National Empowerment Fund
Presentation
28 August 2014
Mr. Bongani Qokose
Regional Manager: Mpumalanga
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Presenter
Mr Bongani Qokose Regional Manager : Mpumalanga
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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 empowered
businesses, as well as by promoting a culture of savings and investment
among black people
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NEF Mandate Grow black economic participation
Fund Management 1. Fund black-empowered
businesses
2. Business plan toolkit
3. Mentorship support
4. Early-stage investments
Asset Management 1. Investor Education
2. Public Share Offers
3. Enterprise Development
4. BEE Repository
Unpacking the NEF Mandate …
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Culture of savings & investment Financial & non-financial support
Challenges / Market Failures
facing black business
• Limited own capital,
• Access to affordable capital,
• Limited management skills, including financial, marketing and technical
expertise,
• Lack of accurate and reliable financial information,
• Poor quality of business plans,
• Lower bargaining power and strong competition from established
businesses with entrenched market dominance, and
• Lack of access to local international markets.
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R250 000 – R75 million
Start-up
Expansion
Equity Acquisition
NEF Funding
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Product / Fund Description Funding amounts
Entrepreneurship Finance For starting a new business R250 000 – R10 million
Procurement Finance For tenders and contracts R250 000 – R10 million
Franchise Finance For pre-approved franchise licenses R250 000 – R10 million
Acquisition Finance For black investors acquiring a stake in medium to large
companies R2 million – R75 million
Expansion Capital For growing an existing business R250 000 – R75 million
*Project Finance Participation in green-field projects R5 million – R75 million
Capital Markets Listing on the JSE or its junior Altx markets R2 million – R75 million
Liquidity and Warehousing
The NEF has Black Facilitator status, which can help black
shareholders and companies wishing to sell a stake while
keeping the shareholding black
R2 million – R75 million
*Rural and Community Development Fund for agri-processing, tourism, mining & beneficiation,
manufacturing etc R1 million – R50 million
*Strategic Projects Fund
Venture-capital fund investing in early-stage projects for the
purpose of developing strategic industrial capacity in poverty
nodes, in renewable energy, business process outsourcing,
tourism, manufacturing, mining and mineral beneficiation etc.
R1 million – R75 million
NEF Funding Products in detail On average, the NEF’s business loans are repayable over 4 to 7 years, and up to 10 years where marked with an asterisk (*) be low:
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NEF Funding Criteria
Each application is assessed in terms of the following criteria:
minimum percentage of black ownership or interest,
black women empowerment,
black managerial and operational involvement,
commercial viability of the business,
specific product criteria,
job creation,
geographic location of the business (rural/urban/disadvantaged areas),
community involvement,
compliance with all the relevant laws and regulations,
return on investment, and
the possibility of co-funding with another public or private sector institution.
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Performance
Reporting
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NEF Approved and Disbursed Deals
by value
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NEF Approved and Disbursed Deals
by number
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NEF Portfolio by Value
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Business Planning?
www.nefbusinessplanner.co.za
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Simple to use
Free to the public
Step by step question & answer
process
Helps with financial projections
Formats into a Word document
Confidential (password-protected)
Download and print
Submit to any funder
No. Heading Description
1 Executive Summary Brief description of the business?
2 Purpose of funding What do you need the money for?
3 Valuation of business If buying a business, how was its value calculated?
4 Products & Services What is the business going to sell?
5 Industry Analysis Trends, developments , opportunities, laws, outlook etc
6 Target Market Who are your customers?
7 Competitor Analysis How are you going to do better than your competitors?
8 Supplier Analysis Do you have the best suppliers, eg cost, delivery, quality etc
9 Operational Analysis Technology, quality-control, safety, costs & processes etc
10 Management & HR Experience, qualifications, number and race of employees etc
11 Internal & External Risks Do you have plans to address possible risks & problem areas?
12 Social-economic benefits What does your business offer to society, eg jobs, skills etc
13 Financial Analysis History & projections: Income & exp, balance sheet, cash-flow
Details of a Business Plan
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Mentorship
Ongoing mentorship support across the country
Globally, 30% of start-ups fail in the first 2 years,
Less than 50% survive beyond 4 years
Mentors across the country to help businesses
Expert advice on strategy and operations
Improve the chances of the business succeeding
Provided for free to NEF investees
SAVINGS AND INVESTMENT
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Investor Education
National campaign and booklet to
promote public understanding of:
How to save & invest
Tips on investing
Personal financial discipline
What are shares & dividends
What are bonds
Investing in property
The money-market
Terms & concepts
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Enterprise Development …
Broad – Based Black Economic
Empowerment Codes of Good
Practice – Section 9(1) Series 600
provides that companies make
monetary or non monetary
contributions either recoverable or
non recoverable for development,
sustainability and financial and
operational independence of
beneficiaries.
