FUND
NATIONALEMPOWERMENT
Growing Economic Participation
FUND
NATIONALEMPOWERMENT
Growing Economic Participation
PRESENTATION TO THE
SELECT COMMITTEE ON
ECONOMIC & FOREIGN AFFAIRS
24 FEBRUARY 2005
FUND
NATIONALEMPOWERMENT
Growing Economic Participation
CONTENTS
1. Introduction 2. Organisational Structure3. Investment Division4. Finance Division
FUND
NATIONALEMPOWERMENT
Growing Economic Participation
Main objective
To be a catalyst in facilitating economic equality and transformation
New focus Maximise the empowerment dividend
Driven by
- Current market needs- Broad-based empowerment charter- Government policy and other sectoral
charters- Addressing past failures of BEE
structures
NEF INTRODUCTION
FUND
NATIONALEMPOWERMENT
Growing Economic Participation
NATIONAL EMPOWERMENT
FUND
(NEF)
NEF TRUST
NEF VENTURES
In terms of the NEF Act Capitalisation from National
Treasury Specific product offerings in
terms of June 2004 product relaunch
Joint Fund between IDC and the NEF
Separate investment criteria and fund mandate
Transactions between R3m to R10m Minimal overlap with NEF Trust
Transformer product only NEF screens and processes
applications as Fund Manager Capitalisation on a 50/50 basis
between both organizations Fund Size R170m, with initial
expectations of an additional R30m to be earmarked for a smaller Fund
Management fees paid by IDC and NEF respectively
FUND DIFFERENTIATION
FUND
NATIONALEMPOWERMENT
Growing Economic Participation
NEF Board
Chief Executive Officer
Chief Financial Officer
A Wright (Acting)
BEE
Ret
ail E
quity
Man
ager
Gen
erat
or
Acc
eler
ator
Tran
sfor
mer
Fina
ncia
l Acc
ount
ing
Man
agem
ent A
ccou
ntin
g
Audit CommitteeHuman Capital & Remuneration Risk Management Committee Investment Committee
Executive - Group Entrepreneurial
SchemesP Naidoo (Acting)
Executive - Market MakingVacant
Support Services Executive
Risk / Internal Auditor Vacant
Rur
al &
Com
mun
ity S
uppo
rt
Proc
ess
and
Proj
ects
Coo
rdin
atio
n
Secretarial & Compliance OfficerE Riley
Kno
wle
dge
Man
agem
ent
Executive Advisory ServicesVacant
BEE
Fac
ilita
tion
Stra
tegi
c Pr
ojec
ts
Und
erw
ritin
g fo
r IPO
Offi
ce A
dmin
istr
atio
n.
Hum
an R
esou
rces
Mar
ketin
g &
Com
ms
Lega
l Adv
isor
y Se
rvic
es
Info
rmat
ion
Tech
nolo
gy
PAVacant
Minister
NEF ORGANISATIONAL STRUCTURE
Total number of employees: 41
FUND
NATIONALEMPOWERMENT
Growing Economic Participation
NEF’S BUSINESS OFFERING
FUND
NATIONALEMPOWERMENT
Growing Economic Participation
THE NEF IS A DFI OPERATING UNDER THE UMBRELLA OF THE dti
• providing historically disadvantaged persons with the opportunity of, directly or indirectly, acquiring shares or interests in state owned commercial enterprises that are being restructured or in private business enterprises;
• encouraging and promoting …. investments and meaningful economic participation by historically disadvantaged persons;
• promoting and supporting business ventures pioneered and run by historically disadvantaged persons;
• promoting the universal understanding of equity ownership among historically disadvantaged persons;
• encouraging the development of a competitive and effective equities markets inclusive of all persons in the Republic;
• contributing to the creation of employment opportunities
• Increasing the contribution of small enterprises to the economy
• Significantly advancing broad-based black economic empowerment
• Increasing the level of direct investment in the economy and in specific priority sectors
• Contributing towards providing accessible, transparent and efficient access to redress for economic citizens
• Partially fulfilling
– Contributing towards building skills, technology and infrastructure platforms in the economy from which enterprises can benefit
– Repositioning the economy in higher value-added value matrices in manufacturing and services
Market Making – Current products
(CMF, LWF, SPF)
NEF’s products/ activities NEF’s objectives as per the NEF Act dti’s objectives addressed
The NEF’s product offerings have been structures to address the NEF’s objectives and the dti’s strategic objectives for 2004 to 2007
FUND
NATIONALEMPOWERMENT
Growing Economic Participation
THE NEF IS A DFI OPERATING UNDER THE UMBRELLA OF THE dti (continued)
• Increasing the contribution of small enterprises to the economy• Significantly advancing broad-based black economic
empowerment • Contributing towards providing accessible, transparent and
efficient access to redress for economic citizens• Partially fulfilling
- Increasing the level of direct investment in the economy and in specific priority sectors
