BRIEFING ON THE NEF STRATEGY AND ANNUAL PERFORMANCE PLAN 2017/18 - Presentation to the Select Committee on Trade & International Relations Ms ...
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BRIEFING ON THE NEF STRATEGY AND
ANNUAL PERFORMANCE PLAN 2017/18
Presentation to the Select Committee on
Trade & International Relations
Ms Philisiwe Mthethwa
21 June 2017
1
Contents
Section Slide
1 About the NEF 3
2 Strategic Planning Framework & Objectives 5
3 Provincial Dynamics 14
4 NEF Annual Performance Plan 2017/18 24
5 Life to Date Performance Milestones 36
6 Key Priorities 38
7 Empowering Farmworkers to 49
Become Entrepreneurs
8 Organisational Structure 59
2
About the NEF
3
NEF Mandate…
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 owned and managed
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
4
The Strategic
Planning Framework…
Broad Based Black Economic Empowerment
The Codes of Good Practice
Sectors
NEF
• Tourism; Biofuels; Construction;
Agri-processing; Transport; ICT &
Media;
Mining services; Franchising
Objectives
Objectives
Government Priorities:
NEF Act:
Industrial Policy Action Plan:
The dti
• Automotives, components, medium 1) Acceleration of economic growth and transformation,
and creating decent work and sustainable livelihoods;
heavy commercial vehicles 2) Infrastructure development to achieve social and
• Plastics, pharmaceuticals and
economic goals and rural development;
chemicals
• Biofuels 3) Skills and human resource development;
• Strengthening linkages between 4) Build a developmental state and improve public
cultural service.
industries and tourism
• Business process servicing
NEF Sectors in line with national industrial objectives
5
Unpacking the NEF Mandate …
NEF Mandate
Grow black economic participation
Financial & non-financial support Culture of savings & investment
Fund Management Asset Management
1. Fund black-empowered businesses 1. Investor Education
2. Business plan toolkit 2. Public Share Offers
3. Mentorship support 3. Enterprise Development
4. Early-stage investments 4. BEE Repository
5. TWR services
6
Challenges/ Market Failures
MARKET FAILURES NEF SOLUTIONS
Funding of between R250 000 and R75 million for start-up, expansion
Limited own capital and equity transformation purposes as well as use of concessionary
facilities. Non-descriptive on % of own contribution.
Limited management skills, Entrepreneurship Development tools and dedicated mentorship
including financial, marketing support.
and technical expertise
Competitive cost of finance with a higher risk appetite as well as
Access to affordable capital requirement for operational involvement (sweat-capital) reduces the
need for collateral payment.
Lack of accurate and reliable Dedicated pre-investment mentorship support and technical assistance
financial information with our partners.
Poor Quality Business Plans Collaboration with other Government agencies like seda, incubation,
entrepreneurial training and general pre-investment support and NEF
Online Business Plan-Tool Kit.
Lower bargaining and strong Linkages and emphasis on the implementation of the codes of good
competition power from practice (B-BBEE).
established businesses with
entrenched market dominance Wholesale Franchisor Facilities (Engen, Nandos, etc.)
Lack of access to local and Linkages with off-takers. Relationships with franchisors and corporates
international markets for access to markets.
7
NEF Positioning
as a B-BBEE Funder…
“The NEF provides the funding solutions for the implementation of the B-BBEE Codes of Good Practice.”
CODE OF GOOD PRACTICE NEF FUNDING PRODUCT OTHER DFI’s & BANKS
Ownership Acquisition Finance IDC – Higher value threshold
Weighting 25 points Capital Markets Fund Sefa – Lower value threshold
Liquidity and Warehousing Fund DBSA – Infrastructure focused
Strategic Projects Fund Land Bank – Agri focused
Indirect: Start up; Expansion Capital Banks – Security focused
Management Control Acquisition Finance As above
Weighting 15 points Indirect: Capital Markets; Start up; Department of Labour
Expansion Capital
Skills Development Indirect: All products via approval process SETAs
Weighting 20 points
Enterprise & Supplier Start up and Expansion Capital: Sefa – Overlap R250k to R5mil
Development Procurement Contracts Funding Other DFI’s & banks as above
Weighting 40 points Start up and Expansion Capital establishes
“Beneficiary Entity”
Socio-Economic Dev. Rural & Community Development Funding SEDA to provide NFS to co-ops
Weighting 5 points - “Contribution Beneficiaries” Land Bank – Agri focused
8
Funding Across the Economic Spectrum
Fund Focus Threshold
1 iMbewu Fund SME Fund providing R250 000 –
(SMEs) Entrepreneurship, R15 million
Procurement & Franchise
Finance
2 Women Achieve minimum 40% of R250 000 –
Empowerment enterprises owned and R75 million
Fund (WEF) managed by black women
3 Rural & Supporting rural economic R1 million –
Community development through New R50 million
Development Ventures, Acquisition,
Fund Expansion & Greenfields
Finance
4 uMnotho Fund Funding of New Ventures, R2 million –
Acquisition, Project Finance, R75 million
Expansion, Capital Markets,
Liquidity & Warehousing
5
5 Strategic Early-stage investment in Up to R75 specialist
Projects Fund industrial / manufacturing million funds
transactions
9
Non-Financial Support
Pre-investment
As the first-point-of-contact the unit provides product advisory
services, manages the online business-plan solution, manages
the administration of applications, incubation and
entrepreneurial training.
