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									      PRESENTATION TO THE PARLIAMENTARY PORTFOLIO


                  COMMITTEE ON TRADE AND INDUSTRY




         NATIONAL
         EMPOWERMENT
         FUND
         Growing Black Economic Participation




Presenters:
Victor Mabuza – Asset Manager
Andrew Wright – Manager in the CEO’s Office
Nozizwe Mthembu – Legal Officer


     10 MARCH 2006
 PRESENTATION SECTIONS:

                    POSITIONING
                    PERFORMANCE
                    FINANCIAL
                    CURRENT INITIATIVES
                    CASE STUDIES
NATIONAL
EMPOWERMENT
FUND
Growing Black Economic Participation
NATIONAL
EMPOWERMENT
FUND
Growing Black Economic Participation
                             NEF STRATEGIC FOCUS
                Broad Based Black Economic Empowerment
                       The Codes of Good Practice



                              Priority
                              Sectors
                                                           Government Aims:
                              Arts & Culture,              1. Access to Finance



                Objectives
 Objectives

                              Tourism,                     2. Job creation
  NEF Act:



                 The dti      Textiles,                    3. Geographic spread
                              Agro Processing              4. Women empowerment
                              Automotive,                  5. Integrated manufacturing economy
                              Chemicals,                   6. Efficient, fast & flexible economy
                              ICT, Aerospace               7. Diversity of enterprise
                              Film Industry,               8. Skills transfer & development
                              Exports




Accelerated & Shared Growth Initiative for SA ASGI - SA
6% GDP Growth    10% Investment Growth     10% Export Growth        2014
         NEF POSITIONING IN ADDRESSING MARKET FAILURE
              •    Identification of market failures particularly regarding participation of Black People in
                   ecoonomy
              •    Avoid duplication of other DFI product offerings
              •    Positioning of NEF to complement other DFIs and financial institutions

Examples of market failure                                                 NEF product                 Complementary to other
                                                                                                       DFIs / Banks
Limited access to finance for Black entrepreneurs with no collateral.      Start-up &                  Places new businesses in
Bridging finance for honouring preferentially procured supply contracts.   Expansion capital           bankable positions
                                                                                                       Khula & IDC
Enter buy-in / buy-out transactions from position of weakness              Transformation capital      Banks provide debt funding

Lack of equity funding for rural & community infrastructure projects       Rural & Community Support   Leverages debt funding
(longer term lower return)                                                                             DBSA, IDC & CPPP
Institutional Fund managers focus on large listed companies >R1bn          Capital Markets Fund        Assists with exits
market capitalisation                                                                                  IDC
Dilution of broad based BEE shareholdings through second round capital     Liquidity & Warehousing
raising                                                                    Fund
Limited market liquidity to enable Black entrepreneurs to sell some/all    Liquidity & Warehousing
of their businesses                                                        Fund
Over-geared historic BEE funding structures, potentially unwind out of     Liquidity & Warehousing     Rescue & restructure
the money                                                                  Fund
Lack of BEE funding for large strategic (greenfield & brownfield)          Liquidity & Warehousing     Co-invest with IDC, DBSA
projects                                                                   Fund
NATIONAL
EMPOWERMENT
FUND
Growing Black Economic Participation
NATIONAL
EMPOWERMENT
FUND
Growing Black Economic Participation
                           BEE Participation Thresholds




                                                       Market   Liquidity &
                Start up     Expansion   Buy-in/ out                          Strategic Projects
                                                       Making   Warehousing



     BEE
participation   >75%         >50%        >25%          >25%      >25%         Influence
NATIONAL
EMPOWERMENT
FUND
Growing Black Economic Participation
NATIONAL
EMPOWERMENT
FUND
Growing Black Economic Participation
       PERFORMANCE


NATIONAL
EMPOWERMENT
FUND
Growing Black Economic Participation
NATIONAL
EMPOWERMENT
FUND
Growing Black Economic Participation
                       NEF INVESTMENT PROCESS REPORT:
                           Since 1 April 2005 to 28 February 2006


                                                            Investment
                                                                                  Legal
                                                            Committee

  ENQUIRIES
                APPLICATIONS
                                  PENDING
                                               NEW DEALS
                                 MORE INFO                      DUE
                                               ACCEPTED
                                                             DILIGENCE
                                                                           APPROVED       DISBURSED
                                                                                              (Including
                                                                                               Undrawn
                                                                                               Capital)




Approx                          1,092          28            30            17           60
              1,556            worth         worth         worth         worth        worth
9,532                          R801m         R241m         R244m         R282m        R241m