- Contributing towards building skills, technology and infrastructure platforms in the economy from which enterprises can benefit
• Providing historically disadvantaged persons with the opportunity of, directly or indirectly, acquiring shares or interests in state owned commercial enterprises that are being restructured ….;
• Encouraging and promoting savings, investments and meaningful economic participation by historically disadvantaged persons;
• Promoting the universal understanding of equity ownership among historically disadvantaged persons;
• Encouraging the development of a competitive and effective equities markets inclusive of all persons in the Republic;
Group and Entrepreneur schemes – existing productsGenerator, Accelerator, Transformer
NEF’s products/ activities
NEF’s objectives as per the NEF Act dti’s objectives addressed
• Providing historically disadvantaged persons with the opportunity of, directly or indirectly, acquiring shares or interests in state owned commercial enterprises that are being restructured or in private business enterprises;
• Encouraging and promoting savings, investments and meaningful economic participation by historically disadvantaged persons;
• Promoting and supporting business ventures pioneered and run by historically disadvantaged persons;
• Promoting the universal understanding of equity ownership among historically disadvantaged persons;
• Contributing to the creation of employment opportunities;
• Increasing the contribution of small enterprises to the economy
• Significantly advancing broad-based black economic empowerment
• Increasing the level of direct investment in the economy and in specific priority sectors
• Contributing towards providing accessible, transparent and efficient access to redress for economic citizens
• Partially fulfilling
- Contributing towards building skills, technology and infrastructure platforms in the economy from which enterprises can benefit
Group and Entrepreneur schemes – existing products
(Rural and Community Development)
FUND
NATIONALEMPOWERMENT
Growing Economic Participation
THE NEF IS A DFI OPERATING UNDER THE UMBRELLA OF THE dti (continued)
• Providing historically disadvantaged persons with the opportunity of, directly or indirectly, acquiring shares or interests in state owned commercial enterprises that are being restructured or in private business enterprises;
• Promoting and supporting business ventures pioneered and run by historically disadvantaged persons;
• Promoting the universal understanding of equity ownership among historically disadvantaged persons;
• Contributing to the creation of employment opportunities
• Significantly advancing broad-based black economic empowerment
• Contributing towards providing accessible, transparent and efficient access to redress for economic citizens
Group and Entrepreneur schemes – existing products
(Retail Equity ownership)
NEF’s products/ activities NEF’s objectives as per the NEF Act dti’s objectives addressed
FUND
NATIONALEMPOWERMENT
Growing Economic Participation
• Identification of market failures in SME sector• Avoid duplication of other DFI offerings• Positioning of NEF to complement other DFIs and financial institutions
Product Market failure Complementary to other DFIs/Banks
Group and Entrepreneurial Schemes
• Generator(R250k-R1m)
• Limited access to finance for HDSA entrepreneurs with no collateral
• Brings new businesses into bankable positions.• Khula and IDC
• Accelerator(R1m-R3m)
• Limited access to finance for HDSA entrepreneurs with no collateral
• Enhances existing businesses future prospects of maintaining independent banking relationships.
• Khula and IC
• Rural and community development(R1m-R3m)
• Lack of equity funding fro rural & community economic infrastructural development especially with prospects of long term (10 year) medium to low returns. This equity catalyses debt from DFIs and banks.
• NEF will only provide a potion of total capital requirement, balance as debt from IDC, DBSA, Land Bank, Banks
• Working with CPPP
• Transformer(R3m-R10m)
• Limited access to finance for HDSA entrepreneurs with no collateral
• Enter buy-in/buy-out negotiations from a position of weakness
• Co-investment with other DFIs
The NEF’s initial products have been designed to address specific market failures as highlighted below:
NEF POSITIONING IN ADDRESSING MARKET FAILURE
FUND
NATIONALEMPOWERMENT
Growing Economic Participation
NEF POSITIONING IN ADDRESSING MARKET FAILURE cont.