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Enterprise Development
Enterprise
Development Fund
NEF
Returns Mandate BEE
Facilitator Co -
Funding
Measured Entity
Returns Proper
appropriation
of funds Risk sharing BEE points Free from
legislative
restraint Free from
operating risk
Contribution
Beneficiaries ( NEF Investees & Beneficiaries
from Measured Entities Supply
Chain )
Returns Financial
Independence Sustainability Increased
quality / skills Guaranteed
off - take Vested equity
40 %
60 %
Co - funding
Fund Manager
Benefits of NEF as
FM Highly regulated
Public Entity e . g .
PFMA Governance Reporting
Quasi Equity
Equity
Non Financial Support
• Are you black?
• Do you have a viable business idea and a
business plan?
• Does it have financial projections?
• Do you need funding of between R250 000
and R75 million?
• Have you registered a company?
• Do you have a valid RSA ID?
• Will you be directly, operationally involved?
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Come to the NEF today
Examples of
NEF Funding
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This is a R50 million project
The NEF invested R28,3 million
The Trust represents 22000
beneficiaries in the Jozini area
(Northern Kwa-Zulu Natal)
Overlooks the third largest lake
in South Africa
The hotel has 60 rooms
Accommodates 144 guests
The community owns this 4-Star hotel!
Turning Villagers into Shareholders
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R14.8m R19.4m
CCT NEF IDC Technical Partner
AMAJUBA
R37m
60 HA raspberry farm in Amajuba district, KZN
Farm established on land secured through restitution
process
Supply local and export markets (70% of production)
Tap into growing popularity of raspberries
Supplies berries to Europe
Supplies berries to Woolworths
CR
A Sweet Deal for the People!
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Masiza Mussel Farm
(R9.9 million, Western Cape)
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• The commercialisation and an expansion of The Masiza Mussel Farm Pilot Project
• Masiza produces 739 tons p.a. of black mussels in Saldanha Bay, Western Cape
• Has a 100% off-take agreement with LaVie Seafood (the only processor of mussels in RSA)
Pre - NEF Investment
• Masiza Trust (6 farmers) & Blue Bay Aqua Farm
Pre - NEF Investment
• Masiza Trust, Blue Bay Aqua Farm, LaVie and
Blue Bay Workers Trust, Technical Partner
(Mentor) and NEF
• NEF 7 year Senior Loan of R4.95 million @ 8%
interest with a 1 year interest and capital
moratorium
• NEF 7 year Shareholders Loan of R4.95 million
@ 8% interest with a 1 year interest and capital
moratorium
• The NEF is targeting a minimum IRR of 8%
Shareholders
Funding Structure
Project Description
Investment
Rationale
• 62% owned by BEE and Located in poverty stricken area
• Supports economically sustainable and globally competitive marine aquaculture
sector
• Retention of 6 jobs and creation of 10 new jobs at primary farming level & 90 new
jobs at processing plant
Masiza Mussel Farm…
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Qumbu Shopping Center t/a Aduma Trading (Pty)Ltd -
Eastern Cape (R34 million)
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Project Salient Features
• Area: Eastern Cape, Qumbu
• Sector: Retail Property
• Deal type: Start-up
• Community shareholding: Aduma Trading (Pty) Ltd :
44% Qumbu Community Trust :
37% NEF: 19% (warehoused by
NEF) • NEF investment: 34 million
• Numbers of jobs created: 99
permanent and 151 temporary
iMbewu Fund deal summaries
1. Sale’s Hire is a Cape Town based
company that specialises in the hire of
builder’s equipment and other related tools.
The company has 20 company owned
outlets in the Western Cape. The company
intends to franchise 9 of their branches to
the current black management in those
branches.
2. Sale hire specialized in hire and sale of
tools and equipment in the construction
industry. Their product offering ranges from
access platforms, breakers , cleaning
equipment , compacting and concrete,
compressors , drills , generators and power
tools etc. These products service both the
DIY and construction industry.
