA production only 100 ha currently  Project will be leading local supplier at full capacity  Supply local and export markets (70% of production)  Tap into growing popularity of raspberries

CR R14,8m R19,4m CCT IDC NEF

TECHNICAL PARTNER

AMAJUBA R37m

Compliance with R&CD product criteria

Broad based community ownership Sustainable projects with strong social benefits Strong technical partners Skills transfer Poverty alleviation

Strong empowerment dividend

Broad based economic ownership (1100 beneficiaries) Job creation (795 jobs including 91 permanent) Women empowerment ( 60% of workforce) Project location – rural KZN area

Local Economic benefits

Contribution of R9.8 m pa in salaries to local economy Electrification of houses Provision of land for new houses

Partnership with IDC

Leveraging IDC sector knowledge Contributing NEF know-how in financing rural communities

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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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4-Star Hotel in Hluhluwe Imfolozi Game Reserve

• This is a R24 million project
• The NEF invested R21million
• The Trust represents 260

Household beneficiaries in the Mpembeni Community (Northern Kwa-Zulu Natal)

• Big 5 Experience in the Oldest

Game Reserve in SA

• The hotel has 22 Villa Rooms,

Magwanani Spa, Curio Shop and Conference Facilities

• Accommodates 44guests and

Conference will hold 90guests

30 rm cottage and tents

• perated by the

park authorities 80 rm chalet

• perated by the

park authorities

Site

N2

R13.3m for Tala Game Reserve

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KZN NEF Pipeline Tourism Projects

Royal Thonga Safari Lodge

Royal Thonga Safari Lodge

Royal Thonga Safari Lodge

Simumye Zulu Lodge

Simumye Zulu Lodge

Nungwane Resort and Falls

Nungwane Resort and Falls

iPhiva Bush Lodge

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The communities of Umlazi and Lamontville townships in KZN, represented by Sizovuna Investments, acquired a 25% stake in Umlazi Mega City shopping centre with NEF funding of R52,8

• million. This genuine BB-BEE deal is delivering substantial social

returns to community beneficiaries at large, including job creation and skills development.

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R51.8 million for Umlazi Mega City

Turning Township Residents into Owners

R75 million for Mavundla Square - Greytown

Greenhouse Agriculture

Cucumebr

Growing tomatoes in Mathonsi

1st grade tomato

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• loured
• ured Pep

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Str traw awberry berry

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NEF INVESTMENT CRITERIA

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NEF Assessment Criteria

NEF utilize various due diligence modules to assess commercial viability

Commercial Technical Legal

• Industry / Sector Analysis
• Target Market Analysis
• Product / Service Analysis
• Marketing Strategy
• Pricing Strategy
• Competitive analysis
• Production Process
• Technology
• Supplier Analysis
• Capex Requirements
• Operating Cost Analysis
• Labour
• Regulations
• Constitutional Documents
• Material Contracts
• Shareholders Agreements
• Probity Checks

Management / Institutional Environmental Financial

• Assessment of Governance

Structures

• Organisational structure
• Group Structure
• Assessment of Key

Management

• Health and Safety Issues
• Land Claims
• Waste Management
• EIA
• Historical Financial Analysis
• Financial Projections
• Cash Flow Analysis
• Profitability Analysis
• Capital Structure
• Working Capital
• Valuation
• Capex

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NEF BUSINESS SUPPORT

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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

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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

NEF PERFORMANCE

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NEF Milestones

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Black SMEs

R5.1 billion

Job-creation

41 000 jobs

Fund A Woman

22%

NEF Investment by Sector

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NEF Investment By Region

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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

Disbursed in KZN:

• 2013: 10 worth R117.3 m (2012: 9 worth R167.6 m)

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Contact Details Telephone: (031) 301 1960 Address: Smart X-change Building Ground Floor 5 Walnut Road Durban Email: kzn@nefcorp.co.za mazibukop@nefcorp.co.za hlelas@nefcorp.co.za Web: www.nefcorp.co.za