• Capital Markets fund (R1m-R10m)
Product Market failure Complementary to other DFIs/Banks
• Liquidity and warehousing(R10m-R50m)
• Strategic projects (>R25m)
• Institutional fund managers do not focus on listed companies with market caps <R1bn and even less emphasis is placed on markets caps of <R500m
• IPOs and capital raisings for small to medium sized Black Empowered businesses are thus extremely
• Large strategic projects create an ideal opportunity for BEE participation at the outset.
• Funding to secure an equity position for BEE participants at the start-up phase is not readily available.
• Adverse funding structures dilute the BEE strategic positioning.
Market Making
• Second round funding requirements on broad based structures can dilute the BEE shareholding.
• Other than IPOs, there is not much market liquidity for HDSA owner-managers who wish to realise some value from their businesses without compromising BEE status and hence value.
• Historic funding structures, especially where BEE groups have acquired controlling stakes, are often punitive and over-geared which places pressure on the underlying operations.
• Assists with exists from equity positions held in successful medium to large private businesses
• IDC
• Co-investment with IDC, DBSA, Land Bank
• Restructure funding with a longer-term view• IDC, Banks
FUND
NATIONALEMPOWERMENT
Growing Economic Participation
WHAT DIFFERENTIATES NEF? Exclusive generalist funding
for BEE Not focused on personal
credit worth/ security Focused on the “Hurt Factor”
(livelihood dependent) Appetite for risk with a
development focus
FUND
NATIONALEMPOWERMENT
Growing Economic Participation
KEY QUALIFYING CRITERIA Entrepreneur Support
• Operational involvement at senior management level
• Financial commitment (relative to the individual and not the size of the transaction)
• Demonstrate sustainability of the business
• NEF investment into operating companies
• Compliance with laws and regulations(e.g. Income tax, Employment Equity)
Rural & Community Support
• Community involvement at all levels
• Strong social upliftment benefits
• Co-funding with other investors (NEF will not be the sole investor)
• Projects must be undertaken in conjunction with a recognised partner
Market Making
• Track record of operational involvement
• Established businesses
• No dilution of management capacity
• Compliance with laws and regulations (e.g. Income tax, Employment Equity)
FUND
NATIONALEMPOWERMENT
Growing Economic Participation
Generator Accelerator Transformer
• R250 000 to R1m • R1m to R3m • R3m to R10m Size of investment• Create new HDP-
owned and managed enterprises
• Grow and develop existing HDP-owned and managed enterprises
• Transformation of enterprises at the ownership, decision-making and control levels
Principal goal
• Close corporations) and private (Pty) Ltd companies.
• CCs and (Pty) Ltd companies
• Unlisted limited companies
Types of organisations supported
• Acquisition of equipment
• Financing of working capital
• Bridging finance• Acquisition of
licenses/franchises• Rehabilitation, lease
and performance bonds
• Primarily to fund business expansion, either by acquisition or organically
• Management buy-outs
• Management buy-ins• Employee buy-ins,
Employee share ownership plans
Principal use of investment capital
• Debt (secured and unsecured)
• Equity
• Secured debt• Convertible debt• Preferred equity • Equity
• Secured debt• Convertible debt• Preferred equity• Equity
Types of investment
• 3 – 7 years • 3 – 7 years • 3 – 7 yearsTerm of investment
• >75% • >50% • >25%HDP equity thresholds (including NEF stake)
DETAILED INVESTMENT CRITERIA – ENTREPRENEUR SUPPORT
FUND
NATIONALEMPOWERMENT
Growing Economic Participation
THE FRAMEWORK TRACKS THE DEAL FLOW PROCESS THROUGH THE FOLLOWING GENERIC STAGES:1. Eligibility screening;2. Assessment of commercial viability (including historic analysis) and sustainability of financial forecasts, incorporating review of the business plan;3. Evaluation of management’s ability to implement the business plan;4. Proposed investment structure and capacity of business to service/ bear the required cost of funding;5. Identifying risks inherent in the business, formulating the due
diligence investigation plan and setting due diligence materiality limits; 6. RECOMMENDATION TO EXCO (PRE DUE DILIGENCE);
