South African Micro-finance Apex FundSouth African Micro-finance Apex Fund sasamafmaf

ANNUAL REPORTANNUAL REPORT

2010/112010/11

Presented by Mr. Loni MamatelaPresented by Mr. Loni Mamatela

Acting Chief Executive Officer Acting Chief Executive Officer

Date: 13/ 10/2011Date: 13/ 10/2011

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Presentation OutlinePresentation OutlineMandate, Vision, Mission, Values & Objectives

Operating Model

2010/2011 Performance Highlights

samaf National Footprint

2010/11 Financial Performance

Auditor General Report

Challenges

Way forward

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MandateMandatesamaf’s mandate is to create work opportunities and sustainable livelihoods through the facilitation and provision of affordable access to finance to micro, small and survivalist businesses for the purpose of growing their income and asset bases. It is also required to act as a catalyst in the development of a vibrant micro-finance industry in South Africa. The primary purpose is:

To facilitate the provision of affordable access to finance by micro and survivalist

businesses;

To extend financial and non-financial services to reach deeper and broader into the

rural areas, informal settlement and peri-urban settlement of South Africa;

To contribute towards the reduction of poverty and unemployment;

To build a strong, effective and efficient wholesale (Apex) Fund;

To contribute to better quality of life; and

To contribute towards a sustainable and vibrant micro financial industry in South

Africa.

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Vision & MissionVision & MissionMission

“To be a leader in developmental micro finance” (in South Africa)

To provide developmental finance and non-financial services to financial intermediaries through:

Mobilization of financial intermediaries

Wholesaling of funds

Development of institutional capacity

Lobbying and advocacy towards policy development

Development of valuable partnerships (between government , businesses and communities)

Vision

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Values & ObjectivesValues & Objectives1. Contribution to poverty alleviation goals through; Funding Intermediaries( Enterprise loans and poverty

alleviation loans) Capacitating Financial Intermediaries Regulation and Prudential Standards2. Exceed our stake holder expectation through;

Improving outreach through expanded satellite network / offices

Improving internal turnaround standards3. Improvement of processes to achieve service delivery

excellence through; Improving financial reporting and management Strengthening risk management Increased compliance of legal and other regulations

4. Leverage performance through capacity and people through;

Organisational Development Balance Scorecard & Performance Management Organisational Design & Change Management

5. Building sustainable Apex Fund Improved quality of lending portfolio and internal

control environment

ObjectivesValuesIntegrity: Dealing with staff and stakeholders in an

honest and ethical manner.

Transparency – ensuring compliance with best

practice on the dissemination and sharing of

information with all stakeholders and consulting

with them to ensure comprehensiveness and

buy-in to samaf activities.

Professionalism: adhere to specific defined

norms and setting standards of workmanship,

respect and communication.

Accountability: taking responsibility for the

decisions and actions, including allocation of

powers and duties.

High Performance: excellent performance and

satisfied customers that guarantee long term

sustainability of the South African Micro-Finance

Apex Fund.

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samaf Operating Model

IT

FIN

SC

HR

FI’s

SAMAF

Internal Audit

ExternalInternal

CB

EducationSelectionResearch

Primary / CoreSupport

MARKET

External

EDD

REG

PR & COMS

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Disbursements of R41m were made to FI’s in respect of loans and grants.

14 Micro Finance Institutions, 23 Financial Services Cooperatives and 24 stokvels were

supported.The total number of borrowers increased by 13.5% from 35 884 to 40 726.

80% of loans by the FI to end users were in rural communities and 95%

were micro-enterprise loans.

The number of end user savings increased by 20 % from 25 840 to 31 129

Installment repayments by FIs average 90%

272 individuals from 68 institutions nationally participated in capacity building

workshops.

samaf received an unqualified audit report

2010/11 Performance Highlights2010/11 Performance Highlights

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Approved Funding (Rm)Approved Funding (Rm)

An increase of 41% as compared to the previous financial year was achieved

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Total Disbursements (Rm)Total Disbursements (Rm)

Capacity building

increased by 192% as

compared to the

previous financial year

On lending funds

increased by 71% as

compared to the

previous financial year

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19.8

On- lending per Province (R)On- lending per Province (R)

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Provinces On-lendingEC 3,000,000NC 0WC 5,000,000MP 2,637,500NW 0LP 6,845,000GP 4,800,000FS 0KZN 120,000

Capacity Building per province (R)Capacity Building per province (R)