                                             NEF work in progress: 135 of R1bn
                                            M
                                               ar




                                                                0
                                                                    10
                                                                         20
                                                                              30
                                                                                   40
                                                                                        50
                                                                                             60
                                                                                                  70
                                                                                                            80
                                                 ch
                                                   -0
                                                     3

                                                M
                                                 ay
                                                   -0
                                                     3

                                                Ju
                                                    ly
                                                       -   03
                                      Se
                                        pt
                                           e   m
                                                  be
                                                    r-
                                                       03
                                      No
                                           ve
                                              m
                                                be
                                                     r-
                                                        03
                                           Ja
                                             nu
                                                   ar
                                                     y-
                                                       04
                                            M
                                               ar
                                                 ch
                                                   -0
                                                     4




Accumulative No. of Deals Disbursed
                                                M
                                                 ay
                                                   -0
                                                     4

                                                Ju
                                                    ly
                                                       -   04
                                      Se
                                        pt
                                           e   m
                                                  be
                                                    r-
                                                       04
                                      No
                                           ve
                                              m
                                                be
                                                     r-
                                                        04
                                                                                                                              28 FEBRUARY 2006




                                           Ja
                                             nu
                                                   ar
                                                     y-
                                                       05
                                            M
                                               ar
                                                 ch
                                                   -0
                                                     5

                                                M
                                                 ay
                                                   -0
                                                                                                                 NEF - APPROVED & DISBURSED DEALS BY NUMBER




                                                     5

                                                Ju
                                                    ly
                                                       -   05
                                      Se
                                        pt
                                           e   m
                                                  be
                                                    r-
                                                       05
                                      No
                                           ve
                                              m
                                                be
Accumulative No. of Deals Approved




                                                     r-
                                                        05
                                           Ja
                                             nu
                                                   ar
                                                     y-
                                                       06
                                                                                             60
                                                                                                       75
                                   NEF - INVESTED PORTFOLIO BY SECTOR BY VALUE
                                                 28 FEBRUARY 2006


                                              Wood & Paper   Agriculture
                                                Industry        0.4%       Arts & Craft
                             Transportation       0.6%                         0.0%         Chemicals &
                                  0.8%                                                    Pharmaceuticals
                                                                                               2.1%         Construction
     Tourism & Entertainment                                                                                   18.7%
              17.9%

                                                                                                                  Education
Textile Industry                                                                                                    0.1%
      4.7%
                                                                                                                    Engineering
Services                                                                                                               2.3%
  0.6%
                                                                                                                    Environmental
                                                                                                                         0.1%
Printing Services
      2.8%                                                                                                        Financial Services
                                                                                                                        2.7%
   Motor Industry
       0.3%
                                                                                                              Food & Agro Processing
                                                                                                                      9.1%
           Mining Services
                6.4%                                                                            Franchise
                                                                                                  2.1%
                      Manufacturing
                          2.0%                           ICT & Media
                                                            26.3%
                               NEF - INVESTED PORTFOLIO BY SECTOR BY NUMBER
                                              28 FEBRUARY 2006



                                                   Arts &Chemicals & Pharmaceuticals
                                                          Craft
                                   Agriculture         0.0%         1.8%
                                                                                       Construction
                                      1.8%
                                                                                          8.9%
                                                                                                       Education
     Wood & Paper Industry, 0.1%                                                                         1.8%

      Transportation                                                                                           Engineering
           3.6%                                                                                                   3.6%

Tourism & Entertainment
         5.4%                                                                                                         Environmental
                                                                                                                           1.8%
Textile Industry
      5.4%

Services                                                                                                              Financial Services
  3.6%                                                                                                                      3.6%

Printing Services
      5.4%                                                                                                          Food & Agro Processing
                                                                                                                            23.2%


   Motor Industry
       3.6%

             Mining Services                                                               Franchise
                  1.8%                                                                       1.8%
                                   Manufacturing            ICT & Media
                                       8.9%                    14.3%
NEF - INVESTED PORTFOLIO OF STAGE OF INVESTMENT BY VALUE
                    28 FEBRUARY 2006


                                         Liquidity &
            Capital Market              Warehousing
                21.4%                       8.3%


                                                            Start-Up
                                                             18.8%




 Transformer                                           Expansion

    38.9%                                               12.5%
       NEF - INVESTED PORTFOLIO BY STAGE OF INVESTMENT BY NUMBER
                            28 FEBRUARY 2006

                                     Liquidity &
                    Capital Market   Warehousing
                        5.0%            1.7%