7. Performance of due diligence and evaluation of results;8. Final review of due diligence and comparison to
investment structure;9. FINAL RECOMMENDATION TO EXCO AND IC
EVALUATION FRAMEWORK
FUND
NATIONALEMPOWERMENT
Growing Economic Participation
Application form Screening Business plan Prelim Investment report Investment Committee
→ → → → → → →
Receipt of Investment
Application Form and business
motivation
Assessment of application for
eligibility
Investment Associate perform assessment for commercial viability, incorporating business
plan Communication with applicant: decline application or proceed with evaluation
Completeness of Business Plan and evaluate financial
forecasts
Prepare Investment Report for pre-due
diligence & proposed Term Sheet approval
Present Pre Due Diligence report to
Investment Committee
(INCOM)
Product information communicated to applicant
Send client investment criteria & application form
Application received entered onto deal data base
Asses against eligibility criteria per Investment Charter
Decline or forward for subsequent screening
Committee, (includes CIO,) approves findings on applications (accepted / declined)
Allocate to Investment Associates
Assess Valuation Affordability Business case Contact client to
discuss application
Issue appropriate letter (decline or proceed)
Communicate reasons for declining application
Committee, (includes CIO) approves findings on applications (accepted / declined)
Ongoing query & feedback to applicant
Approval at weekly team meeting
Circulate investment report to EXCO
Term sheet to be included in investment report
Includes risk analysis & due diligence materiality limits
Approval by EXCO
Circulate investment report to INCOM
INCOM needs 2 weeks to evaluate
Term sheet to be included in investment report
Includes risk analysis & due diligence materiality limits
Approval by INCOM
Formal Documentation required:
Completed application form, motivation & financial summaries
Eligibility screening completed on application form
Minutes of Committee Meeting
Letter to client if declined
Report to monthly investment committee meeting
Commercial viability assessment report
Provide Business Plan checklist, if necessary
Letter to Client Business Plan
Pre-screening report
Investment report Proposed Term
Sheet Minutes of Meeting
Pre Due Diligence Report
Proposed Term Sheet
Minutes of Meeting
INVESTMENT PROCESS: TRANSACTIONS > R5m
FUND
NATIONALEMPOWERMENT
Growing Economic Participation
Due diligence Final Investment Report Investment Committee Legal
→ → → → →
Perform Due Diligence (DD) Final Investment Report
EXCO Submission for
approval
Report to INCOM for final approval
Legal agreements & disbursement
Risk focused Return assessment based on
sensitivity scenarios Sign off DD file for quality review DD
working paper file Executive Summary report of DD
Prepare investment report recommending deal & subject to legal contracts
Include scope of DD
DD results on executive summary report
Circulate Investment Report to EXCO
Final term sheet to be included in investment report
Circulate Investment Report to INCOM Members
INCOM needs 2 weeks to evaluate
Final term sheet to be included in investment report
Monthly meeting scheduled in advance
Drafting of legal agreements using NEF standard templates
Finalise with attorney’s input
Circulate to investee for review & acceptance
Disburse
NOTES:
1. Timings associated with the Generator and Accelerator products may be quicker in that structuring would be standardised to a point.
2. Capital expansion transactions would likely be able to be accelerated.
3. EXCO comprise of executive management, including CEO of NEF.
4. Negotiations with respect to MBI’s and MBO’s would expectantly take a longer turnaround.
5. Timings are indicative assuming all information from the application is complete and timeous and represents actual time spent on transaction.
Formal Documentation Required:
Due Diligence file Executive summary of DD
Investment Report Executive Summary
report of DD Signed Term Sheet
Investment Report Executive Summary
report of DD Signed Term Sheet Minutes of Meeting
INCOM resolution (minutes of meeting)
Approval letter
Legal contracts Disbursement
documentation
INVESTMENT PROCESS: TRANSACTIONS > R5m cont.
