Driving Inclusive Economic Growth Across all...

Driving Inclusive Economic Growth

Across all Provinces Presented to Select Committee on Trade & International Relations,

25 Feb. 2015, 10:00 - 13:00, Parliament of the Republic of S.A.

Presenters

1. Ms Philisiwe Mthethwa Chief Executive Officer

2. Mr Setlakalane Molepo Divisional Executive: Rural

& Community Development

3. Mr Mziwabantu Dayimani General Counsel

4. Ms Zama Khanyile Head: uMnotho Fund

2

3

Contents

3

Section Slide

1 About the NEF 4

2 Growing Black Industrialists 9

3 Provincial Dynamics 17

4 Investment Philosophy and Achievements

27

5

Administrative & bureaucratic impediments

which delay, obstruct and may destroy black

business 31

6 Appendices 35

7 Investee Stories 63

About the NEF

4

NEF Mandate…

5

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.

The NEF is an agency of the dti and is the

only DFI exclusively mandated to grow

B-BBEE

5

Our Pledge to the People

As a member of the NEF family, I hereby solemnly

pledge to remain faithful to the values and ethos of

the NEF, because as an instrument in the quest for

inclusive growth, I recognise that the economic

dreams and aspirations of black people depend on my

willingness to serve with truth in my heart. In taking

the hopes of black economic freedom to greater

heights, and growth itself to the skies, I hereby

undertake that as a patriot I will perform my call to

duty with integrity and honour, with empathy and

dedication to excellence, inspired by the vision of a

growing and inclusive economy. This is my oath, my

vocation, my contract with the nation

“

” 6

Pledge taken by all NEF staff, management and Trustees.

Strategic Need for B-BBEE

Who Owns Whom (30 June 2014)

As a consequence of the apartheid

legacy, BEE equity control on the JSE’s

average market cap of R11.9 trillion as at

30 June 2014 (for Listed Companies),

stands at 3%, (R358 billion) for black

South Africans.

To reach 25% of black control it requires

an additional 22% worth R2.6 trillion at

current estimated market cap.

7

Performance Milestones Output Achievements 1 Approvals Benefited over 2000 black entrepreneurs through approval of 600 transactions

worth more than R5.8 billion across the country.

2 Disbursement Approximately R4.1 billion has been disbursed to 429 of these companies.

3 Integrity Secured unqualified external audit opinions for 9 years running.

4 Supporting jobs To date the NEF has supported in excess of 80 000 jobs.

5 Industrialisation 20 strategic and industrial projects worth R30 billion, with the potential to

support over 80 000 jobs.

6 A culture of savings &

investment

In a transaction worth over R1 billion the NEF Asonge Share Scheme made

available more than 12 million MTN shares to over 87 000 investors comprising

black individuals and groups. 49% of investors were women.

7 Investor education Reached over 20 000 people in villages and townships through 80 community

seminars on how to save and invest, personal financial discipline, shares,

dividends, bonds, the property and money markets.

8 Entrepreneurship

training / incubation

Business skills training provided to 2 500 potential entrepreneurs who attended

97 seminars from 2012 to date.

9 National footprint Regional offices in all but one province. 30% of the number of approved

transactions emanated from the regional offices during Financial Year 2012/13.

10 Collections A total of R1 billion has been repaid by investees. Among others, Ndalo Luxury

Ventures has settled its loan obligations in full.

8

9

Growing Black Industrialists

SPF Mandate

10

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

Development and Economic Impact

• Creation of new manufacturing and industrial

capacity

• Creation of new jobs as opposed replacement

capital finance

• Investment of new fixed capital into

economically depressed areas or poverty

nodes

• Creation of an inclusive economy by increasing

South African participation

• Increase RSA export earning potential and

reduce import dependency

• Increase co-investment and linkage with

foreign direct investment

11

Creating Black Industrialists

Strategic Industrial Sectors

RENEWABLE

ENERGY

MINERAL

BENEFICIATION

AGRO-

PROCESSING

INFORMATION &

COMMUNICATIONS

TECHNOLOGY

INFRASTRUCTURE TOURISM

Biofuels

Biomass

Biogas

Solar

Wind

Hydro

Mining &

Mineral

Beneficiation

Chemicals

Agriculture

Telecoms

Broadcasting

Roads

Dams and Bridges

Sewer and Bulk

Services

B&Bs

Hotels

Guest

Houses

(Women-

owned)

Real Estate

Together with local & international partners the NEF has developed 20 strategic and

industrial projects worth R30bn, with the potential to support over 80 000 jobs.

The NEF’s future equity rights will total R4.2bn at financial close.

12

What is a Black Industrialist?

A black industrialist is an entrepreneur or enterprise that has a

substantial equity and operational interest in the long-term

ownership and control of a medium to large enterprise in a key

sector of the economy as defined in IPAP, with a high job-

creation potential, and making a meaningful contribution to

growth and development. These black-owned companies may

increase South Africa’s export-earning potential and reduce

import dependency by growing the country’s economic capacity

through primary (retrieval and production of raw materials),

secondary (processing or beneficiation) or tertiary industries.

As a patriotic corporate citizen the black industrialist is

motivated both by the quest for personal success and the

sustainable growth of the South African and African economies,

and pursues his or her endeavours with irreproachable

integrity. In accordance with legislation and for the purpose of

eligibility for funding from the National Empowerment Fund

(NEF), a black person is an African, Coloured or Indian natural

person who is a citizen of the Republic of South Africa by birth

or by descent as well as a natural person who acquired

citizenship by naturalisation prior to 27 April 1994.