Socio Economic Development
Empower black people in existing NEF transactions and other
broad based groups through various social development
interventions such as social facilitation, entrepreneurial training,
investor education, corporate governance training and market
access for the acceleration of meaningful participation.
Post-investment support
Monitor investments, provide ongoing portfolio management,
manage mentorship support and collections as well as legal
compliance
Turnarounds, Workouts and Restructuring
Rehabilitate distressed transactions and reduce impairments
Through a combination of measures including balance sheet
restructuring, equity and /or working capital injection, operational
restructuring, introduction of a strategic equity partner and / or
turnaround specialist and business rescue.
10Key Strategic Objectives…
• Promote and support business ventures
established and managed by black people;
• Promote the understanding of equity
ownership among black people;
• Provide black people with direct and indirect
opportunities to acquire share interests in
State Owned and private business
enterprises;
• Encourage and promote investments, savings
and meaningful economic participation
among black people.
11The NEF’s strategic outcome
oriented goals are to:
1. To provide finance to business ventures established
and managed by black people.
2. Invest in black empowered businesses that have
high employment creating opportunities
3. Support the participation of black women in the
economy
4. Facilitate investment across all provinces in South
Africa
5. Encourage and promote savings, investment and
meaningful economic participation by black people
6. Advance black economic empowerment through
commercially sustainable enterprises
7. Establish the NEF in the South African economy as
a credible and meaningful DFI
8. Establish the NEF as a sustainable DFI.
12NEF’s Performance
and Investment Criteria…
“The Empowerment Dividend”
The assessment of impact is not driven only by financial returns
but by measurement in terms of “The Empowerment Dividend”
made up as follows:
• Broad Based Black Economic Empowerment
• Ownership, management control, employment equity etc.
• Black Women Empowerment
• Job Creation
• Growth Sectors
• Geographic Spread
• Investment Return
13Provincial Dynamics
Striving for growth across all provinces
14Invested growth across all provinces
1. As a national Development Finance institution (DFI) the NEF is
committed to ensuring that its products and services reach the
entire nation.
2. Since the launch of the NEF Asonge Share Scheme in July
2007 the NEF has implemented various measures and
interventions to strive towards an even, representative and
equitable distribution of its services across the country.
3. As a result, the NEF’s invested presence in Gauteng has come
down from above 60% of total disbursed funds in 2006, to 44%
by March 2017.
4. This is not as a result of a reduction of funding in Gauteng, but
is a direct consequence of planned, targeted and increased
funding in the other 8 provinces because they are integral to
South Africa's economy, comprising 76% of the population.
15Reasons for growth across all provinces
Year Intervention Outcome
Local community & Every year present & exhibit in a growing number of local community workshops
2006 -
1 stakeholder hosted by national, provincial and municipal governments, as well as various
2017
workshops business and civic stakeholders.
Reached over 30 000 participants through 138 community seminars on how to save
2007 –
2 Investor Education and invest, personal financial discipline, shares, dividends, bonds, the property and
2017
money markets, in villages, townships and cities countrywide.
NEF Asonge Share Attracted 87 000 investors (47% in GP, 16% in KZN, 9% in WC, 7% in LP, 6% each
3 2007 in NW & MPu, 4% each in EC & FS, and 1% in NC).
Scheme
Venture capital fund responsible for driving the NEF’s contribution to
2007 – Strategic Projects
4 industrialisation by increasing participation of black people in early-stage projects,
2017 Fund
especially in poverty nodes.
Establishment of the Fund with the aim of unlocking the economic value that resides
2008 – Rural & Community
5 in our Rural Communities, through the provision of Funding to identified rural and
2017 Development Fund
community entrepreneurs, arranged as co-operatives..