FUND
NATIONALEMPOWERMENT
Growing Economic Participation
INVESTMENT PROCESS: TRANSACTIONS > R5m Application Form / Screening /
Business PlanPreliminary Investment
Report Investment Committee Due Diligence Final Investment Report
PIDSA
Total Applications Received
(01/06/04 – 21/02/05) 185
1. E & B CitrusR10,000,000 (EC)
2. EHD Components
R9,940,000 (GP)
Pending Applications (01/06/04 – 21/02/05)
70 (Pre-Investment Business
Support required to accelerate transactions)
1. DatacentrixR50,000,000 (GP)
2. E & B Conservancy R10,000,000 (EC)3. Solar Systems
R7,000,000 (GP)4. Vac Air Technology
R10,000,000 (GP)
Receipt of Investment Application Form & Business Motivation
Assessment of application for eligibility
Investment Associate perform assessment for commercial
viability, incorporating business plan
Communication with applicant: decline application or proceed with
evaluation
Completeness of Business Plan
Evaluate Financial forecasts
Internal Team Approval
Prepare Investment Report for pre-due
diligence & proposed Term sheet Approval by
EXCO Investment Committee (INCOM)
Present Pre Due Diligence Report to
EXCO INCOM Perform Due Diligence (DD) Final
Investment Report
EXCO INCOM Submission for
Approval
Presentation to the NEF INCOM / Ventures IC for Final Approval
(FICA)
Interim Investment Committee for
transactions above R5m approved
PIDA
FUND
NATIONALEMPOWERMENT
Growing Economic Participation
INVESTMENT PROCESS: TRANSACTIONS UP TO R5m
FUND
NATIONALEMPOWERMENT
Growing Economic Participation
NOTES:1. Timings associated with the Generator and
Accelerator products may be quicker in that structuring would be standardised to a point.
2. Capital expansion transactions would likely be able to be accelerated.
3. EXCO comprise of executive management, including CEO of NEF.
4. Negotiations with respect to MBI’s and MBO’s would expectantly take a longer turnaround.5. Timings are indicative assuming all information from the application is complete
and timeous and represents actual time spent on transaction.
Legal agreements & disbursement
EXCO Submission for
approval
Final Investment Report
Perform Due Diligence (DD)
→→→→ Due diligence Final Investment Report Investment Committee Legal
Legal contracts Disbursement documentation
Investment Report Executive Summary report of DD Signed Term Sheet Minutes of Meeting Approval letter
Investment Report Executive Summary report of DD Signed Term Sheet
Due Diligence file Executive summary of DD
Formal Documentation Required:
Drafting of legal agreements using NEF standard templates
Finalise with attorney’s input Circulate to investee for review
& acceptance Disburse Outsource legal service
Circulate Investment Report to EXCO
Final term sheet to be included in investment report Exco team
Prepare investment report recommending deal & subject to legal contracts Include scope of DD DD results on executive
summary report Investment Associate
Risk focused Return assessment based on
sensitivity scenarios Sign off DD file for quality review DD
working paper file Executive Summary report of DD Team members form investment
associate team Specialist, if necessary
INVESTMENT PROCESS: TRANSACTIONS UP TO R5m cont.
FUND
NATIONALEMPOWERMENT
Growing Economic Participation
INVESTMENT PROCESS: TRANSACTIONS UP TO R5m Application Form / Screening /
Business PlanDue Diligence Final Investment
ReportPreliminary Investment
ReportInvestment Committee
Receipt of Investment Application Form & Business
MotivationAssessment of application for
eligibilityInvestment Associate perform
assessment for commercial viability, incorporating business
planCommunication with applicant: decline application or proceed
with evaluation
Completeness of Business Plan
Evaluate Financial forecastsInternal Team Approval Prepare Investment Report
for pre-due diligence & proposed Term sheet
Approval by EXCO Investment Committee
(INCOM)Present Pre Due
Diligence Report to EXCO INCOM
Perform Due Diligence (DD)