13

SPF Project Development Stages

14

SPF Portfolio – NEF Equity Rights

15

Project Sector Current NEF

Equity Total Invested Total Project Size

NEF Future

Equity Rights

RMI Mineral Beneficiation 30% 13 500 000 15 000 000 000 2 250 000 000

SA Metals Mineral Beneficiation 29% 40 000 000 1 950 000 000 282 750 000

Coking Coal Mineral Beneficiation 85% 6 000 000 500 000 000 212 500 000

African Silica Mineral Beneficiation 49% 7 000 000 1 500 000 000 367 500 000

Coconut Water Agro-processing 49% 5 000 000 50 000 000 12 250 000

Busamed Hospitals Healthcare 49% 260 000 000 1 600 000 000 -

Milk for Life Agro-processing 49% 2 000 000 50 000 000 -

Link Africa Infrastructure 30% 100 000 000 1 000 000 000 300 000 000

Radisson Blu Kruger resort Tourism 40% - 250 000 000 -

TFST Renewable Energy 6% 5 313 210 1 800 000 000 46 080 000

Biomass to Bioethanol Renewable Energy 49% 10 000 000 800 000 000 196 000 000

Tyre Energy Extraction Renewable Energy 49% 8 000 000 50 000 000 12 250 000

KC Energy Renewable Energy 40% 48 000 000 150 000 000 -

Tyre Manufacturing Research Manufacturing 100% 1 590 000 335 000 000 167 500 000

FIS Biodiesel Renewable Energy 30% 10 000 000 800 000 000 120 000 000

MIBT Manufacturing 35% 18 600 000 30 000 000 5 250 000

Richards Bay Wind Farm Renewable Energy 17% - 1 700 000 000 69 500 000

Paediatric Dental Facility Infrastructure 49% - - -

Auto Disable Syringes Manufacturing 49% 7 156 600 200 000 000 49 000 000

Mabele Fuels Renewable Energy 12% 40 000 000 2 232 000 000 31 750 000

Totals 582 159 810 29 997 000 000 4 122 330 000

SPF Achievements Since Inception

16

High risk investments - NEF only DFI with fully Venture Capital (VC)

capability and offering focused on participation of black people in

project development;

Equity investments - typically with 7-10 years investment horizon;

Circa R600mn disbursed in past 7 years (R85mn p.a. on average),

which has leveraged R3.8bn in external funding;

79% of the approved funds have been disbursed (87% excl. Richards

Bay wind farm);

74% of projects at pilot, financial close, construction or operation

stage; and

80,000 direct and downstream jobs to be created by the SPF Portfolio

Provincial Dynamics

17

Striving for growth across all provinces

Invested growth across all provinces

18

1. As a national Development Finance institution (DFI) the NEF is

committed to ensuring that its products and services reach the

entire nation.

2. Since the launch of the NEF Asonge Share Scheme in July

2007 the NEF has implemented various measures and

interventions to strive towards an even, representative and

equitable distribution of its services across the country.

3. As a result, the NEF’s invested presence in Gauteng has come

down from above 60% of total disbursed funds in 2006, to 50%

by September 2014.

4. This is not as a result of a reduction of funding in Gauteng, but

is a direct consequence of planned, targeted and increased

funding in the other 8 provinces because they are integral to

South Africa's economy, comprising 76% of the population.

Reasons for growth across all provinces

19

Year Intervention Outcome

1 2006 -

2015

Local community &

stakeholder workshops

Every year present & exhibit in a growing number of local community

workshops hosted by national, provincial and municipal governments, as well

as various business and civic stakeholders.

2 2007 –

2014 Investor Education

Visited over 100 villages, townships and cities countrywide (12 destinations

per province), and reached over 21 000 participants.

3 2007 NEF Asonge Share

Scheme

Atrracted 87 000 investors (47% in GP, 16% in KZN, 9% in WC, 7% in LP,

6% each in NW & MPu, 4% each in EC & FS, and 1% in NC).

4 2007 Strategic Projects Fund

Venture capital fund responsible for driving the NEF’s contribution to

industrialisation by increasing participation of black people in early-stage

projects, especially in poverty nodes.

5 2008 Rural & Community

Development Fund

Proactively source transactions in rural areas in order to unlock underlying

economic value.

6 2007 -

2015

Advertising & media

coverage

Placement of adverts and stories in local, regional and national media

countrywide.

7 2009 Business Plan &

Mentorship launch

Workshops in every province raising awareness on the online solution for

developing own business plans with financial projections. Over 20 000

registered users have accessed the tool.

8 2009 –

2010 Eyethu Sonke Le BEE!

4 destinations in each province promoting understanding of B-BBEE, funding

& access to government & private-sector procurement & enterprise

development opportunities.

9 2009 -

2015 Regional offices

Opened regional offices countrywide. NC office space presently being

identified.

10 2011 –

2015

Incubation &

entrepreneurial training

Business skills training provided to over 2 500 beneficiaries who attended 97

seminars from 2011 to date, countrywide.

20

Geographic spread of investments

GDP Source: StatsSA (November 2014); Gross Domestic Product, Third quarter 2013

(The GDP contribution by province has been updated with the most recent available

statistics from Statistics South Africa, in order to be able to match the performance to the

most current available statistics.

