aees summit 2014 national empowerment fund mr. phakamile madonsela
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aees.co.za | aeen.co.za
CONTACT US: info@aees.co.za / info@aeen.co.za
WELCOMEWELCOME TOTO
National Empowerment National Empowerment FundFund
KZN REGIONAL OFFICEKZN REGIONAL OFFICE
Presenter
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Mr. Phakamile Madonsela
Regional Manager -
KwaZulu-Natal
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
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NEF Mandate…
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“…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
SME Market Failures
The NEF seeks to address the following market failures:Lack of access to financeLack of access to marketsLack of specific industry-knowledge and/or management experienceLimited or no equity contributionSMEs have low bargaining power with suppliers and customers (they are price-takers)SMEs compete with well-established businessesThey are often undercapitalized and have low asset baseSMEs are characterised by lack of accurate and reliable information, and lack of business-planning skillsLack of management depth – small and multifunctional, and often lack a range of business-management skills
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R250 000 – R75 million
Start-up
Expansion
Equity Acquisition
NEF Funding
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Suite of Products to Facilitate Business Growth
StartStart--UpUp
CC & (Pty) LtdCC & (Pty) Ltd Acquire assetsAcquire assets Working capitalWorking capital Bridging financeBridging finance Debt and EquityDebt and Equity Black >75%Black >75% Max. 7yearsMax. 7years
ExpansionExpansion
CC & (Pty) LtdCC & (Pty) Ltd Debt & EquityDebt & Equity Black >51%Black >51% Max. 7yearsMax. 7years
Acquisition Finance
MBOsMBOs& Leveraged& Leveragedfinancefinance
Management buyManagement buy--insins ESTEST Unlisted entitiesUnlisted entities Debt & EquityDebt & Equity Black >26%Black >26% Max 7yearsMax 7years
Liquidity & WarehousingLiquidity & Warehousing
Create sustainable BEE Create sustainable BEE ownershipownership
Refinancing existing BEERefinancing existing BEEstructuresstructures
Capital MarketsCapital Markets
Facilitate new Facilitate new entrants into JSEentrants into JSE& Alt& Altxx
Black >26%Black >26%
Max. 2years
Start-Up Expansion Maturity/Decline
High Risk Low Risk
Preferential Procurement
Preferential Preferential ProcurementProcurement
CC & (Pty) LtdCC & (Pty) Ltd Acquire assetsAcquire assets Working capitalWorking capital Bridging financeBridging finance Debt Debt Black >75%Black >75% Max. 7yearsMax. 7years
StartStart--UpUp
CC & (Pty) LtdCC & (Pty) Ltd Acquire assetsAcquire assets Working capitalWorking capital Bridging financeBridging finance Debt and EquityDebt and Equity Black >75%Black >75% Max. 7yearsMax. 7years
ExpansionExpansion
CC & (Pty) LtdCC & (Pty) Ltd Debt & EquityDebt & Equity Black >51%Black >51% Max. 7yearsMax. 7years
MBOsMBOs& Leveraged& Leveragedfinancefinance
Management buyManagement buy--insins ESTEST Unlisted entitiesUnlisted entities Debt & EquityDebt & Equity Black >26%Black >26% Max 7yearsMax 7years
Liquidity & WarehousingLiquidity & Warehousing
Create sustainable BEE Create sustainable BEE ownershipownership
Refinancing existing BEERefinancing existing BEEstructuresstructures
Capital MarketsCapital Markets
Facilitate new Facilitate new entrants into JSEentrants into JSE& Alt& Altxx
Black >26%Black >26%
Start-Up Expansion Maturity/Decline
High Risk Low Risk
Preferential Procurement
Preferential Preferential ProcurementProcurement
CC & (Pty) LtdCC & (Pty) Ltd Acquire assetsAcquire assets Working capitalWorking capital Bridging financeBridging finance Debt Debt Black >75%Black >75% Max. 7yearsMax. 7years
NEF Funding CriteriaEach application is assessed in terms of the following criteria:Commercial Viability of the businessBroad Based Black Economic Empowerment Black Women Empowerment, Black Managerial and Operational Involvement, Risk Sharing with EntrepreneurJob Creation, Geographic Location of the business (rural/urban/disadvantaged areas), Community Involvement, Compliance with all the relevant laws and regulations, Return on investment, andThe possibility of co-funding with another public or private sector institution.