      Transformer
            10.0%




                                                            Start-Up
                                                             56.7%
Expansion
 26.7%
                 NEF - INVESTED PORTFOLIO BY REGION BY NUMBER
                                28 FEBRUARY 2006

                           Mpumalanga   Northern Cape             Western Cape
                              1.7%          0.0%                     16.7%
                 Limpopo                                                         Eastern Cape
                  5.0%                                                              5.0%

Kwa Zulu Natal
    8.3%
                                                                                        Free State
                                                                                           1.7%




                                                        Gauteng
                                                         61.7%
                 NEF - INVESTED PORTFOLIO BY REGION BY VALUE
                               28 FEBRUARY 2006

                                   Western Cape
                   Northern Cape
                                      19.7%
                       0.0%
    Mpumalanga                                            Eastern Cape
          0.2%                                                 14.9%
 Limpopo
   1.2%
                                                                       Free State
Kwa Zulu Natal                                                           0.1%
    5.6%




                                        Gauteng
                                         58.4%
NATIONAL
EMPOWERMENT
FUND
Growing Black Economic Participation
        SIZE OF TRANSACTIONS BY VALUE
                28 FEBRUARY 2006




                                        < R3m
                                        15.4%




> R3m
84.6%
        SIZE OF TRANSACTIONS BY NUMBER
                28 FEBRUARY 2006

> R3m
33.3%




                                         < R3m
                                         66.7%
                                       FINANCIAL



NATIONAL
EMPOWERMENT
FUND
Growing Black Economic Participation
NATIONAL
EMPOWERMENT
FUND
Growing Black Economic Participation
NATIONAL
EMPOWERMENT
FUND
Growing Black Economic Participation
CURRENT INITIATIVES



 NATIONAL
 EMPOWERMENT
 FUND
 Growing Black Economic Participation
NATIONAL
EMPOWERMENT
FUND
Growing Black Economic Participation
NATIONAL
EMPOWERMENT
FUND
Growing Black Economic Participation
                                           BEE Retail Schemes: Key Objectives

                                          The creation of innovative savings and investment
                                           opportunities for Black people to create wealth (assets)

                                          Provide a meaningful broad-based ownership of SOCE
                                           shares by Black people

                                          Unlocking listed SOCE share value for NEF investments
                                           through value-adding and empowerment opportunities
                                           for Black people

                                          Educating and promoting an understanding of
                                           investments and other related savings instruments
                                           amongst Black people


NATIONAL
EMPOWERMENT
FUND
Growing Black Economic Participation
                                                          Designated SOCE’s

                                             Asset          Shareholding %      Status
                                       1.    MTN Group          1.5          received by NEF
                                       2.    Telkom               5          not yet received
                                       3.    SAA                  5          not yet received
                                       4.    ACSA                10          not yet received
                                       5.    Connex Travel       10          not yet received
                                       6.    Viamax              10          not yet received
                                       7.    Syncat              10          not yet received
                                       8.    Transwerk Perway    10          not yet received
                                       9.    Sentech             10          not yet received
                                       10.   Uthingo              5          received by NEF
                                       11.   SAFCOL              10          not yet received




NATIONAL
EMPOWERMENT
FUND
Growing Black Economic Participation
                                                                   Product Offerings
                                       Once-off share offerings
                                       Collective Investment Schemes
                                        Broad-based Share Ownership structuring & administration


                                       Assets to be used:
                                        NEF SOCE share set-asides
                                        (currently on Balance sheet)

                                        Further SOCE share set-aside allocations
                                        (upon transfer to NEF Balance sheet)

                                        NEF invested equity portfolio
                                        (when it exercises its exit strategy)

                                        Equity set-asides for BB-BEE groupings by applicant
                                         companies
NATIONAL
EMPOWERMENT                             (Database access and ESOPs)
FUND
Growing Black Economic Participation
                                                  Targeted Beneficiaries
                                       Targeted broad-based groups of Black people:

                                              General public (nationally and of all income levels)

                                              Savings Schemes (e.g. stokvels, investment clubs, etc.)

                                              Rural and Community organisations (e.g. burial societies,
                                              co-operatives, etc.)

                                              Women-entrepreneur groupings (both rural and urban
                                              organised groupings)

                                              Other organized groupings (e.g. informal traders, employee
                                              share schemes, etc.)