EC R339m

9%

FS R72m

2%

GP R1,8m

50%

KZN R751m

20%

LP R184m

5%

MP R135m

4%

NC R57m

1%

NW R39m

1%

WC R297m

8%

WC

NW

NC

MP

LP

KZN

GP

FS

EC 7.7

5.1

33.8

16.0

7.3

7.6

2.0

6.8

13.7

NEF Invested Portfolio by region by value (inception - 31 Dec ‘14

21

Geographic spread of

Strategic Projects Fund (SPF)

SPF Investment Spread by Province

Province

No of

deals

% by

number

of deals R’000s

% by

value

Limpopo 2 8% 12 000 2%

Mpumalanga 3 13% 60 000 9%

Gauteng 6 25% 109 800 16%

North West 1 4% 500 0%

KwaZulu-

Natal 3 13% 177 190 27%

Free State 2 8% 121 750 18%

Northern

Cape 0 0% - 0%

Eastern

Cape 3 13% 32 156 5%

Western

Cape 4 16% 154 813 23%

Total 24 100% 668 209 100%

Western Cape 23%

Northern Cape 0%

KwaZulu Natal 27% Eastern Cape

5% North West

0%

Limpopo 2%

Free State 18%

Mpumalanga 9%

Gauteng 16%

Portfolio by value - per province

The SPF portfolio by value is spread almost evenly in KZN, WC, FS and GP. The NEF is

making progress in increasing funding in other provinces with more projects as indicated by

the portfolio by number in Mpumalanga. Regional offices are working extensively in increasing

participation in other provinces.

22

Limpopo 6%

Mpumalanga 8%

Gauteng 11% North West

3%

KwaZulu-Natal 45%

Free State 2%

Northern Cape 1%

Eastern Cape 21%

Western Cape 3%

Geographical Spread of Investment by RCDF up to 30 December 2014

RCDF Investment Spread by Province

Province No of

deals R000s %

Limpopo 3 26 403 6.5%

Mpumalanga 4 32 565 8.1%

Gauteng 3 43 425 10.8%

North West 2 12 684 3.1%

KwaZulu-Natal 8 179 836 44.6%

Free State 1 8 495 2.1%

Northern Cape 1 3 612 0.9%

Eastern Cape 6 84 786 21.0%

Western Cape 2 11 328 2.8%

Total 30 403 134 100%

Geographic spread of Rural &

Community Development Fund (RCDF)

Widely represented in all the Provinces, though still low in FS and NC, but evenly

concentrated in other provinces, with KZN and EC predominantly sharing a significant %

of businesses funded, principally because of tourism in KZN, with agro-processing (dairy

& feedlot) and shopping complexes comprising the bulk of transactions in the WC .

Gauteng, 7 Mpumalanga,

13

North West, 10

Limpopo, 12

Northern Cape, 8

Free State, 16

Western Cape, 4

Eastern Cape, 12

KZN, 15

23

Geographic spread of Incubation &

Entrepreneurship Training Entrepreneurial Training Seminars from April 2011 to date

Province Number of Training

Seminars Conducted

Gauteng 7

Mpumalanga 13

North West 10

Limpopo 12

Northern Cape 8

Free State 16

Western Cape 4

Eastern Cape 12

KZN 15

Total 97

The NEF currently has working relationships with 10 business incubation centres across the country, which

provide in-depth business support, training and in some instances assistance with access to markets, across

various sectors of the economy. To date over 2500 businesses have been referred for incubation and

entrepreneurship training to help take them to operational stage. At least 75% of the seminars were held in rural

and township areas. These incubation centres were mainly established or supported through direct Government

support, and their partnership with the NEF helps to maximise the impact that can be achieved through

Government spending.

24

Regional Offices 1. The NEF has regional office presence in all

provinces but the Northern Cape, where the

organisation is in the process of identifying

office space.

2. This national presence ensures that the NEF

reaches every area of the country including

the remotest rural areas, where the poorest of

the poor mostly reside.

3. The NEF always takes part in national (the

dti, DED & DSBD), provincial and local

government roadshows, as well as various

other stakeholder events, to take its message

to the people.

4. It is as a result of this that the NEF has

successfully funded business ventures

through its Rural and Community

Development Fund, whose objective is to

unlock value in rural and township

communities.

Geographic Spread – Investor Education

Investor Education campaign has been rolled out in the Eastern Cape, Northern Cape, Free State,

Limpopo, Western Cape, North West, KZN, Mpumalanga and Gauteng with 8 seminars per

province. Attendees: over 21 000 participants.

