WEL WELCOME COME TO National Empowerment Fund KZN REGIONAL OFFICE - PowerPoint PPT Presentation

WEL WELCOME COME TO National Empowerment Fund KZN REGIONAL OFFICE

Presenter Mr. Phakamile Madonsela Regional Manager - KwaZulu-Natal 1

History  Established through the National Empowerment Fund Act No 105 of 1998  Government Agency under the Department of Trade and Industry  Capitalised by government in 2005 with R2.4billion  Is represented in 8 Provinces (Gauteng, KZN, EC, MP, NW, LP, WC, FS)  Largest SME Funder in South Africa with more than R5.1 billion worth of assets under management as of 31 March 2013 2

NEF Mandate… “…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 3 3

SME Market Failures The NEF seeks to address the following market failures: Lack of access to finance  Lack of access to markets  Lack of specific industry-knowledge and/or management experience  Limited or no equity contribution  SMEs have low bargaining power with suppliers and customers (they are price-takers)  SMEs compete with well-established businesses  They are often undercapitalized and have low asset base  SMEs are characterised by lack of accurate and reliable information, and lack of  business-planning skills Lack of management depth – small and multifunctional, and often lack a range of  business-management skills 4

NEF MANDATE Grow black economic participation Financial & non-financial support Culture of savings & investment ASSET MANAGEMENT FUND MANAGEMENT 1. Investor Education 1. Fund black business 2. BEE Repository 2. Pre-Investment Support 3. Public Share Offers 3. Post Investment Mentorship 4. Enterprise Development 5

NEF Funding R250 000 – R75 million  Start-up  Expansion  Equity Acquisition 6

Suite of Products to Facilitate Business Growth Start-Up Start-Up Expansion Expansion Maturity/Decline Maturity/Decline Preferential Preferential Procurement Procurement Preferential Preferential Preferential Preferential Acquisition Finance Liquidity & Warehousing Liquidity & Warehousing Liquidity & Warehousing Liquidity & Warehousing Start Start- Start Start- -Up -Up Up Up Expansion Expansion Expansion Expansion Capital Markets Capital Markets Capital Markets Capital Markets Procurement Procurement Procurement Procurement  MBOs  MBOs MBOs & Leveraged MBOs & Leveraged & Leveraged & Leveraged   Create sustainable BEE Create sustainable BEE CC & (Pty) Ltd CC & (Pty) Ltd CC & (Pty) Ltd CC & (Pty) Ltd Facilitate new Facilitate new  Create sustainable BEE  Create sustainable BEE  CC & (Pty) Ltd  CC & (Pty) Ltd  CC & (Pty) Ltd  CC & (Pty) Ltd  Facilitate new  Facilitate new          CC & (Pty) Ltd  CC & (Pty) Ltd CC & (Pty) Ltd CC & (Pty) Ltd finance finance finance finance   ownership ownership ownership ownership  Acquire assets  Acquire assets Acquire assets Acquire assets  Debt & Equity  Debt & Equity Debt & Equity Debt & Equity entrants into JSE entrants into JSE entrants into JSE entrants into JSE     Acquire assets Acquire assets  Acquire assets  Acquire assets  Management buy  Management buy Management buy- Management buy- -ins -ins ins ins      Working capital  Working capital Working capital Working capital  Black >51%  Black >51% Black >51% Black >51% & Alt x & Alt x & Alt & Alt x x     Working capital Working capital EST EST  Working capital  Working capital  EST  EST     Bridging finance Bridging finance Max. 7years Max. 7years  Refinancing existing BEE  Refinancing existing BEE Refinancing existing BEE Refinancing existing BEE  Bridging finance  Bridging finance  Max. 7years  Max. 7years        Bridging finance  Bridging finance Bridging finance Bridging finance  Unlisted entities  Unlisted entities Unlisted entities Unlisted entities     Debt and Equity Debt and Equity Black >26% Black >26% structures structures structures structures  Debt and Equity  Debt and Equity  Black >26%  Black >26%      Debt  Debt Debt Debt  Debt & Equity  Debt & Equity Debt & Equity Debt & Equity      Black >75%  Black >75% Black >75% Black >75%    Black >75%  Black >75% Black >75% Black >75%  Black >26%  Black >26% Black >26% Black >26%      Max. 7years  Max. 7years Max. 7years Max. 7years  Max. 2years       Max. 7years Max. 7years  Max. 7years  Max. 7years  Max 7years  Max 7years Max 7years Max 7years     High Risk High Risk Low Risk Low Risk 7

