Presentation to Portfolio Committee on Small Business Development:

Status of Isivande Women’s Fund (IWF) as at 31 March 2015

AGENDA

Introduction & Background

Objectives of the Fund

The Fund Criteria

Fund activity to date

Challenges and Lessons learnt

Conclusion

INTRODUCTION & BACKGROUND

Isivande Women’s Fund (IWF) is an initiative of the Department of Small Business Development (DSBD) having been migrated from the Department of Trade and Industry (the dti);

IWF was introduced as a response to challenges faced by women with regard to limited access to finance for women that inhibits the establishment, growth, sustainability and profitability of women’s enterprises;

IWF was launched in 2007, but due to delays in implementation could not get off the ground smoothly until 2010;

In May 2010, the dti entered into an Memorandum of Agreement (MoA) wherein the dti appointed the IDC to be the owner and facilitator of the Fund as well as to provide Technical Support for effective period of eight (8) years.

INTRODUCTION & BACKGROUND IDC temporary took over the management ( trial phase) but

IWF criteria was mostly below IDC mandate so it was decided to outsource the management of the fund (through the provision of the MoA)

A tender for IWF’s management was issued and won by IDF Managers who were appointed to manage IWF with an initial R45 million with IDC’s supervision;

Fund size and Management Fees

Initial R45 million (A further R20 million was approved in Dec 2013 and hence total funds under management is now R65 million;

INTRODUCTION & BACKGROUND IDC Management Fee of 2% on the aggregated sum of

amounts standing to the credit of the IDC bank account in the relevant financial year;

The Fund Manager’s fee of 3% of the committed capital is paid annually, and so based on the tenor of this IWF partnership agreement being 8 years, it should be (3% x R65 000 000 x8=R15 600 000).

IDF Managers was established in March 2008 and currently manages funds for sefa, Shell South Africa and Government (IWF) totalling R149m.

An 8-year period comprising of 4-year investment period and 4-year divestment period was proposed for IWF;

FUND OBJECTIVES

Invest in businesses based in South Africa and owned and managed by women;

Build and develop women-owned businesses;

Promote and develop entrepreneurship in rural and peri-urban areas; and

FUND OBJECTIVES

Achieve the targeted portfolio returns of 0% nominal IRR to ensure long term sustainability of the Fund; (in other words a nominal return equal to inflation). i.e. the fund manager is expected to achieve a portfolio return of say, at least 6% if the average inflation for the 8 year period is 6%. In that case, the capital is not dwindled by inflation and anything above inflation is shared in the ratio of 35%:65% between the Fund Manager and the investor respectively. This is an incentive for the Fund Manager to perform and partake in the upside of the fund.

FUND CRITERIA

Invest only in portfolio/investee companies that qualify as SME’s;

Invest between R30k and R2m per transaction;

50% plus 1 of the ordinary share capital must be held by women;

30% or more of the management positions shall be held by women;

At least 80% of the funds to go to black women owned businesses;

Businesses must be commercially viable;

At least 30% of the fund to be invested in rural and peri-urban areas;

FUND PERFORMANCEIWF TOTAL PORTFOLIO

Total Fund Size R65 000 000Management Fee budget R15 600 000Net Funds for Investment R49 400 000Funds Committed R35 045 735Uncommitted Funds R14 354 265Disbursements to Clients R28 849 715Undisbursed Funds R6 196 020Portfolio at Risk* R6 017 104Repayments Received

*21% of Portfolio at Risk is impairments and the rest write

offs.

R7 306 261

FUND PERFORMANCE

FUND PERFORMANCE

Employment creation •The total number of funded companies since inception is 45 (including 3 follow-on transactions). This has resulted in the creation of 155 new jobs and sustained 394 existing jobs.

SECTORAL SPREAD

GEOGRAPHIC SPREAD

PERFORMANCE TARGETS/ACTUALS

PERFORMANCE TARGETS / ACTUALS as at 31 March 2015

Quarter Target (no. of deals)

Actual (No. of deals) Value of Actual

Quarter 1 4 6 R6 129 100

Quarter 2 6 4 R2 340 000

Quarter 3 4 4 R2 450 040

Quarter 4 2 0 R0

  16 14 R10 919 140

PERFORMANCE PLAN PROJECTIONSMULTI –YEAR PERFORMANCE PROJECTIONS

Strategic Goal/

Objective Outcome

Strategic Objective

Performance Indicator

Baseline Information

Performance Targets

2014/15 2015/16 2016/17

Grow a dynamic SME sector

Increase level of investment in black women owned businesses

Value of approved transactions

R32.98m R16.35m R5m R0

PERFORMANCE PLAN PROJECTIONS

The figures demonstrate that the fund has disbursed most of the funds available for investment, excluding the fund management fees for an 8 year period.

The budget also demonstrates that the additional capital commitment of R20million is likely to be fully committed within the first half of the 2015 calendar year.

LESSONS LEARNT IWF must be willing to take higher risk in businesses;

Higher risk projects will subject the Fund to high levels of write off and impairment leading to lack of long term sustainability;

Simplify the application process – more away from private equity approach;

Simplify the qualifying criteria;

Business support critical to the success of nature of business funded;

LOOKING FORWARD

Simplified legal agreements – basic grant or loan agreements;

Quicker turnaround times;

Enhanced marketing strategy to attract deal flow;

The fund will be fully committed before the end of the next financial year 2015/16.

Industrial Development Corporation19 Fredman Drive, SandownPO Box 784055, Sandton, 2146South AfricaTelephone 011 269 3000Facsimile 011 269 2116E-mail callcentre@idc.co.za

Thank you