z

NORTHERN

CAPE

FREE STATE

LIMPOPO

KZN

EASTERN

CAPE

MPUMA

LANGA

NORTH

WEST

GP

WESTERN CAPE

25

Mahikeng,

Lichtenburg,

Rustenburg,

Hammanskraal,

Vryburg, Taung

Klerksdorp,

Potchefstroom

Kimberley,

Prieska,Kakamas,

Keimoes,Upinton,

Kathu, Barkley West,

Kuruman

Saldanha, Langa, Bellville

Nyanga, Mannenburg /

Gugulethu, Worcester,

Caledon, Cornville –

George, Kwanonqaba-

Mossel Bay

Port Elizabeth, East London, King Williams

Town, Mount Frere, Butterworth, Umtata,

Fort Beaufort, Grahamstown

Bloemfontein, Botshabelo,

Welkom, Thaba Nchu, Qwaqwa,

Kroonstad, Ladybrand,

Bethlehem

Seshego, Lebowakgomo,

Lephalale, Bela-Bela,

Thohoyandou, Giyani,

Phalaborwa, Tzaneen

Newcastle, Dundee,

Ladysmith, Estcourt,

Pietermaritzburg, Port

Shepstone, Newlands

East, Chatsworth,

Umlazi. Kwa Mashu,

Ulundi, Richards Bay

Springs, Alexander

Soweto, Diepsloot

Ext 2, Soshanguve,

Mamelodi West,

Krugersdorp Kagiso

2, Sebokeng

Delmas Botleng,

Secunda,

Ermelo, Piet Retief

Emalahleni,

Middleburg,

Mbombela,

Hazyview

NEF booklet on how to

save and invest

Media coverage & advertising Province /

area

Northern

Cape

North West Limpopo Mpumalanga Free

State

Eastern

Cape

KwaZulu

Natal

Western

Cape

Gauteng &

National

Mass

Media

DFA,

Gemsbok,

Noordkaap,

Kalahari

Bulletin,

Northern Cape

Express,

Stellelander

Radio

Motsweding

FM,

RSG,

Radio

Kaboesna,

Radio

Riverside,

Radio

Teemaneng,

Kuru FM

Rustenburg

Herald,

Klerksdrop

Record,

Mafikeng Mail,

Stellalander,

Radio

Motsweding

FM,

Radio Mafisa,

Radio Modiri,

Mafikeng FM,

Star FM,

Aganang,

North West FM

Polokwane

Express,

Limpopo Mirror,

Capricorn Voice,

Radio

Radio

Phalaborwa,

Radio

Sekhukhune,

Lebowakgomo,

Thobela FM,

Mungana Lonene

FM,

Phalaphala FM

Mpumalanga

News,

Mpumalanga

Mirror,

Witbank News,

Cosmos

Gazette,

Highvelder,

Middleburg

Observer

Radio

Ligwalagwala

FM,

Ikwekwezi FM,

Capricon FM

Free State

Sun,

The

Weekly,

Free State

Times,

Free state

Express

Radio

Lesedi FM

Daily

Dispatch,

Herald,

Algoa Sun

Radio

uMhlobo

Wenene,

Algoa FM

Ilanga,

Mercury,

Isolezwe,

Radio

Ukhosi FM

Gagasi

FM,

Lotus FM

Die Son,

Cape

Argus,

Cape

Times

Radio

uMhlobo

Wenene,

True FM

City Press,

Sowetan

Business

Report,

Business

Day,

Sunday

Times,

Financial

Mail,

Mail and

Guadian,

Daily Sun

The New

Age

Radio

SAFM,

Metro FM,

Power FM,

Kaya FM

Talk Radio

702

Radio 2000

The NEF strives to reach all communities across the

country by placing adverts and stories in public, community

& privately-owned media in all provinces.

26

27

NEF Investment

Philosophy &

Achievements

28

“The Empowerment Dividend”

Broad Based Black Economic Empowerment Ownership, management control, employment equity 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…

Invested Sector Breakdown

29

Agro Processing, 6%

Chemicals & Pharmaceuticals,

4%

Construction and Materials, 14%

Distributors, Dispatchers and Processors, 1%

Energy, 7%

Engineering, 6%

Financial Services, 1% Food and

Beverage, 4%

ICT, 3% Manufacturing, 9%

Media, 6%

Mining Industry, 3%

Motor Industry, 1%

Printing and Publishing

Services, 1%

Property, 3%

Retail, 5%

Services, 14%

Textiles, 1%

Tourism and Entertainment, 3%

Transportation, 7%

NEF Invested Portfolio by sector by value since inception - 31 December 2014

-

50 000 000

100 000 000

150 000 000

200 000 000

250 000 000

300 000 000

350 000 000

400 000 000

2010 2011 2012 2013 2014 YTD 2015

Receipts Amount

2010

2011

2012

2013

2014

YTD 2015

Cash Collected

30

Over R1 billion collected cumulatively from loans disbursed across the country, in

black-owned and managed businesses across virtually all sectors of the economy.

Receipts to

Dec 2014 at

R310 million

are 88% of

full financial

year 2014

Administrative & bureaucratic

impediments which delay, obstruct

and may destroy black business

31

Administrative & bureaucratic impediments (1)

1. Reluctance by national and provincial Government departments

to give NEF direct cession of proceeds from contracts.

2. Late payments by Governments to SMEs after services have

been delivered, straining the cash flows of SMEs. This is a major

contributing factor to the demise of SMEs.

3. Rigid terms of contracts which do not allow for extension where

the timelines to start delivering in terms of the contract are tight

and do not give SMEs sufficient time to raise funding.

4. Contracts awarded are in many cases not profitable for black

businesses as margins are thin and SMEs are price-takers. In

desperation, they end up signing ominous contracts which they

cannot deliver on.

5. In some instances, departments still require SMEs to put down

performance guarantees, which raise the cost of business capital.

6. Provincial departments seem hesitant in supporting farmers that

have already received funding from the NEF because they view

them as having already benefited from Government, even though

these farmers have received loan funding.

32

7. In franchising, the NEF has observed prejudicial and ethically-

questionable practises by some franchisors, where black

franchisees are used as guinea pigs to test markets, business

models and locations.

8. Delays in obtaining Environmental Impact Assessments

Municipalities. These delays have a negative impact on project

timelines and business operations.

