Assistance Provided to Export Oriented BusinessesBriefing to the Select Committee on Trade and International Relations

1 September 2010

Presenters

1. Ms Philisiwe ButheleziChief Executive Officer

2. Mr Andrew WrightChief Financial Officer

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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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Key Strategic Objectives …

Promote and support business ventures pioneered and run by black people;

Promote the understanding of equity ownership among black people;

Provide black people with direct and indirect opportunities to acquire share interests in State Owned and private business enterprises;

Encourage and promote investments, savings and meaningful economic participation among black people.

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The Strategic Planning Framework …

Broad Based Black Economic EmpowermentThe Codes of Good Practice

NEF priority sectors aligned with IPAP sectors

NEF

Act

:O

bjec

tives

The

dti

Obj

ectiv

es

Sectors NEF/ ASGISA: • BPOs; Tourism; Biofuels; Construction; Agri-processing; Transport; ICT & Media; Mining services; Franchising Industrial Policy Action Plan:• Capital/ Transport Equip.• Metal Fabrication• Chemicals & Plastics• Pharmaceuticals• Forestry, pulp, paper & furniture• Automotive

Government Priorities:

1) Acceleration of economic growth and transformation, creating decent work and sustainable livelihoods;

2) Infrastructure development to achieve social and economic goals and rural development;

3) Skills and human resource development;4) Build a developmental state and improve

public service.

Alignment of NEF Strategic Objectives to National Performance AgreementOutcome 4: Decent employment through Inclusive growth

Promotion and support of business ventures pioneered and run by black people, thereby directly contributing to the outcome of inclusive economic growth.

Contribution to the fourth output: Raising South Africa’s competitiveness through investments made by the NEF’s

Strategic Projects Fund.

Contribution to the sixth output : Critically review our support for cooperatives and small businesses .. address the

circumstances of workers and enterprises in the survivalist sectors of the economy. The NEF has specific and measurable targets in terms of the number and value of

deals. The provision of financial and non-financial support (mentorship programme) to small

business. Focus on increasing sustainable investment to strengthen the NEF’s balance sheet. Development of new models for co-operative enterprise such as using the OVOP

model from Japan.

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“The Empowerment Dividend”

Broad Based Black Economic EmpowermentOwnership, management control, employment equity, skills 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 …

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Key Positioning Objectives of the NEF … To focus exclusively on providing investment funding to black empowered businesses

and wealth creating investment opportunities for black individuals; To be experts in investment and funding structures for black empowered businesses

and black individuals in direct support of black empowerment policy; To stimulate sector targeted economic growth, job and wealth creation as a direct

product of investment and funding activities; To act as a warehousing conduit for the transfer of valuable equity allocations and

investments to the black public; To ensure broad-based and sustainable empowerment; To maximize the empowerment dividend in parallel to the financial dividend; To create a prudently and effectively managed fund with a time horizon of at least 10

years; To maintain and grow the capital base of the NEF for the benefit of its beneficiaries

and provide a self sustainable real return to stakeholders; To differentiate against and work in syndication with existing business funding offerings

by other operating Development Finance Institutions (DFIs) in promoting BB BEE; To work in partnership with both public and private sectors;

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Additional Key Positioning Objectives …

To evaluate the effectiveness of black empowerment policy and the development thereof;

To capitalise on the status of being the only gazetted “BEE Facilitator” and apply this status in the development of key sectors and the transformation thereof:

Full black ownership status in the case of equity warehousing;

Providing a BEE recognised fund allowing for full recognition for Enterprise Development scores for contributing companies;

Effectively investing Enterprise Development contributions into mandated and recognised activities;

Focusing on Enterprise Development contributions as a key source of additional capital for the NEF.

The Promotion of Exports by the NEF

The promotion of exports is built into the NEF strategic plan as a

product of the output applied to the dti regarding the need to raise

our competitiveness, to raise our net exports and to grow our trade

as a share of world trade.

Addressed in the sourcing and evaluation of export orientated

transactions within the existing product offering of the NEF.

Given the growth potential for exporters, should Black empowered

companies applying for finance from the NEF be positioning

themselves for export, this aspect is used as a motivator for

funding.

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The Promotion of Exports by the NEF

Once invested, the NEF actively seeks ways and means of

assisting investees seek new export markets.

These initiatives will involve:

Introducing the investees into the dti Export Marketing &

Investment Assistance Scheme (EMIA),

Facilitating their participation on state and trade visits to

countries of potential new foreign markets, and

Sponsoring their participation on trade shows through the post

investment non-financial support initiatives.

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Standard NEF Investment Criteria

Overall sustainability of the Black empowered business is firstly considered.

Specific criteria for funding will vary depending on the type of funding requested,

however generic criteria include:

The Black applicant/s should be actively involved in the operation of the

business;

There should be a minimum Black ownership of 25.1% or 50.1%, depending

on the funding product type;

There should be clear industry experience of the BEE party/ies or non-BEE

partners;

The business model must be financially sustainability.

Export Oriented Investees

The NEF has identified five (5) businesses as examples of Black empowered

businesses that the NEF has funded which are currently involved in export

activities or are positioning themselves to do so and in sectors aligned to IPAP:

Amajuba Berries (Pty) Ltd

DMS Powders (Pty) Ltd

Safepak (Pty) Ltd

Colliery Dust Control (CDC)

Sun Space and Information Systems (SunSpace) (Pty) Ltd

Amajuba Berries & Safepak have previously been considered for sponsorship

by the NEF for exhibitions at international trade shows.

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Export Oriented Investees

Company Name Sector Proposed Markets Motivation

1. Amajuba Berries (Pty) Ltd

Fresh Produce Europe Markets Sells fresh raspberries to the European markets. By undertaking trade missions to Europe, the company will be exposing itself to its target market. The company cannot sell all its produce in the local market as the local economy has a limited need for the product.   

2. DMS Powders (Pty) Ltd

Manufacturing African countries, Australia and some Asian countries

Currently export to other African countries, Australia and some Asian countries. They are currently facing competition from Chinese firms, particularly in the East. Their product is used in the mining and scrap metal industries so would be suitable for mineral rich countries.

3. Safepak (Pty) Ltd Manufacturing European Markets Safepak manufactures a variety of plastic packaging for retailers in SA and overseas. They have recently launched an apple bag product that has attracted interest from overseas (UK). Any additional exposure to overseas (particularly the European) markets would assist in fast-tracking the product launch and take-up in the market.

Export Oriented Investees

Company Name Sector Proposed Markets Motivation

4. Colliery Dust Control (CDC)

Manufacturing European Markets CDC specializes in the manufacture of components for an integrated dust suppression system for use on continuous miners in underground coal mines. Their products are being used on a small scale at mines in Botswana and Australia. The intent is to expand this market and penetrate the European market. They have also been approached by several mines in China.

5. Sun Space and Information Systems (SunSpace) (Pty) Ltd

Manufacturing African countries (Algeria, Nigeria & Kenya to begin with); Australia and European countries.

SunSpace is a market leader in the design and manufacture of satellites. Their business model relies having on support from governments. It is thus important that they are properly positioned with the South African government to benefit from existing inter-governmental relationships. There is a need to especially strengthen relationships with various African countries (Algeria, Nigeria & Kenya to begin with); Australia and European countries.

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Contact information …

The National Empowerment Fund

West Block 187 Rivonia Road

Morningside, 2057

PO Box 31, Melrose Arch

Melrose North, 2076

Tel: (+27)-11- 305 – 8159

Fax:(+27) – 11 – 305 – 8316

buthelezip@nefcorp.co.za

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THANK YOU