National Empowerment Fund (NEF)“GROWING BLACK ECONOMIC P ARTICIPATION”

2012 Africa SMME Conference and Awards

Presented by

Mr Chris LouwRegional Manager: Western Cape

27 September 2012

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NEF Mandate …

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

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NEF MandateGrow black economic participation

Fund Management1. Fund black-empowered

businesses2. Business plan toolkit3. Mentorship support4. Early-stage investments

Asset Management1. Investor Education2. Public Share Offers3. Enterprise Development4. BEE Repository

Unpacking the NEF Mandate …

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Culture of savings & investmentFinancial & non-financial support

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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R250 000 – R75 million

Start-up

Expansion

Equity Acquisition

NEF Funding

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Offerings in line with Re-engineered Processes

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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 WarehousingThe 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 agri-processing, tourism, mining & beneficiation, manufacturing etc R1 million – R50 million

*Strategic Projects FundVenture-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 detailOn average, the NEF’s business loans are repayable over 4 to 7 years, and up to 10 years where marked with an asterisk (*) below :

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NEF Funding CriteriaEach application is assessed in terms of the following criteria: commercial viability of the business, minimum percentage of black ownership or interest, black women empowerment, black managerial and operational involvement, 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.

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Over R3.7 billion approved for black businesses

More than R2,7 billion disbursed

Over R680 approved for 233 SMEs

Over 29 000 jobs supported and created

Successes To Date

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R108m approved for 7 rural community deals

21.5% of the NEF’s portfolio compriseswomen-owned businesses

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NEF Approvals & Disbursements by Value

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NEF Portfolio by Sector by Value …

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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MentorshipOngoing 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

Enterprises Owned and Managed by Women

Investee % of Women Shareholding

Sector Value

Wassa Trading 100 Retail (Energy) R12 460 000

Nawane Ciao Baby Cucina 100 Food Franchise R 3 900 000

Ranna Pazza Karoo Cattle 100 Food Franchise R 4 400 000

Tawana Business Projects 100 Construction R 2 500 000

Barcelos Mthatha 100 Food Franchise R 1 100 000

Safepak 50 Manufacturing R 4 400 000

Moshitoa Selections 50 HR Services R 3 000 000

Afripotego Business Projects 100 Construction R 2 750 000

Funded portfolio to date = 25%Target = 40% Women, be a part of this growth

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espAFRIKA:-

Events management company. Owners of the world renowned Cape Town Jazz Festival.NEF provided R10m revolving credit facility.

• The transaction relates to the acquisition of 4 (four) farms that will cater for Citrus products from South Africa worldwide. • This investment will create an opportunity for the Emgro Properties (BEE Group) to own productive farms with established

markets in place. • The facilities will be through the guidance of Mouton Citrus (Pty) Ltd and assistance of daily running, operations,

marketing, technical know-how, distribution etc.  

Pre - NEF Investment

• MCPL (45%), Seald Sweet (45%) and Mgro (10.0%)

Post - NEF Investment

• MCPL 20%, Mgro 40%, Workers 25%, NEF (15%) Community warehoused

• Shareholder loans of R40 million, Interest charged at prime less 3% repayable over a 10 years period

• R10 million preference shares redeemable over a 10 years period with a 6% coupon rate.

• The NEF is targeting a minimum IRR of 15%

Shareholders Funding Structure

Project Description – Mgro MCPL Deal

InvestmentRationale

• 80% owned by BEE grouping (Mgro Group) including permanent farm workers, seasonal

workers and community of Citrusdal.

• Located in poverty stricken area of Citrusdal, Western Cape.

• Supporting a black company to own productive citrus farms with established global markets.

• Retention of 40 jobs and creation of 110 new jobs at primary farming level & 540 seasonal jobs

during harvesting 16

Masiza Mussel Farm (R9.9 million, Western Cape)

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• The commercialisation and an expansion of The Masiza Mussel Farm Pilot Project

• Masiza produces 739 tons p.a. of black mussels in Saldanha Bay, Western Cape

• Has a 100% off-take agreement with LaVie Seafood (the only processor of mussels in RSA)

Pre - NEF Investment

• Masiza Trust (6 farmers) & Blue Bay Aqua Farm

Pre - NEF Investment

• Masiza Trust, Blue Bay Aqua Farm, LaVie and Blue Bay Workers Trust, Technical Partner (Mentor) and NEF

• NEF 7 year Senior Loan of R4.95 million @ 8% interest with a 1 year interest and capital moratorium

• NEF 7 year Shareholders Loan of R4.95 million @ 8% interest with a 1 year interest and capital moratorium

• The NEF is targeting a minimum IRR of 8%

Shareholders Funding Structure

Project Description

InvestmentRationale

• 62% owned by BEE and Located in poverty stricken area

• Supports economically sustainable and globally competitive marine aquaculture sector

• Retention of 6 jobs and creation of 10 new jobs at primary farming level & 90 new jobs at processing plant

Masiza Mussel Farm…

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iMbewu Fund deal summaries

1. Sale’s Hire is a Cape Town based company that specialises in the hire of builder’s equipment and other related tools. The company has 20 company owned outlets in the Western Cape. The company intends to franchise 9 of their branches to the current black management in those branches.

2. Sale hire specialized in hire and sale of tools and equipment in the construction industry. Their product offering ranges from access platforms, breakers , cleaning equipment , compacting and concrete, compressors , drills , generators and power tools etc. These products service both the DIY and construction industry.

Sale’s Hire

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The community of Middledrift formed the Gwebindlala Trust, through which they provided land for dairy farming. Through funding provided by the NEF to the value of R9, 920, 000, Middledrift Dairy established a commercial dairy farm. The funds have been utilised for start-up costs, acquisition of assets, machinery and working capital. Middledrift Dairy has an off-take agreement with Clover.

Mohale Agricultural Cooperative approached the NEF for funding assistance to the tune of R 13,7 million for the purchase of poultry and vegetable farm. Their product line includes chickens, cabbages and maize. The 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.

R9, 9 million in Middledrift

R13,7 million Limpopo Province

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Examples of NEF funding

Franchises Funded to DatePre-approved Franchise Agreements

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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.

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Limited management time to spend on non-core business

Insufficient knowledge of BEE ED requirements Insufficient resources and skills to support BEE start-

ups, which require significant skills injection to achieve economic viability

Poor economies of scale achieved based on number of initiatives

Lack of time and resources to identify sustainable Beneficiaries;

Lack of a business model to maximise recognition of contribution;

Lack of a process to monitor progress on projects and to introduce corrective measures, where necessary;

Delaying implementation until the right partner comes along; and

Reservation of spending lump sum due to fear that money will be wasted or misused.

Why Enterprise Development?

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Approach

NEF ED FUND

IMBEWURURAL AND COMMUNITY

FUND

MEASURED ENTITY

Accounting Entry(No SPV)

3% of NPAT

Up to 40% of funding

Risk

Cap

ital

(Pre

f sha

res)

-Direct ED points on scorecard-Socio-economic return

-Financial returns

-Ease gearing-Bridge gap for own

contribution-Risk sharing-Turnaround

• Are you a black entrepreneur?

• Do you have a viable business idea and a

business plan?

• Does it have financial projections?

• Do you need funding of between R250 000

and R75 million?

• Have you registered a company?

• Do you have a valid RSA ID?

• Will you be directly, operationally involved?

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Come to the NEF today

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Thank youContact Details

Northern Cape and North West offices to be opened during 2012

www.nefcorp.co.za