9. Delays in granting municipal land lease agreements.

10. For petrol stations, it takes time to secure a retail license from

the department of Minerals. It can take more than three

months from the date of submitting the application.

11. It takes oil companies even longer to apply for site licenses.

This can be worse and cumbersome in instances where the

entrepreneur owns the site.

12. Reluctance and delays by local Economic Development

agencies in providing equity instruments.

Administrative & bureaucratic impediments (2)

33

34

Thank You

35

Appendices

36

Renewable Energy Projects

KC ENERGY

The cogeneration project aims to develop a Combined Heat and Power (CHP) plant producing steam (60 tph) and electrical power (6MWp) for process plant usage and will be based in Newcastle, KwaZulu Natal province. The plant is currently under construction and is expected to come online in July/Aug 2014.

Location Newcastle, KZN

Project Development Stage Construction

NEF Investment to date R48 million

NEF Equity 40%

Project Promoter KC Energy

Total Project Cost c. R184 million

No. of Jobs Created 221

37

Renewable Energy Projects MABELE FUELS

The project intends to develop a circa 154 million litre per

annum fuel grade bioethanol plant, in Bothaville, in the Free

State Province. The plant feedstock is grain sorghum and

the production methodology involves a process utilising

grain milling through starch conversion to sucrose as well as

fermentation and drying that ultimately culminates in the

production of saleable bioethanol.

Location Bothaville, Free State

Project Development Stage Financial Close


NEF Equity 11.76%

Project Promoter Mabele Fuels (Pty) Ltd

Projected Financial Close Requirement R2.5 billion

No. of Jobs Created 636

38

Infrastructure & Manufacturing BUSA MED

Busamed is a black-owned hospital group that is poised to

compete with the big three. The vision is to be a consolidator of

the fragmented health care market. This will be kick-started with

the commercialisation of 4 hospital licenses for 1000 hospital

beds, spread over three provinces, namely Gauteng, Western

Cape and the Free State. With the first being in the Western

Cape, this hospital will be a world class cardiologic centre of

excellence. The aim is to develop centres of excellence which

will provide world-class services.

Location Cape Town



NEF Equity 49%

Project Promoter Goldenwood (Pty) Ltd

Projected Financial Close Requirement R1.6 billion

No. of Direct Jobs Created 3,000

39

Infrastructure & Manufacturing

LINK AFRICA

The project aims to deploy Last Mile Fibre Optic cables across the

national landscape of South Africa. Fibre optic infrastructure that is 4

times faster at less than half the cost of normal fibre will be deployed.

Licensed patented technology that uses existing sewer and other

currently existing infrastructure rather than the normal method of

digging up trenches to lay fibre optic cables, will be utilised. An initial

capital investment of ZAR300 million will lead to the establishment of

a South African Last Mile Fibre Optic Infrastructure Company, i3

Africa.

Location KZN



NEF Equity 30%

Project Promoter Link Africa (Pty) Ltd

Projected Financial Close Requirement R900 million

No. of Direct Jobs Created 200

40

Market Failures &

Non-Financial Support

41 41

• Limited own capital;

• Access to affordable capital;

• Limited management skills, including financial,

marketing and technical expertise;

• Lack of accurate and reliable financial information;

• Poor quality of business plans;

• Lower bargaining power and strong competition from

established businesses with entrenched market

dominance;

• Inadequate access to affordable capital; and

• Lack of access to local and international markets.

Challenges / Market Failures

facing black business

Business Planning?

www.nefbusinessplanner.co.za

42

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

42

43

Crafting Entrepreneurs

In response to the market

failures facing emerging black

entrepreneurs, the NEF

facilitates the provision of

incubation support and

entrepreneurship training

across the country.

44

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 Target Market

45

Target Market Products & Services

1

Black individuals and groups with significant

operational experience and an extensive

investment portfolio and accumulated capital (Tier

1)

1. New Ventures Finance

2. Expansion Capital

3. Capital Markets

4. Strategic Projects Fund

5. Acquisition Finance

2

Black individuals and groups with operational

experience which could include having concluded

a limited number of BEE transactions. This sector

typically has limited accumulated capital with

existing investments still encumbered / “not in the

money yet” (Tier 2).

1. Business Plan Toolkit

2. Investor Education

3. Rural & Community Development Fund

4. Entrepreneurship Finance

5. Franchise Finance

6. Procurement Finance

7. Expansion Finance

8. Mentorship Support

3

Black individuals and groups with limited business

or entrepreneurial experience (Tier 3).

1. Business Plan Toolkit

2. Investor Education

3. Rural & Community Dev. Fund

4. Franchising



4

White individuals and groups who own, manage

and/or control economic means and are potential

partners for, or opponents to, economic

transformation (Tier 4).

1. Enterprise Development Fund

2. Equity Acquisition


4. Strategic Projects Fund

5. Liquidity & Warehousing


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 Warehousing

The 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 agro-processing, tourism, mining &

beneficiation, manufacturing etc R1 million – R50 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, business process outsourcing, tourism,

manufacturing, mining and mineral beneficiation

etc.

R1 million – R75 million

NEF Funding Products in detail On average, the NEF’s business loans are repayable over 4 to 7 years, and up to 10 years where

marked with an asterisk (*) below:

46

NEF Funding Criteria Each application is assessed in terms of the following criteria:

minimum percentage of black ownership or interest,

black women empowerment,

black managerial and operational involvement,

commercial viability of the business,

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.