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RCDF Product Offering
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Acquisition Finance New Venture Expansion Capital
Investment Threshold R1m to R50m R1m to R50m R1m to R50m
Trigger for RDCF participation
Co-operative, community groupings arranged as a Trust or any legal entity, and workers trust
Co-operative, community groupings arranged as a Trust or any legal entity, and workers trust
Co-operative, community groupings arranged as a Trust or any legal entity, and workers trust
Principal goal To cater for rural entrepreneurs or communities seeking to buy equity in existing rural & community enterprises.
To assist rural entrepreneur's and communities with equity contribution towards establishment of sustainable new ventures in agri-sector.
To facilitate involvement and ownership by communities in projects promoting social upliftment.
Types of companies/projects
Focus on small to large ventures where Partnerships between NEF, BEE party or community entity, and technical Partner is involved.
Medium sized new venture projects with total funding requirements of between R1m and R50m.
Rural and community projects using entities such as Coops and private companies.
Types of instruments Debt, Equity, quasi-equity and Preference Shares
Debt, equity, quasi-equity Debt, equity, quasi-equity and preference shares
Black equity thresholds
Minimum of 50.1%
Interest Rate Prime (+/-) Empowerment Dividend or Development impact influenced
Term of Investments / other terms
5 to 10 years Clear exit strategy
Up to 10 years Total project equity ≥ 40% NEF exposure ≤ 50% of project costs
Up to 10 years
RCDF Strategic Objectives
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MEASURESOBJECTIVES
Identification of new rural entrepreneurs presence in rural communities across the country
Fund projects with rural communities, workers, and co-operatives
Facilitate the partnership of communities into projects alongside strategic partners or technical partners.
Manage the expectations of beneficiaries & clearly outline objectives through stakeholders’ meeting & workshop that define the distribution of dividends
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Cash Crops
Field Crops
Horticulture
Food Crops
RCDF Sector Focus
Agro Processing
Manufacturing
Primary Agriculture
Secondary Agriculture
Alternate Agriculture
Hydroponics
Commercial Property
Leisure – Ecotourism
Animal Farming
Agro Forestry
Aqua culture fisheries
Inland Fishing
Fresh Water farm e
Marine Culture
Ultimate value creation – unlocked by the RCDF strategy
Aim is to unlock the potential economic
activity of rural economies
Sustainable Rural Ventures
New Rural Entrepreneur's
Value Add Industry - created
Food Security issues addressed
Export Potential unlocked
Sustainable Employment
Community Development
FX earner for the country
RURAL
FUND
IDENTIFIED
SECTORS
Influenced by the Government sector transformation initiatives
i.e. Charters, policies
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Producers(“Dairy farmers”)
Processing Facility(“Product Identification
dairy products”)
Identified Potential Markets
(“established retailers”)
Ultimately Consumers(“Product Distribution”)
Milk Supplier
Dairy ProductsValue Add
Food Security
VALUE CHAIN CREATION
RCDF Target InvestmentPrimary Investment
Ultimate outcome of RCDF InvestmentSustainable enterprises
RCDF InvestmentSecondary Investment
Primary SectorSecondary Sector Tertiary Sector
Challenges Challenges Intervention / Response
Poor Quality of Business Plans Establish concrete partnership with research institutions like ARC and academic institutions to assist with Business Plan preparations.
Lack of contribution (Fronting)
Ensure that strategic partners are willing to contribute to the project.
Appropriate Skills Allocate a mentor at the initiation of the project to identify gaps as the project progresses.
Lack of product diversification Encourage diversification of products value addition and agro processing.
Access to Markets Establish markets for projects to ensure sustainability with strategic partners (Woolworths, Pick’n Pay, Beefcor ,etc).
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RCDF Challenges…
Challenges Intervention / Response
No buy – in by communities Ensure that project awareness is created for all beneficiaries prior to implementation.
Lack of knowledge on investment products or processes
Address communities on the advantage of commercializing their land instead of selling /leaving unutilized.
Complexity of transactions, project locations and need for stakeholders support
Ensure that transactions are properly funded with a right mix of funding instruments i.e. debt and equity, grant funding.
Communities expect direct access to funding
Ensure that a clear social plan is in place prior to fund disbursement.
Inability to speedily disburse approved transactions
Continue engagement with all stakeholders to expedite closure.
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RCDF Agriculture Funded Projects
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A Sweet Deal!