2007 - Advertising & media
6 Placement of adverts and stories in local, regional and national media countrywide.
2017 coverage
Workshops in every province raising awareness on the online solution for
Business Plan &
7 2009 developing own business plans with financial projections. Over 24 000 registered
Mentorship launch
users have accessed the tool.
4 destinations in each province promoting understanding of B-BBEE, funding &
2009 – Eyethu Sonke Le
8 access to government & private-sector procurement & enterprise development
2010 BEE!
opportunities.
2009 -
9 Regional offices Opened regional offices in all provinces.
2017
Incubation &
2011 – Business skills training provided to over 2 898 beneficiaries who attended 109
10 entrepreneurial
2017 seminars to date, countrywide.
training
16Geographic spread of investments
GDP Contribution by Province - 2015
NEF Invested Portfolio by region by value
since inception - 31 March 2017
EC 7.8 NW
4% WC EC FS
FS 5.1 NC 13% 8% 2%
MP 2%
GP 34.1
5%
KZN 16.0 LP
6%
LP 7.2
MP 7.5
NC 2.1 KZN
16%
NW 6.5 GP
44%
WC 13.6
GDP Source: Statistics South Africa; Gross Domestic Product, Fourth quarter
2016.
17Geographic spread of Rural &
Community Development Fund (RCDF)
Geographical Spread of Investment by
RCDF Investment Spread by Province
RCDF to date
Eastern Limpopo
Province % No of deals R000s Western Cape Mpumalanga
Cape 4%
Limpopo 3.72% 2 24 800 3% 5%
19% Gauteng
Mpumalanga 5.06% 4 33 703 15%
Gauteng 14.63% 7 97 542
Northern
Cape
North West 11.03% 5 73 500 North
1%
West
KwaZulu-Natal 38.02% 13 253 469
Free 11%
Free State 5.42% 4 36 150 State
5%
Northern Cape 0.54% 1 3 612 KwaZulu-Natal
Eastern Cape 19.04% 8 126 913 38%
Western Cape 2.54% 2 16 900
Total 100% 46 666 589
Widely represented in all the Provinces, though still low in FS and NC, but evenly concentrated in
other provinces, with EC, KZN and MP predominantly sharing a significant % of businesses funded,
principally because of tourism in KZN, with agro-processing (dairy & feedlot) and shopping
complexes. The rest of the investment is spread across other Provinces but very low.
18Geographic spread of
Strategic Projects Fund (SPF)
SPF Investment Spread by Province
No of Geographic Spread of Investment by
Province R000s %
deals Western SPF Mpumalang
Limpopo 2 12 000 1% Cape Limpopo a Gauteng
Mpumalanga 4 90 800 10% 12% 1% 10% 9%
Gauteng 7 78 336 9% Eastern
North West 3 52 216 6% Cape North
KwaZulu-Natal 15% West
4 242 900 28%
6%
Free State 1 162 357 18%
Eastern Cape 2 131 957 15%
Western Cape 4 108 000 12%
Total 27 878 566 100% Free State
18% KwaZulu-
Natal
28%
The SPF portfolio by value is spread almost evenly in KZN, WC, FS and GP. The
NEF is making progress in increasing funding in other provinces with more
projects as indicated by the portfolio by number in Mpumalanga. Regional offices
are working extensively in increasing participation in other provinces.
19Geographic spread of iMbewu
iMbewu Investment Spread by Province Geographic Spread of Investment by
No of
Province R000s % iMbewu
deals Western
Limpopo 24 143 665 10% Eastern Cape Limpopo
Mpumalanga 27 113 191 8% Northern Cape 10% 10%
8% Mpumalanga
Cape
Gauteng 197 678 858 47% 8%
1%
North West 13 41 420 3%
KwaZulu-Natal 40 168 205 12% Free
Free State 22 32 802 2% State
2%
Northern Cape 1 8 750 1%
Eastern Cape 24 120 072 8% KwaZulu-
Western Cape 51 142 607 10% Natal
Total 399 1 449 570 100% 12%
Gauteng
North 47%
West
3%
The iMbewu Fund portfolio by value is spread almost evenly in the EC, WC, LP and MP with
GP being dominant. The NEF is making progress in increasing funding in other provinces with
Gauteng at less than 50%. Regional offices are working extensively in increasing participation
in other provinces.