47

Examples of Enterprise

Development Fund Successes

Bakwena Ba Makgopa

48

Corporate Governance and

Investment Processes

49

NEF Investment Governance Framework

Fund Management

Investment Committee

Authorised to approve

transactions with value up

to R5m and to

recommend transactions

with larger value to

Executive Committee for

approval.

Executive Investment

Committee

Authorised approve transactions

with value up to R15m and to

recommend transactions with

larger value to Board Investment

Committee for approval.

Board Investment

Committee


transactions with value up

to R50m and to recommend

transactions with larger

value to Board of Trustees

for approval.

Board of Trustees


transactions with value up to

R75m

Credit Committee

Subcommittee of Fund

Management Investment

Committee, authorised to

approve IMbewu contract

finance transactions with

value up to R1.5m

The Investment Governance Framework is guided by the

Delegation of Authority and the Charters of the respective

committees.

All committee members are required to declare specific

interests at meetings and general interests annually

Due diligence – minimum 3 professionals per transaction

50

Proactive Marketing (advertising, stakeholder & media relations)

Pre-Investment and Regions -

basic evaluation

Request DD either at Funds or Fund Management Investment Committee (FMIC)

Up to R5m approved by FMIC

Loan Agreements drafted in-house

Clients handed to POIU– Allocated to Post IA

Regular site visits

Regular risk ratings

Mentorship provided

Collection

Monthly Post Management Committee meetings

Distressed investments transferred to Turnarounds, Workouts & Restructuring

Investment

team networks

Detailed screening by Investment Associates (IA’s)

Due Diligence (DD) performed based on nature of deal

Above R5m up to R15m recommended to EXCO IC

Referrals from external stakeholders (e.g. deal originators, business incubators & Govt. agencies

NEF Operating

Manual applied EXCO IC

approves up to R15m

Legal compliance by FMIC Management

Walk-in Clients at Head Office and in Regional Offices

Final Investment

Paper reviewed by FMIC

Credit Risk Assessment Process

Above R15m to R50m approved by Board IC

Funds disbursed

Above R50m

approved by Board of Trustees

Deal

Origination Screening

Due

Diligence (DD)

Approval

Stage

Legal

Stage

Post

Investment

NEF Investment Process

51

The NEF POWER of 3 Our Quest for Excellence

Telephones answered within 3 rings.

Walk-in clients assisted within 3 minutes.

Acknowledgement letter sent within 3 days.

Up to a 3-month process from application to

disbursement…

Return client calls within 3 hours.

Resolve complaints within 3 days

52

NEF’s Investment Funds

53

54

NEF Funds – Across the Economic Spectrum

Fund Focus Threshold

1 iMbewu Fund

SME Fund providing

Entrepreneurship,

Procurement & Franchise

Finance

R250 000 –

R10 million

2

Women

Empowerment

Fund (WEF)

Achieve minimum 40% of

enterprises owned and

managed by black women

R250 000 –

R75 million

3

Rural &

Community

Development

Fund

Supporting rural economic

development through New

Ventures, Acquisition,

Expansion & Greenfields

Finance

R1 million –

R50 million

4 uMnotho Fund

Funding of New Ventures,

Acquisition, Project

Finance, Expansion, Capital

Markets, Liquidity &

Warehousing

R2 million –

R75 million

5 Strategic

Projects Fund

Early-stage investment in

industrial / manufacturing

transactions

Up to R75

million

55

iMbewu Fund

Small Medium Enterprises

56

iMbewu’s mandate and purpose

NEF mandate (translated):

To increase SA’s SME capacity

In order to secure:

Economic impact

Social impact

National growth and development

By financing and supporting BEE SMEs

Above R250k

Typically up to R10M but could be as high as R50M.

What this requires from us:

Ensure Broad-based empowerment

Ensure required impact

Be sustainable

We will therefore become global thought leaders in:

Managing SME risk in developing economies

Designing value propositions for SMEs in developing economies

Sustainability in serving SMEs in developing economies

Women Empowerment Fund

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NEF Women Empowerment Fund

58

Fund a Woman, Fund a Nation

Objective

To deliberately facilitate the participation of Black

women in the main stream of the economy

Strategy

Leverage existing relationships to drive a pipeline of

women lead transactions

Partner with government departments to facilitate

opportunities provided by those departments

Project development of opportunities identified from

deficiencies in the market highlighted in investment

approval processes (e.g. Local manufacturing of

beads)

Sponsor identification through women lead

businesses and associations, incubator, business

schools and funding competitions

59

Rural & Community

Development Fund (RCDF)

Rural and Community Development Fund


1. Investing in the upliftment and

empowerment of South

Africa’s black rural and

community groups.

2. To secure the participation of

rural black South Africans in

viable community owned

enterprises.

3. Funding threshold ranges

from R1 million to R50 million.


1. Unlock the full entrepreneurial

capability & potential of black people

in rural economy.

2. Facilitate structural changes in rural

economic activities & inclusive rural

development activities

3. Increase the extent of participation in

rural enterprises-communities,

workers & co-ops

4. Provide project funding & encourage

Broad Based Black participation in

support of communities

5. Assist with skills development and

social planning

6. Make in roads into the poverty nodes

or outlying provinces

60

61

uMnotho Fund

Access to BEE Capital

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uMnotho’s Mandate and Purpose


To provide access to Acquisition

Finance, New Ventures Finance,

Expansion Finance, Capital

Markets and Liquidity and

Warehousing.

