31 May 2016

�Tsori Capital Background �Challenges faced by municipalities on waste�The opportunities in recycling�The challenges that co-operatives face in capitalis ing on the opportunities in recycling�Capacitating co-operatives in recycling�Bankable waste project structure involving co-opera tives�Risks and mitigation plan�Project implementation governance structure�Development impact�Available funding for waste recycling projects�Highlights of some of the projects under implementa tion�Questions session

Tsori Capital– Background

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• Tsori Capital cc is an integrated Pan-Advisory, Accounting Services, Engineering services company;

• Tsori Capital is 100% Black owned with 70% female majority shareholding.

• Tsori Capital enjoys a highly diversified experienced team with background from various disciplines and a wealth of experience in Mechanical Engineering, Water and Sanitation, Accounting, Project Management, General Consulting and Investment banking

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To become a point of reference for integrated consulting and engineering services in Africa and Middle East.

To inspire, bring development to the people of Southern Africa and make the impossible possible.

The Tsori Capital strategy is under-pinned by two major themes:

� Unlock investments for our clients thereby creating value that helps:

• promote human development, productivity growth, broad based wealth creation and regional

integration (infrastructural and productive capital)

• serve the poor, directly and indirectly

� Mobilise, develop, apply, and manage knowledge in support of development effectiveness, innovation

and an enabling development environment

VISION

Mission

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Innovation

Excellence

Safety

Integrity People

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• Corporate and Project Finance Advisory

Services;

• Accounting and Internal Audit Services;

• Water and Sanitation Services;

• Mechanical Engineering services;

• General Supply Services

r• Corporate and Project Finance Advisory Services and General Professional Services include the

following:

– Co-operative/SMME program structuring, packaging, fundraising and project

management

– Financial modelling;

– Developing fundraising strategies;

– Raising and structuring of debt and equity finance;

– Due diligence;

– Calculation and optimisation of Water tariffs required to repay capital within a given

repayment period.

– Business plans

– Annual water tariff reviews;

– Data alignment and revenue enhancement

– Management buyout or buy-in;

– Black economic empowerment deal structuring;

– Business valuation and restructuring;

– Policy development;

– Research;

– Information and records management; and

– Economic Analysis

Challenges faced by the municipalities on waste

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Area cleaning

• Illegal dumping

• General littering

• Littering by the public in public spaces and especially in low income areas has created an environmental health challenge on rats, foul smells and risk of pollution.

• Unserviced settlements

• The growth of peri-urban informal settlements is major challenge. Standard waste disposal operation are not well suited for the provision of waste cleaning services

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Waste collection

• Waste removal service provision

• Breakdown and maintenance of waste collection trucks

• High transport fuel bill

Waste Disposal

• No Environmental Management System and Environmental Management Plan

• Lack of internal and external environmental audits

• Landfill Site buffer zone determination and enforcement

• Low maintenance of equipment and lack of weighbridge

• Lack of groundwater monitoring

• Lack of ambient air quality and lateral gas migration monitoring

The opportunities in recycling

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• Recycling rates in the country are around 10% (DEA&DP, 2015);

• The Department of Science and Technology reported in the National Waste Roadmap 2013 that the local waste sector currently employs approximately 29 000 people;

• That is around 0.51% of the country’s gross domestic product;

• An estimated 90.1% of all general and hazardous waste generated in the country is still landfilled.

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Waste stream

Value (R million/year)

Scenario 1

Recycling at 10%

(Status quo)

Scenario 2

(Recycling at 50%)

Medium term

Scenario 3

20% & 60% reduction in

industrial and domestic

waste to landfill by 2024

Scenario 4

Recycling at 100%

Municipal waste (nonrecyclable

portion)

0 740 1481 2962

Organic component of municipal waste 199 299 399 570

Biomass waste from industry 0 2047 4094 6823

Construction and demolition waste 66 136 207 413

Paper 736 810 1033 1291

Plastic 735 1668 2449 4082

Glass 150,4 205 282 470

Metals 5668 6022 6377 7085

Tyres 3,6 38 72 91

WEEE 7 19 32 64

Slag 467 587 705 940

Ash 7 14 22 109

Waste oils 147 193 240 333

Total 8189 12790 17393 25235

Source: Department of Science and Technology ,RDI road map 2015-2025

The challenges that co -operatives face in capitalising on the opportunities in recycling

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• A complex legislation and regulatory framework, specifically around compliance with environmental authorisations;

• Access to waste, especially Municipal Solid Waste;

• Access to market, some entities recycling waste do not want to enter into offtake agreements before the plants are commissioned;

• Access to land;

• Access to technical skills;

• Access to finances;

• Lack of business skills etc

Capacitating co -operatives in recycling

r• Requires smart partnerships between all 3 spheres of government and the

private sector;• Co-operatives should be assisted to set up waste recycling and manufacturing

plant throughout the country;• DEA, Provincial Department of environmental affairs and municipalities working

with the transaction advisor should facilitate workshops with an aim to prepare the beneficiaries;

• Co-operatives which are active or interested in waste recycling must be grouped into secondary co-operative structures;

• Co-operatives assisted by local government should embark on a campaign of encouraging residents to sort waste at source, and incentivise the residents that oblige through purchasing the sorted waste;

• District and local municipalities to make land available for the program for the construction of the warehouse and buyback centers;

• District and local municipalities to give full access of the landfill site to the co-operatives for the securing raw materials;

• Co-operatives should also be allowed to collect waste from all government properties;

• Municipal waste collection should be outsourced to the co-operatives to ensure maximization of waste collection of recyclable materials;

• Transaction advisors conduct a technical review on how much waste exist within the targeted areas using a PRASA model;