Sale’s Hire
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Franchises Funded to Date Pre-approved Franchise Agreements
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uMnotho Fund Deal Summaries
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1. This is a greenfields project in the broiler industry. Velevutha Agricultural Consultancy’s operations will be in contract growing for chicken processing entities. It has secured a 10 year outgrower contact with Crown Chickens (Pty) Ltd, a subsidiary of the JSE listed Sovereign Foods Limited to grow over 6,3 million chickens per annum. The NEF has approved R44 million new ventures finance to fund the land, infrastructure and equipment required to kick-start the project. Velevutha represents a genuine broad-based BEE initiative including 33% women, 10% Staff and 7.5% Broad-Based BEE ownership as well as the creation of 12 new jobs and transformation of a white, blue-chip dominated industry.
R44 million in the Eastern Cape
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4. LA Crushers (Pty) Ltd is a mining contracting company based in Phalaborwa with operations in Limpopo and Mpumalanga. Having operated for more than 20 years, their client base includes blue chip companies like Phalaborwa Mining, BHP Billiton, Foskor and Exxaro. LAC’s Head Office is in Phalaborwa, and the company employs some 500 personnel. The NEF’s R45 million investment was to enable an acquisition of a 46% by a BEE Consortium, including the surrounding communities as well as for the business’ working capital requirements.
uMnotho Fund Deal Summaries 3. Just On Cosmetics (Pty) Ltd (JOC )is a black-owned
cosmetics retailer whose operations commenced in 1991. To date, the company boasts 38 outlets in the Eastern Cape, Kwa-Zulu Natal and the Free State, 2 warehouses, 36 vehicles more than 50 suppliers and over 600 employees. NEF has committed R50m in funds to the expansion of JOC. This has the potential of creating in excess of 200 jobs in the above mentioned provinces whiles growing a black-owned company.
R45 million in Limpopo
R50 million in the Eastern Cape
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6. The NEF has supported the introduction of a consortium of black women and the Nozala Trust as shareholders in the Ma-Afrika business, and funded the production of 2 films, namely A Million Colours and Winnie. Through this investment the NEF is supporting transformation in a key industry and has assisted in the facilitation of more than 350 jobs for crew and cast positions.
5. Desert Oil is a fuel branded marketing company. Institution of the company comes a result of Chevron divesting in Retailing in the industry in line with the regulation. The company began its operations in March 2010 before securing full funding. The assets acquired include supply agreements for 28 sights, pumps and tanks on all sites, and land and buildings for 4 sites. The entrepreneurs are strong individuals with 40 years experience in the industry indicating firm commitment to the transaction through a R2m contribution and 2 of the three directors moving from the Western Cape to the Northern Cape.
uMnotho Fund Deal Summaries
R7,950,000 in the Northern Cape
R30 000 000 in the Western Cape
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Enterprises Owned and Managed by Women
Investee % of Women
Shareholding
Sector Value
Wassa Trading 100 Retail (Energy) R12 460 000
Nawane Ciao Baby Cucina 100 Food Franchise R 3 900 000
Ranna Pazza Karoo Cattle 100 Food Franchise R 4 400 000
Tawana Business Projects 100 Construction R 2 500 000
Barcelos Mthatha 100 Food Franchise R 1 100 000
Safepak 50 Manufacturing R 4 400 000
Moshitoa Selections 50 HR Services R 3 000 000
Afripotego Business Projects 100 Construction R 2 750 000
Funded portfolio to date = 25%
Target = 40%
Women, be a part of this growth
MPUMALANGA NEF FUNDED PROJECTS YEAR ENDED MARCH
2013
Spar Kildare (Bushbuckridge) – R12, 3m. The store will be officially
launching on the 25th of July 2013.
Sambane Mining and Logistics (Ermelo) – R1.5m. The project is currently
operating.
Badplaas Saw Mill (Badplaas) – R9m. The project is in implementation
stage.
Bafune Construction and Electrical (Matsulu) – R1m. The project is
completed and company is sustainable.
Khwezi Lakusasa Trading (Nelspruit) – R1.4m. Currently operating
Mdokeni Transport and Tours (Waterval Boven) – R1,9m. Currently
operating
Lizin Transport Services (Machadodorp) – R2,1m. Currently operating.
Lo-Mhlangano Private Tours (Nelspruit) – R2,8m. Currently operating