Overcome market failures

experienced by black enterprises

Provide funding ranging from

R2 million to R75 million to black

entrepreneurs


Provide capital to black-owned

and-managed enterprises,

Provide funding to black

entrepreneurs who are buying

equity shares in established

white-owned enterprises,

Facilitate access to black

businesses that are or wish

to be listed on the JSE.

Design products that overcome

obstacles to access funding in

the property sector.

Ensure portfolio sustainability

63

Investee Stories

64

Investee Stories

Building the Economy,

Sharing the Wealth

Molam’s Farming (R13.2 million)

Molam’s Farming based in Delpan North

West is a 100% black owned start–up

primary agriculture enterprise focusing on

grain (maize and sunfl ower), groundnut

and soybeans crop production. Lantek

SA (precision farming experts) will

provide technical assistance over a 3-

year period. NWK (major grain and

soybeans buyer) and The New Nut

Company (the third largest groundnuts

buyer in RSA) will uplift 100% of the

produce based on contracts and a signed

off-take agreement. Job creation: Total

95 jobs. 20 jobs during development, 15

full-time, 60 seasonal jobs (6-7 months),

Resuscitation of restituted land and

stimulation of the local economy

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Investee Stories


Sharing the Wealth

Richmond Opkomende

Boere Co-operative (R3.6 million)

Richmond Opkomende Boere Co-

operative is a start-up primary

agriculture entity based in the

Northern Cape which will focus on

free range merino sheep farming for

the purposes of lamb and wool

production.

The business is a start-up and will

create 7 permanent jobs, and it is a

co-operatives which consists of 48

members

66 66 66

Investee Stories

Some of the Franchises Funded to date

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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68

Investee Story

Long Walk to Freedom (Pty) Ltd (LWTF) is a

company incorporated for the production of

a film based on President Nelson Mandela’s

autobiography, Long Walk to Freedom. In

1996, the coveted film rights were awarded

to Anant Singh, a South African film

producer who has a successful track record

in the production of local and international

films. The film will be a full-length epic

motion picture, and it will be the only movie

that will span President Mandela’s life from

childhood to his presidency. More than 12,

000 jobs will be created over a 2-year period

during production of the film, and skills will

be transferred from international sources in

all aspects of the film production process.

The company will ensure that where

possible, goods and service are procured

from BEE companies

Long Walk To Freedom (R50

million)

69

Investee Stories The entity’s core business is the blending of top quality cement

that is supplied to the infrastructure development sector and

others. The invested R35 million will enable the company to own

the property, plant and equipment they are currently renting as

well as create 50 fulltime jobs in the process. The company is

black owned and blends, produces and sells cement to a wide

range of customers across the country, and has a strong pipeline

of customers interested in their products including in the SADC

region.

Value Cement is a prime example of broad based black

empowerment with a significant percentage of directors and

management being female. Value Cement has the necessary

muscle and ability to compete in a highly controlled, protected

and competitive industry while further ensuring that the enterprise

is sustainable and creates meaningful employment.

The funding of Value Cement was facilitated through Umnotho

Fund, a funding vehicle within the organisation that is designed to

increase access to BEE capital. Value Cement plant is one of the

most modern blending plants in South Africa and has sufficient

capacity to service most of the provinces as well as export

markets. The plant is designed in such a way that the current

capacity can be tripled without a large capital expenditure and is

ready to supply the market with an excellent product for the next

20 to 30 years.


Sharing the Wealth

Value Cement (R35

million)

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Investee Stories

The transaction was a culmination of the

Enterprise Development (ED) Fund established by

NEF to encourage large enterprises to find an

innovative way through which to meet their B-

BBEE targets.

The first transaction concluded through the ED

Fund was in collaboration with Chrysler SA for

Vigor Swift Connectors (Pty) Ltd, a 100% black

owned company, to provide Customer Relations

Management “CRM”, Warranty and Maintenance

Adjudication Solutions and Roadside Assistance

Services in the Automotive industry.

This transaction will also lead to the creation of five

new jobs.


Sharing the Wealth

Vigor Swift Connectors (Pty)

Ltd. (R400 000)

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Investee Stories

Sales Hire (established in 1990) is a Cape

Town-based company that specialises in the

hire of building equipment and other related

tools. The transaction was enterprising in that

existing managers in the business (each with

at least 5 years’ experience) were selected to

acquire and own the respective outlets that the

managed.

The chosen outlets have previously been

profitable and the NEF was, through the

iMbewu investment team. Through the NEF’s

assistance nine manages were able to

become owners through a franchising

agreement with Sales Hire


Sharing the Wealth

Sales Hire (R22.5 million)

72

Investee Stories

The NEF through iMbewu Fund has allocated R50million in affordable loan

facility towards Black entrepreneurs that are interested in acquiring an

ENGEN retail service station throughout any of our 9 provinces. It is

envisaged that this will lead to an increase in Black owned service stations

from the current 39% to the targeted 45% Black ownership by 2016.

Allowing for further penetration and increase in the provinces that are still

lagging behind such as Mpumalanga, Limpopo and the Eastern Cape.

It is within the context of the Liquid Fuels Charter and the Petroleum

Products Amendment Act (PPAA) which integrates into law the

requirements of promoting BEE that the relationship between the NEF and

ENGEN is founded. It is the common vision of promoting the advancement

of Black South Africans in several tangible forms, including shareholdings of

existing and future oil companies operating in South Africa, the need to

gradually increase the allocation of procurement budgets to BEE suppliers

as well as increasing Black owned and operated retail sites or dealerships in

the country.