• Transaction advisor secures Offtake agreements with waste companies;

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• Quotes sourced from equipment suppliers and contractors;

• Transaction advisors develop a project information memorandum and financial model;

• Funding for capacity building of co-operatives should be secured from corporates. CSI divisions of corporates should be approached to explore possibilities of funding training of co-operatives;

• DEA/Provincial Department of Environmental Affairs/Municipalities extend grant funding to finance 10% to 30% of the development costs of the waste recycling plants;

• The balance of the funding to be raised from Development Finance Institutions to fund the establishment of waste recycling plants;

• Operations and management contracts entered into with reputable operators in order to build skills within the cooperatives;

• Construction commences and Transaction Advisor to performs a project management role;

Bankable waste Project Structure involving co -operatives

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Transaction Advisor

FinanciersDEA/Provincial Departments/ Municipalities

Plant Neopak Recycling (Nampak)

Technical partner Off-takers

Partner

20%

Co-operative 1

Co-operative 2

Co-operative 3

Co-operative 4

Co-operative 5

80%

Grant Loan Loan agreements

Landfill site, Government

buildings, malls, communities etc.

Raw materials

Key risks and mitigation plan

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� Construction risk

This is the risk that construction will not: (i) be completed on time, (ii)within a predetermined budget, (iii) meet the specifications of theproject, thus impacting negatively on the project’s ability to generatecash. This risk will be mitigated by appointment of reputableconstruction companies to undertake the work. This risk will be furthermitigated through pre-completion guarantees and turnkey contractswith the appointed contractors, with built-in provisions for penalties forpoor performance and bonuses for better than expected performance.

� Equipment performance Risk

This risk relates to performance of the equipment to meet the required production. It will be mitigated through performance guarantees that will be required from the equipment manufacturers.

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� Institutional risk

This risk relates to lack of experience of members of the cooperatives to be able to run the businesses. This will be mitigated through appointment of reputable operations and maintenance companies for a period of three to five years to help to up-skill the members of the cooperatives. Educational interventions will also be part of this programme to deal with financial management, marketing, human resource and technical capabilities.

� Market risk

Payment risk relates to cooperatives being able to find market to be able to sell the product and meet its financial obligations. This risk will be mitigated through municipality’s intervention of assisting with finding the market.

Project implementation governance structure

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A governance structure should be established to ensure smooth implementation of any project. All relevant stakeholders should be consulted and included in the governance structure. In the case of waste recycling projects the stakeholders would be:

• Department of Environmental Affairs

• Provincial departments;

• Municipalities

• Co-operatives/SMME’s

• Waste Companies

• Others

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DEA Director, Provincial Government Rep, Municipalities, Waste Companies and Co-operatives/SMME’s

DEA/Provincial Government/ Municipalities

Consultant and DEA resources

ConsultantAccount director

Project Sponsor

Project Management

Steering group

Financial/Market due diligence

Senior consultant & trainee

• DEA project manager

• Consultant Project Managers

Legal due diligenceLegal advisor

Financial modelSenior Consultant

& Trainee

• Authorise project• Final decision maker

• Provides direction• Allocates resources• Makes decisions• Signs off deliverables

• Day to day management• Manages resources• Feed back to steering group• Prioritises activities

• Perform the work• Contribute ideas & expertise • Conduct research• Do the analysis• Develop recommendations

Development impact

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• The cooperatives structure shall broaden black economic empowerment;

• Diversification of local economy’s through creation of new industries;

• Revitalisation of local economic development activities in the townships, small dorpies and villages

• Address the market failure in incorporating youth, women and people with disabilities into the mainstream economy;

• Empowerment of emerging youth, women and people with disabilities as entrepreneurs;

• Creation of new jobs; and

• Development of new skills.

• Minimise waste that needs to be disposed in landfills, thus extending existing landfill capacity;

• Reduce the environmental impact of disposal sites as the bio-degradable waste fraction largely is to blame for the polluting leachate and the methane problems;

• Divert biodegradable waste from the municipal waste stream, thus reducing transportation costs and the environmental costs;

• Enhance environmental awareness in the community;

Available funding for recycling projects

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Name Type of Funding Comment

Department of

Small Business

�Co-operative Incentive Schemes 100% grant funding for manufacturing,

production systems, working capital etc

DTI �Incubation support programme Grant capped at R10million over three

years

DTI �Support programme for

Industrial Innovation

Grant capped at R5million on matching

basis and covers up to 75% of the costs

DTI Critical Infrastructure Programme Cost sharing Grant capped at R30

million. Covers 30% of the

development costs etc

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Name Type of Funding Comment

Sefa �Wholesale funding Up to R100 million loan facility and

support grants for the capacity building

IDC �Debt facility and project

preparation funding

Debt funding: Minimum R5million

Project Preparation Facility of up to

R5million

NEF �Debt Facility Up to R75million loan facility

Highlights of some of the projects under implementation

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Waste Sorting and Baling Plant in Dr Kenneth Kaunda District

• Job opportunities:

– 328 direct;

– More than 200 indirect

– Also incorporate 600 reclaimers

• Total project cost: R31.2million;

• Project Annual Turnover: R87million in year 1 to R116million in year 5 of operations;

• Target market: Neopak Recycling (Nampak)

Waste Sorting and Baling Plant in Emnambithi/Ladysmith Municipality

• Job opportunities:

– 200 direct;

– More than 68 indirect

– Also incorporate reclaimers

• Total project cost: R34,5million;

• Project Annual Turnover:

R43million in year 1 to

R86million in year 5 of

operations;

• Target market: Neopak

Recycling

Please contact:Name: L Mbokotho

E-mail: lmbokotho@tsoricapital.comMobile: 0832923723

Landline: (012)7702025