20Geographic spread of uMnotho
uMnotho Investment Spread by Province
No of
Geographic Spread of Investment by
Province R000s % uMnotho
deals Eastern Cape
Western Cape
Limpopo 6 167 983 6% 7% Limpopo
6% Mpumalanga
Mpumalanga 7 73 346 3% Northern Cape 6%
3% 3%
Gauteng 87 1 678 448 59%
Free State
North West 2 110 402 4% 1%
KwaZulu-Natal 23 312 275 11%
Free State 1 20 704 1% KwaZulu-
Northern Cape 3 95 237 3% Natal
11%
Eastern Cape 11 199 215 7% Gauteng
Western Cape 12 171 369 6% North West
59%
Total 152 2 828 979 100% 4%
uMnotho’s strategic intent is to drive black participation in medium to large enterprises,
the majority of which are domiciled in Gauteng, which is reflected in this slide with the
province comprising 59% of the Fund’s portfolio.
21Regional Offices
1. The NEF has regional office presence in all
provinces. In the last financial year,
approximately 65% of the number of
approved transactions emanated from the
regional offices and Pre-Investment Unit
2. This national presence ensures that the
NEF reaches every area of the country
including the remotest rural areas, where
the poorest of the poor mostly reside.
3. The NEF always takes part in national (the
dti, DED & DSBD), provincial and local
government roadshows, as well as various
other stakeholder events, to take its
message to the people.
4. It is as a result of this that the NEF has
successfully funded business ventures
through its Rural and Community
Development Fund, whose objective is to
unlock value in rural and township
communities.
22Geographic Spread – Investor Education
Investor Education campaign has been rolled out in the Eastern Cape, Northern Cape, Free State, Limpopo, Western Cape,
North West, KZN, Mpumalanga and Gauteng with 4 seminars per province. Attendees: over 30 000 participants.
Delmas Botleng,
Seshego, Lebowakgomo, Secunda,
Lephalale, Bela-Bela, Ermelo, Piet Retief
Springs, Alexander Thohoyandou, Giyani,
Soweto, Diepsloot Ext 2, Emalahleni,
Phalaborwa, Tzaneen, Middleburg,
Soshanguve, Mamelodi Madzivhandila Agricultural
West, Krugersdorp Kagiso Mbombela, Hazyview,
College MRTT Hotel Academy
2, Sebokeng, Ekurhuleni,
Bronkhorstspruit,
Tsakane, Katlehong, LIMPOPO
Mahikeng, Tembisa
Lichtenburg,
Rustenburg,
z Newcastle, Dundee,
Hammanskraal, MPUMA Ladysmith, Estcourt,
Vryburg, Taung Pietermaritzburg, Port
LANGA
NEF booklet on how GP Shepstone, Newlands
to save and invest
Klerksdorp,
Potchefstroom, NORTH East, Chatsworth,
Umlazi. Kwa Mashu,
Vuselela
WEST Ulundi, Richards Bay,
Umfolozi
FREE STATE
KZN
Kimberley,
Prieska,Kakamas, NORTHERN
Keimoes,Upinton,
Kathu, Barkley West, CAPE Bloemfontein, Botshabelo,
Kuruman Welkom, Thaba Nchu, Qwaqwa,
Kroonstad, Ladybrand,
Bethlehem
Saldanha, Langa, Bellville
EASTERN
Nyanga, Mannenburg /
Gugulethu, Worcester,
CAPE
WESTERN CAPE
Caledon, Cornville –
George, Kwanonqaba- Port Elizabeth, East London, King Williams
Mossel Bay, Kraaifontein, Town, Mount Frere, Butterworth, Umtata,
Saldanha, Malmesbury, Fort Beaufort, Grahamstown
Paarl (Wellington)
23NEF Annual
Performance Plan
2017/18
24NEF Strategic Plan 2017/2018
Advance B-BBEE
Approval Targets:
2017/18 = R0.950bn
2018/19 = R1.046bn
2019/20 = R1.331bn Maximise Empowerment
Financial Efficiency & Dividend
Sustainability New & existing jobs to be
Impairment Provisions 18% supported:
ROI between 9% – 10% 2017/18 = 4 064
Collections ratio up to 80%
Growing 2018/19 = 5 629
2019/20 = 7 170
Black
Economic
Participation
Creating Black Fund a Woman,
Industrialists
Fund a Nation
Commercialise strategic
projects geared to support 40% of funding to be
over disbursed each year to
85 000 jobs Promote a Culture of women led enterprises
Savings & Investment
Host 32 Investor
Education seminars per Other Imperatives
year countrywide, in
villages & townships, on Objective Outcome
shares, dividends,
bonds, property & money Geographic
markets etc 1 Grow investments across all provinces
Spread
Provide ongoing business-planning &
Sustainable
mentorship support, business &
2 Black
corporate governance training &
Businesses
incubation support
Reputation Entrench commitment to integrity among
3
25 management staff, investees and suppliersStrategic Objective 1:
Provide finance to business ventures
established and managed by black people
26Approvals & Disbursements
NEF Approvals by Value NEF Disbursements by Value
(R million) (R million)
1400 1332 900
1248 819
1162 800
1200 704 699
1067 700 636
1000 Moratorum 895 597
600 562
800 749 749
500 424
377
600 400
418
300
400
200
200 100
0 0
Targets over strategic Period in Rm
Year Approvals Commitments Disbursements
2017/18 950 745 660
2018/19 1,046 839 915
2019/20 1,331 1,065 1,165
27Maximizing the
Empowerment Dividend
Strategic Objective 2: Invest in black
empowered businesses that have
high employment creating
opportunities.