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Provinces Capacity buildingEC 2,169,000NC 378,000WC 3,325,000MP 1,904,500NW 400,000LP 4,266,579GP 4,460,000FS 797,500KZN 688,176

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samaf NATIONAL FOOTPRINTsamaf NATIONAL FOOTPRINT

M4/F4

M0/F4

M0/F3

M1/F=6

M0/F5

M0/F6

M3/F3

M2/F1M3/F5

1515

M= Micro Finance Institutions

F= Financial Services Co-operatives

2010/11 Financial Performance2010/11 Financial PerformanceStatement of Comprehensive Income

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2010/11 Financial Performance2010/11 Financial Performance

Expenditure

2010/11 2009/10

Compensation 30,568,885 28,944,728

Goods & Services 17,085,896 19,727,128

Total Operating Expenditure 47,654,781 48,671,856

Grants paid 18,388,755 6,300,000

Loans written off 1,047,923 7,450,472

Less: Reversal of Impairment (8,727,675) (1,312,818)

Total Expenditure 58,363,784 61,109,510

Operating expenditure

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Auditor General ReportAuditor General ReportOPINION

An unqualified opinion was expressed, however issues were raised as part of emphasis

of matter.

EMPHASIS OF MATTER

Going concern

The Economic Development Department is re-organising its small lending business

institutions by merging samaf, Khula and small business activities of the Industrial

Development Corporation (IDC). samaf will not cease its operations.

Material losses to the amount of R1 047 923 were incurred as a result of the write off

of loans provided to financial intermediaries.

In addition, material impairments to the amount R 4 795 527 were incurred on loans

provided to Financial Intermediaries.18

Auditor General Report (cont…)Auditor General Report (cont…)

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REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS

Usefulness of information

Predetermined objectives

The reported performance information was deficient in respect of the following criterion:

Measurability : Indicators are not well defined.

Reliability of information

The reported performance information was deficient in respect of the following criterion:

Accuracy: the amounts , numbers and other data relating to actual performance have

not been recorded and reported appropriately.

Completeness: All actual results and events that should have been recorded have not

been included in the reported performance information.

Auditor General Report (cont…)Auditor General Report (cont…)

Compliance with laws and regulations

Procurement and contract management

A service with a transaction value between R10 000 – R500 000 was procured without

inviting at least 3 written price quotations from prospective suppliers as required by

Treasury regulations.

Expenditure management

The accounting officer did not take appropriate steps to prevent irregular expenditure, as per

the requirements of the section 38 (1)(c)(ii) of the PFMA. A payment of R107 333 was

made although the correct procurement process was not followed.

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Auditor General Report (cont…)Auditor General Report (cont…)

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INTERNAL CONTROLS

Leadership

The leadership did not exercise appropriate oversight in ensuring that the prior year

and current year annual financial statements complied with the reporting framework.

The entity did not have sufficient skilled resources. The Acting Chief Executive Officer is

filling the position of Chief Financial Officer.

Financial and performance management

Management did not have adequate controls to ensure the accuracy or completeness

of the financial statements and the report on performance information.

Management did not ensure that certain accounting policies were correctly adopted

Management’s internal control systems relating to IT were inadequate in providing

reasonable assurance that the IT high risk areas were properly managed and controlled.

Lack of governance and administration skills within the FIs

General lack of micro-financial skills both internally and externally

Capacity constraints at the provincial offices

Vast distances travelled to the FI’s within the provinces

samaf did not have sufficient skilled resources particularly at executive level

Uncertainty and low staff morale due to the impending merger of samaf, Khula and IDC small business activities

ChallengesChallenges

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Revised business processes to reduce turnaround times

Implementation of the capacity building impact analysis tool

Implementation of change management to address the merger issues

Address audit findings by:

‐ Reviewing existing policies and developing new relevant policies and

procedures

‐ Tightening controls by communicating policies as well as punitive

measures that may be necessary in the event of transgressions.

Ensure that corporate and individual targets are aligned, clearly

defined and agreed upfront with all members of staff

Way forwardWay forward

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THANK YOU

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AcronymsAcronymsAcronym Definition

the dti The Department of Trade and Industry

EDD Economic Development Department

EXCO Executive Committee

FSC Financial Services Co-operatives

MFI Micro-finance Institution

RRSS Registration, Regulation, Supervision and Stabilisation

FI Financial Intermediary

GFIA Gobodo Forensic Investigation Accountants

PFMA Public Finance Management Act

PAR Portfolio at risk

samaf South African Micro-finance Apex Fund

SME Small Medium Enterprise

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