Final Investment ReportEXCO INCOM Submission
for Final ApprovalInvested Portfolio
PIDAPIDSA
Total Applications Received
(01/06/04 – 21/02/05) 1174
1. Something FishyR390,000 (GP)
2. Makarapa HeadwearR400,000 (GP)
1. Greisen Finance (Pty) Ltd.
R3,990,000 (GP) 2. Izazi Support Systems R300,000 (MP) 3 JC Backhoe Spares
R2,000,000 (GP/PE/KZN)4. Khanya Plastic R1,800,000 (WC) 5. Ogwini Bakery
R1,167,367 (GP)6. Platinum Koi
R900,000 (WC) 7. Quality Frozen Food R2,950,000 (GP) 8. Speedy Umtata
R415,000 (EC) 9. Steel Metal & Tools CC
R3,374,700 (GP)
Pending Applications (01/06/04 – 21/02/05)
553 (Pre-Investment Business
Support required to accelerate transactions)
1. Amsterdam T/D ‘65 CC R680,000 (GP)
2. Semaku R1,345.000 (GP)
NEF VENTURES –5 Transactions(As per attached Report)
1. Exotic BreadsR1,700,000 (KZN)
2. Isibane Safety R1,000,000 (WC)3. Kuzuko R5,000,000 (EC)4. Notae R960.000 (KZN)5. National Trans. & Ind. R1,500,000 (WC)6. Secretarial Unlimited
R450.000 (KZN)7. Theme-U-Snack CC
R1,000,000 (WC)8. Tilt Tango CC R820,000 (WC)
NEF TRUST –GES & MARKET MAKING
6 Transactions (As per attached Report)
FUND
NATIONALEMPOWERMENT
Growing Economic Participation
The following calculations provide a sum-of-the-parts breakdown of the NEF’s required returns:
Rate p.a.Inflation rate 3% – 6%Real return required 3% - 4%Risk factors 2% - 8%Operating costs 2% - 3%Taxation (income tax & CGT) 2% - 3%Subtotal12% - 24%Less: empowerment benefit concessions achieved(0% - 5%)Total return required 12% - 19%
INVESTMENT PRODUCT PRICING cont.
FUND
NATIONALEMPOWERMENT
Growing Economic Participation
WIP SCHEDULE – INVESTMENT DIVISION NEF summary dealflow pipeline is attached. This summary includes the transaction within NEF
Ventures. Excluding the transactions that are in various stages
of review (pending), 27 transactions are being considered within a formal approval framework (dealflow pipeline).
2 of these transactions have had final approval and awaiting disbursement subject to completion of legal documentation.
11 Transactions have been completed & disbursed and form part of the invested portfolio.
FUND
NATIONALEMPOWERMENT
Growing Economic Participation
NEF TRANSACTION WIP SCHEDULELast Updated: 21 February 2005
Company name Company Description Capital Required
Potential Jobs
Current Jobs Province
EHD Components Engine Spares 9,940,000 76 GautengGreisen Finance (Pty) Ltd. Financial Services 3,990,000 15 GautengSolar Systems Electrical Goods 7,000,000 8 8 GautengVac Air Technology Industrial Vacuum Products Mnf. 10,000,000 105 GautengTOTAL: 30,930,000
Amsterdam Trading '65 CC Transportation 680,000 3 GautengExotic Breads Bakery 1,700,000 20 KZNIsibane Safety Protective Equipment 1,000,000 14 Western CapeIzazi Support Systems Harvesting & Distribution of thatched grass 300,000 MpumalangaMakarapa Headwear Headwear 400,000 4 GautengNotae Entertainment 960,000 8 KZNOgwini Bakery Bakery 1,167,367 GautengPlatinum Koi Breeds Fish 900,000 0 8 Western CapeSecretarial Unlimited Printing Services 450,000 5 KZNSemaku Plasma Screen Adverts 1,345,000 4 GautengSomething Fishy Food Franchise 390,000 8 GautengSpeedy Umtata Automotive Services 415,000 7 Eastern CapeTheme U Snack CC Novelty Gifts 1,000,000 5 Western CapeTilt Tango CC Transportation 820,000TOTAL: 11,527,367
VENTURES
GENERATOR
FUND
NATIONALEMPOWERMENT
Growing Economic Participation
NEF TRANSACTION WIP SCHEDULE cont.