28
28Job-Creation since inception
31 March 31 March 31 March 31 March 31 March 31 March 31 March
2011 2012 2013 2014 2015 2016 2017
25 500 jobs 28 624 44 179 47 800 81 618 86 859 92 189
jobs jobs jobs jobs jobs jobs
Targeted number of jobs expected to be created or supported
Year No. of jobs
2017/18 Support 4 064 new or existing job opportunities
2018/19 Support 5 629 new or existing job opportunities
2019/20 Support 7 170 new or existing job opportunities
29Maximizing the
Empowerment Dividend
Strategic Objective 3: Support the
participation of black women in the economy
Targeted women ownership
Year Percentage of (Annual)
2016/17 Portfolio Disbursed
Performance
2017/18 40%
34% of portfolio
disbursed is owned 2018/19 40%
by women 2019/20 40%
30Maximizing the Empowerment
Dividend
Strategic Objective 4: Facilitate investment
across all provinces in South Africa
Targeted Disbursements in under-
NEF Invested Portfolio by region by value
since inception - 31 March 2017 represented provinces (NC, NW, FS,
WC LP, MP &EC)
NC NW EC
13% FS
Year Percentage of Annual
2% 4% 8%
2%
Disbursements
MP
5%
2017/18 25%
LP
6%
2018/19 25%
KZN
GP
2019/20 25%
16%
44%
31Optimising Non-Financial
Support
Strategic Objective 5: Encourage & promote
savings, investment & meaningful economic
participation by black people
Targeted number of investor education
2016/17 Performance seminars held across the country
48 investor education Year No. of Seminars per year
seminars were held 2017/18 32
2018/19 32
2019/20 32
32Optimising Non-Financial
Support
Strategic Objective 6: Black economic
empowerment is advanced through commercially
sustainable enterprises
Indicators 2016/17 2017/18 2018/19 2019/20
Performance
6.1 Number of Business 21 18 18 18
Today Training Sessions
provided
6.2 Number of 30 15 15 15
entrepreneurs who
successfully complete
business incubation
6.3 Number of Social 42 18 18 18
Facilitation sessions for
NEF investees
33Optimising Non-Financial
Support
Strategic Objective 7: Establish the NEF in
the South African economy as a credible
and meaningful DFI
2014/15 Performance Targeted brand awareness levels
(*biennial survey)
81% Brand awareness Year Brand awareness levels
2016/17 Performance 2017/18 N/A*
Target = 70% 2018/19 75%
86% Brand awareness 2019/20 N/A*
34Financial Efficiency And
Sustainability
Strategic Objective 8: Establish the NEF
as a sustainable DFI.
Indicators 2016/17 2017/18 2018/19 2019/20
Performance
8.1 Percentage of 17.60% 18% 18% 18%
Portfolio Impaired
8.2 Targeted ROI 8.03% 9%-10% 9%-10% 9%-10%
8.3 Collections 101.79% 80% 80% 80%
Ratios
35Life to Date Performance Milestones
Output Achievements
Benefited black entrepreneurs through approval of 852 transactions worth
1 Approvals more than R8.6 billion across the country.
Approximately R5.8 billion has been disbursed to these companies since
2 Disbursement
inception.
Secured unqualified external audit opinions for 11 years running.
3 Integrity
4 Supporting jobs To date the NEF has supported in excess of 92 189 jobs (new jobs 63 989 ).
27 strategic and industrial projects worth R28.67 billion, with the potential to
5 Industrialisation support over 85 000 jobs.
In a transaction worth over R1 billion the NEF Asonge Share Scheme made
A culture of savings available more than 12 million MTN shares to over 87 000 investors
6
& investment comprising black individuals and groups. 49% of investors were women.
Reached over 30 000 people in villages and townships through 138
7 Investor education community seminars on how to save and invest, personal financial discipline,
shares, dividends, bonds, the property and money markets.