NEF Funding Criteria Each application is assessed in terms of the following criteria: Commercial Viability of the business  Broad Based Black Economic Empowerment   Black Women Empowerment, Black Managerial and Operational Involvement,  Risk Sharing with Entreprenuer  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.  8

Doc Requirement - Oil and Petroleum Applications Feasibility Study & Traffic Count / Due Diligence and Valuation Report  Purchase and Sale Agreement  DoE Site Licence and Retail Licence  Business Plan and 5 Year Financial Projections  3 year Signed Annual Past Financial Statements  Detail of Sales Volume and Value (Fuel, Convenience Shop and Other)  Approval as a Franchisee (Letter)  Proof of Successful Completion of Retail Training  Copy of Franchise Agreement  Copy of Lease Agreement  Business Registration Documents and Tax Clearance  Compliance Documents (EIA ROD & Municipality Approvals)  FICA Documents (Certified Copies of ID, Proof of Physical Address etc) Funding Requirements Breakdown and Quotations  9

Imbewu Fund Product Offering Procurement Finance Entreprenurial Finance Franchise Franchise Solutions Solutions Solutions Instruments  Debt only  Debt only  Debt only Degree of  Very Low  Medium  Very Low customisation Products  Receivables finance  Working capital  Franchise Finance backed by co-operative  Asset/lease finance  Factoring agreements  Working capital  Asset/lease finance  Other Franchises  Bridging finance  Contract finance Advantage for  Rapid turnaround  Mix of speed and  Pre-approved Finance customization. iMbewu  Caters for volumes  Rapid turnaround  Lowered risk  Caters for volumes Amounts &  R250k< and <R10M  R250K< and <R10M  R250k< and <R10M invested period  3 mths to 5 yrs  3 to 7 yrs  Up to 7 yrs 10 10

Franchises Funded to Date Pre-approved Franchise Agreements 11

Shell Ultra City Estcourt (Pty) Ltd KZN Flagship BEE Petroleum Deal

Shell Ultra City Estcourt (Pty) Ltd KZN Flagship BEE Petroleum Deal

Umnotho Fund Products Acquisition Finance Project Finance Expansion Capital Size of Investment R5m to R75m R5m to R25m R5m to R75m    To provide funding to entities that Principal goal To cater for BEE groups To assist BEE with equity seeking to buy equity in contribution to greenfields are already empowered but seek existing businesses projects expansion capital.    Already empowered Types of Focus on medium to large Medium sized greenfield companies projects with total funding companies. companies/projects requirements of between  Partnerships between NEF, R10m and R200m. BEE, Management and other investors    Term loans Types of instruments Debt Equity and quasi-equity  Equity instruments to support BEE.  Subordinated debt  Quasi-equity  Preference shares  Ordinary equity Minimum of 25.1% Minimum of 25.1%. Minimum of 25.1% Black equity thresholds    Up to 5 years Term of Investments / 5 to 7 years Up to 10 years   Clear exit strategy Total project equity ≥ 40% other terms   LBO’s and SPV’s NEF exposure ≤ 50% of project costs  Proven management experience    Linked to overdraft prime rate (debt) Expected pricing Min. of 15%, nominal pre-tax NEF IRR – min of 18% pre tax  Equity priced at target IRR 14

R14.9million Ngwavuma Quarry Quarry supplying crushed stones for road construction