Company name Company Description Capital Required
Potential J obs
Current Jobs Province
J C Backhoe Spares CC Heavy Duty Equipment Spares 2,000,000 18 10 GP/ PE/ KZNKhanya Plastic Recycling CC Recycles Waste Plastic 1,800,000 20 Western CapeNational Transmission & Ind. CC Imp. & Dist. Conveyor & Trans. belts 1,500,000 20 11 Western CapeQuality Frozen Food Frozen Food Distributors 2,950,000 20 GautengSteel Metal & Tools CC Imports Steel & Aluminum 3,374,700 9 8 GautengTOTAL: 11,624,700
0TOTAL: 0
E&B Citrus Citrus Farming 10,000,000 114 7 Eastern CapeE&B Conservancy Game Farming 10,000,000 40 Eastern CapeKuzuko Game Lodge & Bush Camp 5,000,000 40 Eastern CapeTOTAL: 25,000,000
Datacentrix IT Services 50,000,000 GautengTOTAL: 50,000,000GRAND TOTAL 129,082,067 615 280
Note:This report is for internal deal flow management purposes There is no certainty that all the abovementioned deals will be concluded
TRANSFORMER
RURAL & COMMUNITY DEVELOPMENT
MARKET MAKING
PIDSA - Pre Internal Deal Screening Approval Requested / PIDA - Post Internal Deal Approval Received / DD - EXCO Committee Approval / FICA - Final Investment Committee Approval Received
ACCELERATOR
FUND
NATIONALEMPOWERMENT
Growing Economic Participation
NEF TRUST – INVESTMENT PORTFOLIO
TotalUrban / Male &Rural Female
CAPITALISATION OF FUND 150,000,000
FUNDS COMMITTEDName of Investment:MUKS Business Enterprise CC 250,000 G Other Services Gauteng 3 1 100% 1 1Wax Works 650,000 G Manufacturing W / Cape 18 1 100% 1 1
All Joy 5,000,000 MM Other Services (Food) Gauteng 230 6 86% 1 5 1 14% 1 7
Banra Enterprises CC 430,800 A Manufacturing Gauteng 9 1 100% 1 1Golden Falls Trading (Misho) 900,000 G Manufacturing Gauteng 18 1 100% 1 1Kula's Tissue Products CC 250,000 G Manufacturing Gauteng 8 1 100% 1 1
TOTAL 7,480,800 Undrawn Commitments 450,000 Disbursed 7,030,800
Undrawn Capital 142,519,200
No. of Transactions 6Total Value of Transactions 7,480,800 Employment Positions 286 286 10 5 5 2 2 12
Target CurrentSECTORS Target Current REGIONS Current Male 50% 83%Manufacturing 25% 1.5% Gauteng 4.6% Female 50% 17%Information Technology (IT) 20% Western Cape 0.4%Financial Services 20% Kwa Zulu Natal Non HDP 25% 42%Tourism 15% Mpumalanga HDP 75% 58%Other Services 10% 3.5% LimpopoPrinting 5% Northern CapeSmall scale mining 5% Eastern CapeTotal 100% 5.0% Free state
North West Province* NEF PRODUCT Key Target Current 5.0%Generator G 20% 1.4%Accelerator A 20% 0.3%Transformer T 20%Rural & Community R&C 20%Market Making MM 20% 3.3%
100% 5.0%
No. Percentage HDP NON HDPNo. Percentage HDP Non HDPValue ( R ) Sector Province EmployeesNEF Product
Male FemaleShareholders
NEF TRUST INVESTMENT PORTFOLIO - GES & MARKET MAKINGas at 4 February 2005
Investment Portfolio
FUND
NATIONALEMPOWERMENT
Growing Economic Participation
NEF VENTURES – INVESTMENT PORTFOLIO
TotalUrban / Male &Rural Female
CAPITALISATION OF FUND 170,000,000
FUNDS COMMITTEDName of Investment:Clickrite 4,911,991 ME Printing Gauteng 60 Urban 4 100% 4 0 0 0% 0 4Blink 3,500,000 S Media Gauteng 9 Urban 5 100% 5 0 0 0% 0 5Emergia 3,100,000 S Financial Services Gauteng 3 Urban 2 100% 2 0 0 0% 0 2Lindiwe 3,075,000 S Marketing & Dist. Western Cape 8 Urban 4 80% 4 0 1 20% 1 5Nucleus Administrators 3,400,000 S Financial Services Gauteng 4 Urban 3 100% 1 2 0 0% 0 3
TOTAL 17,986,991
Undrawn commitments 8,589,920 Disbursed 9,397,071
NEF Funded 50% 4,698,536 IDC Funded 50% 4,698,536
Undrawn Capital 152,013,009
No. of Transactions 5Total Value of Transactions 17,986,991 Employment Positions 84 84 18 16 2 1 1 0 19
Target CurrentSECTORS Prudential limits Current REGIONS Current Male 50% 95%Marketing & Dist. 30% 1.8% Gauteng 8.8% Female 50% 5%Financial Services 30% 3.8% Western Cape 1.8%Media 30% 2.1% Kwa Zulu Natal White 11%Printing 30% 2.9% Mpumalanga PDI 89%
LimpopoTotal 10.6% Northern Cape
Eastern Cape* STAGE OF INVESTMENT Key Target Current Free stateSeed capital, Start-up, Early stage S 50% 7.7% North West ProvinceMBO / MBI / Expansion ME 50% 2.9% 10.6%