Entrepreneurship Business skills training provided over 2 898 potential entrepreneurs who
8 attended 109 seminars from 2012 to date.
training / incubation
Regional offices in all provinces. Approximately 65% of the number of
9 National footprint approved transactions emanated from the regional offices and Pre-Investment
Unit, year to date as at 31 March 2017.
10 Collections Over R2.3 billion has been repaid by investees.
36Cash Collected
Over R2.3 billion collected cumulatively from loans disbursed across
the country, in black-owned and managed businesses across virtually
all sectors of the economy.
Portfolio Receipts (Rm)
37Key Priorities
1. RECAPITALISATION:
• IDC
o The business combination process with the IDC has been approved by the
Minister of Trade & Industry and the Minister of Economic Development. The
process is now moving through the requisite legal and regulatory processes.
o As part of the business combination process, the Ministers have recommended
that the IDC grants the NEF a bridging facility effective 1 April 2017 to continue
its operations pending finalisation of the business combination process. The IDC
has since granted a facility of R500 million. However the terms of the facility are
still being negotiated.
• PIC
o An application for a PIC facility of R1 billion is currently in progress. The PIC has
concluded a due diligence process and the application is going through to its
relevant approval structures.
• UIF
o The NEF has applied for subsidies for non-financial support. An application for
R50 million has been submitted to UIF’s Labour Activation Programme which
promotes programmes that create/preserve jobs.
38Projected unencumbered cash position
Notes:
• Actual cash at 31
March R1.35 billion
• R369 million
uncommitted cash at
hand
• To discharge 2017/18
strategy, at least R500
million would be
required as cash
injection
39Key Priorities (cont…)
2. CREDIT RISK:
• Due to the high-risk mandate of the NEF, credit risk is considered a
critical-to-high exposure area.
• The tough economic conditions and low growth rates have negatively
impacted on businesses supported by the NEF, subsequently resulted in
an increasing number/value of transactions in distress. The recent
downgrade in credit ratings could aggravate economic conditions
• Initiatives to ensure the sustainability of the portfolio include:
o Enhanced screening, due diligence and credit risk assessment
processes.
o Increased focus on distressed clients through closer Post-Investment
monitoring and portfolio management.
o Improved credit collection processes.
40Key Priorities (cont…)
3. CONTINUED ALIGNMENT TO NATIONAL PRIORITIES:
• Harnessing economic growth potential & job creation – Explore growth
sectors and identify possible opportunities for the NEF.
• Black Industrialists Programme – to continue the development of black
industrialists through the Strategic Projects Fund.
• A lack of funding will negatively impact on the successful implementation of the
mandate.
4. PEOPLE RISK:
• The NEF could lose key personnel and specialist skills due to uncertainty
regarding the impact of the business combination processes.
• Interventions may be required in order to quell uncertainty and stabilise attrition
levels.
41Key Priorities (cont…)
5. Advocacy:
Alignment with government objectives – support is required to
promulgate legislation to effect new industries, allowing us to invest in
strategic sectors in support of key government initiatives and job
opportunities creation (See Mabele and Kenako Medical Case
Studies)
42Alignment with government Objectives –
Mabele Fuels Case Study:
• 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 Pre-Financial Close
NEF Investment to date R62.35 million
NEF Equity 20.22%
Project Promoter Mabele Fuels Pty Ltd
Projected Financial Close Requirement R2.2 billion
Jobs 16 700
43Mabele Fuels Case Study /cont…
Development impact of the project:
• A high job creator with an estimated cost per job relatively low at
approximately R149,700;
• Use of agricultural outputs in project creates opportunities for
community ownership through community trusts and/or
employee ownership schemes;
• Opportunity for rural socio-economic development;
• A green environmentally friendly alternative to the conventional
use of fossil fuels;
• Provides for greater fuel security in countries such as South
Africa with no oil reserves.
44
44Mabele Fuels Case Study /cont…
Support needed for the project:
• Financial close was reached in late 2012 with the expectation for fund
drawdown in 2013; plant should have been operational by October 2015.
• A key Condition Precedent to fund drawdown post Financial Close was the
finalisation of the Government’s Biofuels sector subsidy mechanism, which
unfortunately currently remains oustanding.
• The project is therefore still on hold pending a response from the
Department of Energy regarding the subsidy mechanism to be adopted for
the Biofuels Industry.
45Kenako Medical Case Study
• Kenako intends to develop the sole manufacturing plant of normal and safety syringes
in the SADC region.
