Driving Women Participation in the Mainstream Economy

Presented to Business Opportunities in Energy Sector Workshop for Women, Kimberley

Presenter

Ms Xolisile Ntanzi Senior Investment Associate, Strategic Projects Fund

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Contents

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Section Slide 1 About the NEF 4

2 Growing Black Industrialists 7

3 Investment Philosophy and Achievements 16

4 Investee Stories 28

About the NEF

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NEF Mandate…

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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

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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.

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Growing Black Industrialists

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.

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SPF Mandate

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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

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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.

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SPF Project Development Stages

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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 Investment to date R61.75 million

Project Promoter Mabele Fuels (Pty) Ltd

Projected Financial Close Requirement R2.5 billion

No. of Jobs to be Created 16,700

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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 being commissioned and is expected to come online shortly

Location Newcastle, KZN

Project Development Stage Construction

NEF Investment to date R65.6 million

Project Promoter KC Energy

Total Project Cost c. R200 million

No. of Jobs to be Created 221

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Infrastructure & Manufacturing BUSAMED

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

Project Development Stage Financial Close

NEF Investment to date R260 million

Project Promoter Goldenwood (Pty) Ltd

Projected Financial Close Requirement R1.6 billion

No. of Jobs to be Created 7,000

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NEF Investment Philosophy & Achievements

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“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…

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Market Failures & Non-Financial Support

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• 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

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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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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.

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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 Target Market

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Target Market Products & Services

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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

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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

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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 5. Procurement Finance 6. Mentorship Support

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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 3. Procurement Finance 4. Strategic Projects Fund 5. Liquidity & Warehousing 6. Mentorship Support

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:

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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.

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NEF’s Investment Funds

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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

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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

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Investee Stories

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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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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.

Building the Economy, Sharing the Wealth

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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

Building the Economy, 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.

Building the Economy, Sharing the Wealth

Afripotego IT & Construction (Pty) Ltd R2.75 million