60 HA raspberry farm in Amajuba district, KZN
Farm established on land secured through restitution process
Community beneficiaries with CCT governed by 11 trustees
Project taps into 482 000ha worldwide market
SA production only 100 ha currently
Project will be leading local supplier at full capacity
Supply local and export markets (70% of production)
Tap into growing popularity of raspberries
CR R14,8mR19,4m
CCT IDC NEF TECHNICALPARTNER
AMAJUBAR37m
Compliance with R&CD product criteriaBroad based community ownershipSustainable projects with strong social benefitsStrong technical partnersSkills transfer Poverty alleviation
Strong empowerment dividendBroad based economic ownership (1100 beneficiaries)Job creation (795 jobs including 91 permanent)Women empowerment ( 60% of workforce)Project location – rural KZN area
Local Economic benefitsContribution of R9.8 m pa in salaries to local economyElectrification of housesProvision of land for new houses
Partnership with IDCLeveraging IDC sector knowledge Contributing NEF know-how in financing rural communities
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Dihoai Feedmill Cooperative
• Dihoai Farming Cooperative, in the Free State, was formed in 2006 by five family members.
• They have been farming chickens and producing their own feed for over five years. The success of their operations has allowed one of the main members to purchase the 50ha farm.
• The cooperative has identified an opportunity to supply other neighbouringfarms, mainly small black emerging farmers that are struggling to secure
goodquality feed at reasonable prices. Feed represents about 75% of the input costto all farmers.
• Small emerging farmers struggle to secure feed or buy in bulk from the current big producers who refer them to local retailers that charge additional 20% mark-ups on the feed products.
• The NEF has invested R8.95million and 25 Jobs created jobs in this operation
Berlin Beef• NEF invested a total of R27 million towards the establishment of a feedlot
in Berlin, Eastern Cape with 21 Jobs created.
• The Feedlot will supply a high through-put abattoir in East London in terms of a 10 year off-take agreement, including upstream investment in the cattle supply region for improved breeding of cattle supplied to the Berlin Beef feedlot.
• The operation plans are for a beef operation with one-time standing capacity of 3 000 head on back grounding and 3 000 head on feedlot.
• The feedlot will produce approximately 58 tons of manure per day, which will be utilised for Biogas power generation
• The project will adopt and comply with requirements of ISO 14001
Greenhouse Agriculture
Cucumebr
Growing tomatoes in Mathonsi
1st grade tomato
Coloured PeppersColoured Peppers
LettuceLettuce
StrawberryStrawberry
RosesRoses
Fresh HerbsFresh Herbs
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Other RCDF Funded Projects
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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The communities of Umlazi and Lamontville townships in KZN, represented by Sizovuna Investments, acquired a 25% stake in Umlazi Mega City shopping centre with NEF funding of R52,8 million. This genuine BB-BEE deal is delivering substantial social returns to community beneficiaries at large, including job creation and skills development.
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R51.8 million for Umlazi Mega City
Turning Township Residents into Owners
Rural Communities owners of 4-Star Hotel in Hluhluwe Imfolozi Game Reserve
This is a R24 million project
The NEF invested R21million
The Trust represents 260 Household beneficiaries in the Mpembeni Community (Northern Kwa-Zulu Natal)
Big 5 Experience in the Oldest Game Reserve in SA
The hotel has 22 Villa Rooms, Magwanani Spa, Curio Shop and Conference Facilities
Accommodates 44guests and Conference will hold 90guests
The Nkumbuleni Community in Eston, Mkhambathini Municipality are land restitution Beneficiaries
The NEF invested R15.3million
The Trust represents 260 Household beneficiaries
The Lodge is within a Game Reserve and has 60 Rooms to accommodate 144 Guests
Other facilities include 4 Wedding and Conference Facilities, Magwanani Spa, Curio Shop and Game Drives
Big 5 Experience in the Oldest Game Reserve in SA
Empowering Land Restitution Claimants to Become Successful Business Owners
R75 million for Mavundla Square - Greytown
Tembe Masizwane / Royal Thonga Safari Lodge
Royal Thonga Safari Lodge
NEF BUSINESS SUPPORT
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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
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MentorshipOngoing 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
NEF PERFORMANCE
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NEF Milestones
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Black SMEs
R5.1 billion
Job-creation
44 000 jobs
Fund A Woman
22%
NEF Investment by Sector
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NEF Investment By Region
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EC8%
FS1%
GP50%
KN22%
LP5%
MP3%
NC1%
NW1%
WC9%
NEF Invested Portfolio by province by value for since inception - 31 March
2013
Disbursed in KZN: - 2013: 10 worth R117.3 m (2012: 9 worth R167.6 m)
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Contact Details
Telephone: (031) 301 1960
Address: Smart X-change Building Ground Floor
5 Walnut RoadDurban
Email: kzn@nefcorp.co.za mazibukop@nefcorp.co.za hlelas@nefcorp.co.za
Web: www.nefcorp.co.za
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