• The plant will initially produce a total of 250 million syringes and 200 million
hypodermic needles per annum.
• The NEF commenced with a R7.2 million feasibility study funding in 2013 and gave a
hands on approach in assisting the Black Industrialist in bringing the project to
bankability.
• Earlier this year the NEF made a further commitment towards the construction of the
plant bringing the NEF’s total investment to R75million.
Location Coega IDZ, Eastern Cape
Project Development Stage Financial Close
NEF Investment to date R75 million
NEF Equity 70%
Project Promoter Kenako Medical Pty Ltd
Projected Financial Close Requirement R180 million
Jobs 108
46Kenako Medical (cont…)
Development impact of Project
Specialised skills transfer for the operation and maintenance to
Kenako staff;
Import Replacement: Kenako will be the sole manufacture of
syringes and needles in South Africa replacing 20% of imports into
the South African and SADC syringe markets;
NEF’s equity to be warehoused for the future benefit of B-BBEE
entities; Kenako is currently 100% black owned;
Strategic Sector Alignment with IPAP2, NGP etc. Furthermore
the investment will be supporting a capable black industrialist;
Geographic Diversification: The project will be based at the
Coega IDZ in the Eastern Cape, increasing investment in this
economically depressed region.
47Kenako Medical (cont…)
Support needed for the Project
• Partial Designation of government procurement of syringes by
Department of health in order to secure sales for Kenako;
• Allow for exceptions to the generic requirements for designation by
ITAC in projects of strategic nature such as Kenako;
• Expedite SAHPRA Regulation for medical devices in particular
syringes to lower influx of poor quality imports;
• Assistance in obtaining grant funding for international product
certifications i.e. FDA, CE etc.
48Empowering farm workers
to become entrepreneurs
49Background
• The NEF and DRDLR concluded an MOU in January 2016 to partner in
implementing some DRDLR programs.
• The Honourable Minister Nkwinti requested the NEF to pilot 10 projects
under the “Strengthening of Relative Rights” programme (“SRR”) to
benefit mainly farm workers and communities to acquire economic
interests in the agricultural land and businesses where they are
working and/or living.
• The SRR policy entails the farmer acquiring 50% of the business, farm
workers acquiring 50% (of which 5% will be allocated to NEF) to be
operated under NEWCO. The land is then acquired by the state and
leased back to the business for 30 years.
• The NEF and DRDLR concluded a Service Level Agreement in
February 2016 to implement the SRR Pilot projects, which pilot, as
outlined below, was successful.
• DRDLR handed 30 SRR projects to the NEF for implementation by 31
March 2017.
50Background Cont…
• The NEF scope of work is to:
o Undertake high level due diligence investigations after
receiving valuation reports from the Valuer General;
o Negotiate business and asset prices on behalf of DRDLR;
o Propose commercially sound transaction structures;
o Draft investment reports for submission to the Ministerial
Technical Task Team (MTTT) and the Ministerial Co-
ordinating Committee (MCM);
o Conclude legal agreements;
o Disburse committed funds;
o Facilitate the establishment of NEWCO’s and B-BBEE
structures;
o Act as an implementing agent for SRR on behalf of DRDLR;
o Provide social facilitation and Post Investment support.
51Scope of NEF Work
• Due Diligence
• Price negotiations
• Transaction agreements
• Employee lists
• Warehousing
• Implementation
• Social facilitation
• NEF 5% shareholder
• Monitoring and mentorship
52Milestones to date
Name of Province Number of Amount Industry Status
Farm beneficiaries Approved
Dubchick Limpopo 6 R21 000 000 Game Farming Partly
Disbursed
Kleinmonden Eastern 40 R10 500 000 Pineapple farming & Fully Disbursed
Rivier Cape Processing
Sun Orange Eastern 58 R38 067 000 Citrus Farm Agreements
Farms Cape to be signed
Solms Delta Eastern 45 R65 000 000 Vineyards for wine Fully Disbursed
Cape production
Birbury Eastern 29 R5 320 903 Pineapples Fully