The first of the new 100 % black owned NEF-financed ENGEN franchises is

now open in City Deep in Johannesburg. Black potential entrepreneurs are

required to put up between 10% and 20% of the purchase price, and the

NEF provides financing for the balance. ENGEN also stands surety for half

of the average R5 million purchase price, and covers training, evaluation

and business support costs. Commonly ENGEN requires that entrepreneurs

put up 60% of the purchase price, however lowering the level of own

contribution required for these deals is aimed at making service station

ownership more accessible for black entrepreneurs.


Sharing the Wealth

73

Investee Stories

Linen Tech (R10 million)


Sharing the Wealth

Linen Tech is a 100% black owned and managed

company, which also has 34% black woman

ownership. The company manufacturers household

linen and distributes towels for institutions and the

hospitality industry. Linen Tech is based in Central

Business District of Johannesburg Due to a closure

of local manufacturers of raw materials

Linen Tech was forced to source raw materials from

Pakistan to maintain its competitiveness and

process locally and add value. The NEF provided

R10 million funding to Linen Tech and in the

process 120 jobs were retained in a currently

troubled textiles industry to assist to retaining

manufacturing capabilities, skills and the know-how

in the country through Linen Tech

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Investee Stories

Colliery Dust Control (Pty) Ltd. develops and

manufactures the components for integrated dust

suppression systems used on continuous mining in

underground coal mines. Colliery Dust Control is a

South African based business and focuses on the

design, manufacturing and supply of integrated dust-

suppression systems for various underground mining

applications.

The NEF provided funding to Business Venture

Investment towards the full acquisition of the

business. The main BEE partners are two black

women, Ms Thembi Chagonda and Ms Babalwa

Geza. Ms Chagonda is an HR specialist and her role

is to drive CDC’s Transformational Agenda, whilst

Ms Geza has an engineering background and has

taken over the role of Deputy Managing Director.

The company supports 24 fulltime jobs


Sharing the Wealth

Colliery Dust Control (Pty)Ltd.

(R41 million)

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Investee Stories

Wassa is a 100% women-owned business

operating in the energy sector. The entrepreneurs

are Ms Nokwanele Qonde, a 60% shareholder,

and Ms Thandekile Sibisi who holds a 40% stake.

The business has been operational since 2008

and is based in Kya-Sands, Randburg. The core

business of Wassa is to wholesale liquid

petroleum gas (LPG) to Industrial and

Commercials retailers. The company buys directly

from SASOL Oil, SASOL Nitro, BP and Petro SA.

LPG is usually used for domestic, industrial and

commercial cooking and heating purposes. The

company currently supplies across Gauteng, and

has a long-term goal to distribute to other

provinces. The company supports a total of 14

fulltime jobs


Sharing the Wealth

Finishing Touch Trading (Pty) Ltd

t/a Wassa (R12.5 million)

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Investee Stories Afripotego IT and Construction (Pty) Ltd. previously trading

as Ekurhuleni Women and Youth Empowerment (Pty) Ltd.

Is the brainchild of Ms Tsakani Mudau, and was

established in 2004 to empower women in the IT and

Construction industries.. She was invited on board by WDB

Investment Holdings (WDBIH), which believes in investing

in women for their self-sustainability. Afripotego IT and

Construction (Pty) Ltd. is one of the eleven Regional Field

Service Centres (RFSC’s) servicing Gidani Lottery

Machines. The company has supported TM Afrika

Kopanang Business Enterprise since 2005 in supplying

building material to Cashbuild clients, Women for Housing

Project in Orange Farm, RDP houses in Bramfischer and

Orlando East, as well as Hardware Stores in Soweto. In the

process of supporting TM Afrika Kopanang, Afripotego IT

and Construction (Pty) Ltd. also decided to diversify after

seeing a gap or business opportunity in construction,

transportation and the supply of building material, as a

women organization. Afripotego IT and Construction (Pty)

Ltd. and TM Afrika Kopanang work jointly in projects that

need greater capacities especially in supplying building

material, transportation and any other logistical

opportunities. The company supports 37 fulltime jobs.


Sharing the Wealth

Afripotego IT & Construction (Pty) Ltd

R2.75 million

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Investee Stories


Sharing the Wealth

Mohale Agricultural Cooperative

(R13.7 million)

Mohale Agricultural Co-operative based

in Limpopo has approached the NEF

for funding assistance totalling R13.7

million for the purchase of Poultry and

vegetable farm. The product line

includes chickens, cabbages and

maize. The identified 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,

offering significant job creation

prospects, the farm is based in

Limpopo Province- one of the less

economic active provinces

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Investee Stories


Sharing the Wealth

Nyonende Poultry Cooperative t/a

Nyonende Investments (PTY) LTD

(R9.6 million)

Nyonende Poultry Cooperative based in

Kwa Zulu Natal is a 100% black owned and

who’s business is that of a Poultry

Hatchery. The entity hatches eggs

commercially for National Chicks, under a

term contract, the facility was financed by

the NEF for R9.6 million. The NEF came in

to acquire the farm and its assets on behalf

of the Cooperative. The project will save 18

existing jobs, create 17 new jobs directly

and many more downstream, the NEF

funding will assist in the transformation of

an industry dominated by large, vertically

integrated, white-controlled, listed groups

and finally women empowerment will be

achieved through an effective 40% black

female shareholding

Driving Inclusive Economic Growth Across all...

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