100% 10.6%
NEF VENTURES - INVESTMENT PORTFOLIOas at 4 February 2005
Investment Portfolio ShareholdersMale Female
Value ( R ) Sector Province EmployeesStage of Investment No. Percentage HDP Non HDP No. Percentage HDP Non HDP
FUND
NATIONALEMPOWERMENT
Growing Economic Participation
FIG 1:Geographical Analysis of Total Enquiries Received ( 1 June- 18 February 2005)
Gauteng42%
Mpumalanga5%
Eastern Cape4%
Limpopo4%
Northern Cape3%
Incomplete Data3%
Kwa Zulu Natal7%
Info & Info213%
Western Cape10%
International0%
North West Province5%
Free state2%
Cellphone Enquires2%
GautengWestern CapeInfo & Info2Kwa Zulu NatalMpumalangaIncomplete DataLimpopoNorthern CapeEastern CapeCellphone EnquiresFree stateNorth West ProvinceInternational
FUND
NATIONALEMPOWERMENT
Growing Economic Participation
FIG 2: Geographical Analysis of Total Applications Received (1 Jun - 18 Feb 2005)
Gauteng50%
Western Cape13%
KwaZulu-Natal8%
Limpopo4%
North West4%Mpumalanga
7%
Eastern Cape8%
Northern Cape2%
Free State4%
Gauteng
Western Cape
KwaZulu-Natal
Free State
Eastern Cape
Northern Cape
Mpumalanga
North West
Limpopo
FUND
NATIONALEMPOWERMENT
Growing Economic Participation
DESIGNATED SOCE’s
FUND
NATIONALEMPOWERMENT
Growing Economic Participation
FUNDING
FUND
NATIONALEMPOWERMENT
Growing Economic Participation
OPERATIONAL HIGHLIGHTS Constitution of Board Sub-Committees including
Investment Committee completed in October 2004.
Executive and management positions stabilised pending final appointments.
Disbursements on transactions approved, following launch of new products, commenced in November 2004.
Further disbursements in the IT, wine making and transport business sectors took place between November 2004 and January 2005.
Compliance and internal control procedures and processes fully implemented and transactions are closely scrutinised to ensure full compliance prior to disbursement.
FUND
NATIONALEMPOWERMENT
Growing Economic Participation
CAPITALISATION
Investments R150 million has been earmarked for investment capital to the NEF which is
expected next week following the successful signing of the Shareholder Performance Agreement.
The NEF has cash reserves at present (January 2005 – R64 million) to funds its operations and investment activities until end March 2005 at which point these will be depleted operationally and fully invested through its current funding work in progress (R129 million).
The first tranche of the R2 billion allocation is expected in the first quarter of the next financial year and this is understood to be in the order of R450 million based on the NEF business plan capitalisation draw downs and discussions with National Treasury.
The DG’s and the DPE are currently working on the transfers of the remaining allocation of SOCE equity investments. Significant impact on the balance sheet.
FUND
NATIONALEMPOWERMENT
Growing Economic Participation
CASH FLOW FORECAST FOR PERIOD ENDING
MARCH 2005
FUND
NATIONALEMPOWERMENT
Growing Economic Participation
CONSOLIDATED BUDGET
FUND
NATIONALEMPOWERMENT
Growing Economic Participation
NEF CAPITAL DRAW-DOWN SCHEDULE FOR YEARS ENDING 31 MARCH 2009
FUND
NATIONALEMPOWERMENT
Growing Economic Participation
ENTERPRISE GOVERNANCE
Statutory Compliance:
Emphasis of matter in terms of PFMA / Treasury Regulations were raised in the March 2004 External Audit Report.
These are being dealt with and will be fully cleared by March 2005
Ongoing PFMA / NTR compliance is being fully adhered to as described alongside.
31 Jan 2005 (done)
22 Feb 2005 (in progress)
10 Feb 2005 (presented to AC)
24 Nov 2004 (done)
31 Jan 2005 (done)
31 Jan 2005 – IA Manager1 Jan 2005 – IA Co-source
15 Oct 04 extension (done)
15 Oct 04 extension (done)
24 Sep 04 (done)
• Dti Performance Agreement
REQUIREMENT
• Risk Assessment
• Materiality Framework
• S38 Certificate
• Q3 Report
• Internal Audit
• Corporate Strategy/ Business Plan
• Budget 2006
• Annual Report
DUE DATE
FUND
NATIONALEMPOWERMENT
Growing Economic Participation
CONCLUSION
Top Related