Farming Cape Disbursed
Westcliffe KwaZulu- 55 R33 000 000 Vegetables, sugar Partly
Farm Natal cane, Timber Disbursed
Hoogland Western 18 permanent R 75 100 000 Table Grapes, Partly
Cape 180 Seasonal vegetables slice & Disbursed
dice
Louie Meyer North West 10 R55 238 000 Cattle farming Partly
Disbursed
Marolien Gauteng 102 R30 433 000 Herb Farm Agreements
signed
Saamstaan Western 56 R160 492 000 Wine Grape Farming Agreements to
Cape be signed
Jurgens Limpopo 42 R44 000 000 Game Farm Agreements to
Boedery be signed
Gannahoek Free 253 R52 444 310 Nuts, Sheep, Crop & Approved
State game
Zuurefontein WC 12 employees R 59 296 935 Potatoes & Onions Approved
Total R649 892 148
53Milestones
Better prices negotiated
Going concern principle
Unlocking hidden value
30 farms worth over R1 bn
13 transactions approved R649 million
54Milestones cont…
Strict disbursement terms
Retention of IP, trademarks,
markets & goodwill
Pioneering a new approach in
land restitution
55Negotiations in progress
Name of Province Beneficiaries Amount Industry
Farm
Bergstroom KZN 192 employees R 360 000 000 Maize, Cattle Farming
Bos Blanco FS 80 employees R 400 000 000 Game, cattle, grains
Masisweni EC 56 employees TBC Livestock, crop, processing
Morgenzon FS TBC TBC Cattle, sheep, game
Slagterskop NC 3 employees R 8 500 000 Sheep farming
Fremax Farms MP TBC R 410 000 000 Potato, maize, feedlot
Siyakhathamela KZN TBC TBC Sugar, Tannery, livestock
Thumamina KZN TBC TBC Sugar, Tannery, livestock
Seven Oaks KZN 100 employees TBC Sugar, timber, livestock
Mikon Farming MP 187 employees R 62 000 000 Poultry
Karsten Group NC TBC TBC Table grapes
TOTAL R 1 240 500 000
56Developmental Impact
Revitalising
rural economy
Farmworkers
are Social Security of
entrepreneurs cohesion tenure
One
Household
One Hectare
57Plan Going Forward
• To ensure the sustainability and efficient operation of all these business by
actively monitoring progress.
• To establish corporate governance structures.
• To promote more similar transformation partnerships with other
interested farmers in all provinces.
• To empower through skills development, and capacity building of the
workers for active participation in the operation and management of
these business.
• To develop Social development & empowerment plans from spin off
opportunities.
• To Link the businesses to more international markets and create
market linkages amongst them.
• To ensure the land tenure rights are realised by the beneficiaries.
• To ensure that proper housing structures are built for the beneficiaries.
• Implement the one household one hectare programme for more
economic activities.
• Create smaller businesses on the household hectares and link them to
market.
58Organizational Structure …
CHAIRMAN AUDIT COMMITTEE
COMPLIANCE & RISK
RISK MANAGEMENT COMMITTEE
BOARD OF TRUSTEES
INTERNAL AUDIT
HUMAN CAPITAL & REMUNERATION COMMITTEE
CHIEF
CHIEF EXECUTIVE
EXECUTIVE OFFICER
OFFICER
SECRETARIAT
BOARD INVESTMENT COMMITTEE
SOCIAL AND ETHICS COMMITTEE
DIV EXEC DIV EXEC :Venture Capital and CHIEF FINANCIAL OFFICER EXEC CORPORATE SERVICES GENERAL COUNSEL
SMEs and Rural Development Corporate Finance
FINANCE MARKETING & COMMS POST-INVESTMENT BUSINESS
RURAL & COMMUNITY DEV. UMNOTHO FUND SUPPORT
STRATEGIC PROJECTS STRATEGY & PLANNING HUMAN RESOURCES LEGAL SERVICES
iMBEWU FUND
FUND
SUPPLY CHAIN MANAGEMENT FACILITIES MANAGEMENT
PRE-INVESTMENT BUSINESS TURNAROUND, WORKOUTS &
SUPPORT RESTRUCTURE UNIT
SYSTEMS & IT Executive (member of Exco)
REGIONAL OFFICES Senior manager
Manager SOCIO-ECONOMIC
DEVELOPMENT UNIT
Headcount: 157 & ASSET MANAGEMENT
Optimal/budgeted headcount: 195
59Thank you
Contact Details
WHERE TELEPHONE
1 Head Office, 011 305 8000 or 0861843 633 /
Johannesburg 0861 THE NEF
2 Eastern Cape 0861 633 327 / 0861 NEF ECP
3 Free State 0861 633 377 / 0861 NEF FSP
4 KwaZulu Natal 0861 633 596 / 0861 NEF KZN
5 Limpopo 0861 633 546 / 0861 NEF LIM
6 Mpumalanga 0861 633 678 / 0861 NEF MPU
7 Western Cape 0861 633 927 / 0861 NEF WCP
8 North West 0861 633 697 / 0861 NEF NWP
9 Northern Cape 0861 633 627 / 0861 NEF NCP
www.nefcorp.co.za
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