                                              Local, Provincial & National Governments (e.g avail
                                              affordable funding for their LEDs, IDPs & Strategic Projects)
NATIONAL
EMPOWERMENT                                    INDIVIDUALLY OR COMBINATIONS THEREOF
FUND
Growing Black Economic Participation
CASE STUDIES



  NATIONAL
  EMPOWERMENT
  FUND
  Growing Black Economic Participation




                                            Choice Technologies
                                         Bohang Bead Manufacturers
                                              Morobe Trading
NATIONAL
EMPOWERMENT
FUND
Growing Black Economic Participation
           Company background

Black owned IT and systems integration business
(hardware and software solutions)
Established in 1997
Staff complement of 5 in 1997 ; 200 in 2005
Based in Gauteng, regional branches in Cape Town,
Durban 10 service centers throughout South Africa
Shareholding pre NEF funding
                                - 51% owned by Choice Group

                                - 49% owned by Dimension Data
                 Salient features of the deal

                       -   Negative market perception
Risks                  -   Financial risk – Negative cash position
                       -   Business risk – Need for more contracts

                       -   Established from scratch ( not an equity
                           acquisition) in existence for > 7yrs
                       -   Employs over 200 employees (>70% BEE)
Strengths
                       -   Training and skills development for youth
                       -    Good track record with stakeholders
                       -    Lucrative government & private contracts
                       -    Preferred supplier for 2010 soccer world
                            cup

NEF funding            -   Capital injection to buy out Didata ( R5m )
                       -   Cash injection for working capital ( R15m)
Funding amount
                       -   R10m Equity
                       -   R10m Debt
           Compliance with funding criteria and NEF
           Mandate

Strong empowerment dividend
ICT is a priority sector
Addresses market failure
Supporting black entrepreneurship
Saved 150 black IT professional’s jobs
Liquidity and Warehousing product
NEF to hold 49% equity whilst BEE managers return
the business to profitability
Commercially viable
NATIONAL
EMPOWERMENT
FUND
Growing Black Economic Participation
           Company Background

Bohang Africa Investments (Pty) Ltd founded in 2003 by Mr. Tlholo
                           Mohlathe.
             All beads are imported into South Africa.

Large scale specialised glass plant in Wadeville producing range of
                           glass beads.

Located adjacent to Consol supplying glass and technical expertise.

     The company will in the first 2 years create 70 new jobs.
                 Salient features of the deal

                       -   Exchange rate risks
Risks                  -   Capital risks
                       -   Business risk



                       -   First manufacturing facility of seed glass
Strengths                  beads in Africa.
                       -   Will create 70 new jobs.
                       -   Training and skills transfer from Consol
                       -   Women Empowerment
                       -   Supports 106 000 rural & community
                           crafters
NEF funding            -   Cash injection for working capital and asset
                           acquisition
Funding amount
                       -   R6.75m Equity
                       -   R13.5m Debt
           Compliance with funding criteria and NEF
           Mandate

Strong empowerment dividend
Arts & Culture one of NEF’s sector focus
Addresses market failure
Supporting black entrepreneurship
New jobs to be created and supporting 106 000 bead
workers jobs
Provincial bead SMME industry clusters
Strategic Projects product
NEF to hold equally with PIC 15% equity with 25%
shareholding in the hands of Rural Women Crafters
Commercially viable
Morobe Trading Enterprises
           CC
                                       (“Morobe”)


       “Preferential Procurement”


NATIONAL
EMPOWERMENT
FUND
Growing Black Economic Participation




   NATIONAL
   EMPOWERMENT
   FUND
    Growing Black Economic Participation
               Company background

Electrification services company 100% owned by a Black woman, Ms.
Alettah Ngwetjana (also a Managing Member).
Established in 1993 to provide various services.
Recently branched into contract work as a result of opportunities
provided by preferential procurement policies.
Company provides maintenance and installation services as a
contractor to Eskom in areas surrounding Polokwane.
Company has created 16 jobs.
NEF provided non-financial support in a form of advise on business
plan and financial modelling.
               Salient features of the deal

•NEF invested R1.1 million in a form of 5-year loan.

•Interest rate charged @ prime less 1% with capital holiday of 6
months.

•Loan secured by assets and suretyship by Ms. Ngwetjana.

•Proceeds used for funding working capital and capital
expenditure – acquired specialized trucks

•ABSA provided asset finance as a result of NEF’s funding.
               Compliance with NEF Mandate

NEF facilitated access to finance to enable the business to service
the contract.
Assisted the business to build the track record and hence improve
its credit rating
Without NEF’s investment, the company would not have qualified
for ABSA facility.
Assisted with capacity building of the business.
Investment resulted in the creation of 16 jobs.
Investment in Limpopo in line with government policy to spread
economic development to rural provinces.
Direct financial support to SME
NATIONAL
EMPOWERMENT
FUND
Growing Black Economic Participation

								
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