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WELCOME

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

of 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

StartStart--UpUp

CC & (Pty) LtdCC & (Pty) Ltd

Acquire assetsAcquire assets

Working capitalWorking capital

Bridging financeBridging finance

Debt and EquityDebt and Equity

Black >75%Black >75%

Max. 7yearsMax. 7years

ExpansionExpansion


Debt & EquityDebt & Equity



Acquisition Finance

MBOsMBOs & Leveraged& Leveraged

financefinance

Management buyManagement buy--insins

ESTEST

Unlisted entitiesUnlisted entities



Max 7yearsMax 7years

Liquidity & WarehousingLiquidity & Warehousing

Create sustainable BEE Create sustainable BEE

ownershipownership

Refinancing existing BEERefinancing existing BEE

structuresstructures

Capital MarketsCapital Markets

Facilitate new Facilitate new

entrants into JSEentrants into JSE

& Alt& Altxx


Max. 2years

Start-Up Expansion Maturity/Decline

High Risk Low Risk

Preferential

Procurement

Preferential Preferential

ProcurementProcurement





Debt Debt



StartStart--UpUp





Debt and EquityDebt and Equity



ExpansionExpansion





MBOsMBOs & Leveraged& Leveraged

financefinance

Management buyManagement buy--insins

ESTEST

Unlisted entitiesUnlisted entities



Max 7yearsMax 7years

Liquidity & WarehousingLiquidity & Warehousing

Create sustainable BEE Create sustainable BEE

ownershipownership

Refinancing existing BEERefinancing existing BEE

structuresstructures

Capital MarketsCapital Markets

Facilitate new Facilitate new

entrants into JSEentrants into JSE

& Alt& Altxx


Start-Up Expansion Maturity/Decline

High Risk Low Risk

Preferential

Procurement

Preferential Preferential

ProcurementProcurement





Debt Debt



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

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

other 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 /

other 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



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 ownership 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 / other 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 operated by the park authorities

80 rm chalet operated 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

Simumye Zulu Lodge

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

Coloured Peppers

Lettuce

Strawberry

Fresh Herbs

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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EC8%

FS1%

GP50%

KN22%

LP5%

MP3%

NC1%

NW1%

WC9%

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: [email protected]

[email protected]

[email protected]

Web: www.nefcorp.co.za

mailto:[email protected]



http://www.nefcorp.co.za/