From surviving To thriving

How to protect and manage Intergenerational Wealth:

A case study of the Royal Bafokeng Nation

Elephants Hill, Victoria Falls 22 July 2017

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Table of contents

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1. Our context - Who we are

2. Our corporatisation journey

3. Our Business Model

4. Asset Management

5. Conclusion

Our context:

Who we are

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~30 minutes from Sun City

~1.5 hours from Johannesburg

Who we are

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We are a 128 000 strong community of people. Part of the RLM, NWprovince in South Africa. We are governed by the SA constitution andlaws and we try to remain true to customs, traditions and values.

5 regions

29 villages

R8bn = socio-

economic

development

spend in 10

years

1400 km2 of

land

90% of RBN has tap water

The broad objective of the RBN’s leadership has always been ensuring that

the current and future generations of the community benefit from the asset

base which largely originated from the platinum deposits.

1834-1891: Bafokeng pooled community resources and started buying back the land they had occupied for centuries from white colonialists

1920:the acquisition came to a halt due to Bafokeng financial commitments and would resume in the 1930’s

1924: Platinum discovery: a part of the reef containing the world's largest deposit of platinum group metals were discovered under Bafokeng land

Over 180 years of asset management = Might be the longest African community

investment case

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Who we are (Cont…)

Who we are

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1. Protect and grow 2. Sustainable yield to

service social needs

Our journey to

corporatisation

Creating a world-class community investment case

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O

Our journey to

corporatisation

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Late 1990’s:

• RBN ran out of cash

• Due its legal status, it was very difficult for RBN raise funding

• As the banks and financiers sais “they did not know who to go after in a case of a difficult”

• RBN also realised that this was likely to be a barrier in implementing its vision and objectives

Previous challenges from

Legal status & structure

Early 2000’s

• RBN realised it needed structure that would be best understood not just by the banks but corporates in general.

• Hence, in September 2002 a resolution was passed by the community to corporitise its affairs including the registration of the Royal Bafokeng Nation Development Trust (RBNDT) and companies to house and develop various investments

The Royal Bafokeng Nation is known for its

visionary leadership from 1834 - the time of Kgosi

Mokgatle to the current 36th King, Kgosi Molotlegi

place, there are two important components to our

success:

• It is important that we balance these.

Our Plan’35 is a developmental project that charts

ways to diversify the Nation’s local economy for the

long term sustainability of Bafokeng generations by

2035 (e.g. Platinum is a finite resource and

which will deplete at a point)

Governance

Our hybrid system (co-existence between

Traditional and Corporate Structures) allows

deep community participation and wide

accountability in how we administer our plans and

funds

Our journey to corporatisation: Core principles

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Our journey to corporatisation: Key moments

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Our journey to corporatisation: Incorporation of structures

Our journey to corporatisation:

Group structure

• RBH• Moumo• CPT• Platinum Stars

• RBI (education)• Lebone II

EducationPublic Service

Management

Social

Services

Royal Bafokeng

Administration

(RBA)

Royal Bafokeng Nation

Development Trust

(RBNDT)

Commercial

Institutions

• Public Service Management• Infrastructure Maintenance• Municipal Services • Protective Services• Land Use Management

• Health & Social Development

• Royal Bafokeng Enterprise Development

• Arts and Culture• Royal Bafokeng Sports

Supreme council(leadership & decision-making)

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Royal Bafokeng Nation

Our journey to corporatisation:

Group structure (Cont…)

• Public Service Management• Infrastructure Maintenance• Municipal Services • Protective Services• Land Use Management

• Health & Social Development

• Royal Bafokeng Enterprise Development

• Arts and Culture• Royal Bafokeng Sports

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SocialImperatives

CommercialImperatives

Chaired byKgosi

Our Business Model

Creating a world-class community investment case

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Business/operating Model

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Education and utilities

• Fully built and maintains 46 public

schools operated by DoE (Incl. a

private school)

98% approved households electrified

56% street lighting

Water

• 530km of reticulation

• 19 reservoirs built

• 95% of approved

households with Portable

water in their stands

R7bn+ spent on infrastructure development to date

Business/operating Model: e.g. of social delivery projects

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Examples

of social

delivery:

Infrastruct

ure and

other

programs

Health

• 6 clinics fully built & maintained by the

RBN

• RBN also pays for some medical staff

to assist the DoH

• Additional investments in ambulances,

emergency response teams and fire and

disaster response teams

Business/operating Model: e.g. of social delivery projects (Cont…)

Sanitation

• 140km of sewers

• 3 treatment plants

• 21000 households waste collection

R7bn+ spent on infrastructure development to date

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Project 1: Bafokeng Stadium

Total budget to upgrade: R429m

• RBN partnered RLM (50/50 contributions)

2009 Confederation Cup venue

• RBN Tender process (with RLM as observers)

2010 Soccer World Cup Venue

• Project delivered by RBN technical team

2013 AFCON

Project 2: Provincial road - P115 Sun City

• Built the P115 Sun City road in partnership with

NW DTRCS for R36 million

• Phase 1 : 50:50

• Phase 2 & 3 : 20:80 (DTRCS)

Project 3: Provincial road - Western Bypass

• Western Bypass: RBN contributed R60m (NW

DTRCS, RLM & RBN)

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Business/operating Model: e.g. of social delivery projects (Cont…)

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Asset Management

Building resilience in a challenging economy

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2006 2015 2017

Global financial crisis- Decline in mining - Energy shortages- High inflation

2012

Marikana:Protracted strikes , cost pressures for RBPlat (labour, electricity)

Decline in platinum prices Decline in commodity prices

20092007 2008 2010 2014 2016

Asset Management: Key economic events

• SA ratings downgrade

• Volatility of the Rand

• Political & Policy uncertainty

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The platinum sector has not fully recovered since 2008/09 financial crises. Accordingly; in 2013 the RBN

realised that the spending pattern was unsustainable and that if it continued the following events were

likely to occur:

• The funding deficit would widen over time

• The RBN cash reserves would be depleted

If we carried on like

this, today we

would have a

negative bank

balance of -R1.2bn* These projections were made in a context of tough economic conditions (volatile

commodity prices and an unstable political environment)

YEAR

2014

2015

2016

2017

Projected

income

(Rm)

R360m

R83m

R46m

-R1.m

Projected

social

expenditure

R775m

R843m

R898m

R967m

Total bank

balance

R1.4bn

R567m

-R331m

-R1.2bn

Asset Management: Impact of

challenges in the mining space

service delivery

Asset Management: What we did to thrive in a tough economy

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20062015 2017

Exchange of Implats royalties for 12%

shareholding

2012

Restructuring programme at RBA

RBNDT raises momentum on diversification strategy

20092007 2008 2010 2014 2016

Financials Property Infrastructure

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Success Indicator

The diversification we have

built into our portfolio

allowed RBH to pay a final

R300m in 2015.

Success Indicator

• Deficit has narrowed

significantly; and

• Our bank balance is

growing again

Asset Management:

What we did to thrive in a tough

economy (Cont…)

530 185 129 11 28

Asset Management:

Building resilience through

diversification

• Portfolio – historically platinum heavy but has evolved through diversification

• Mining vs. non mining assets has improved from 93%:7% (2008) to 15%:85% (2016)

• Overall, The RBN spent an average of ~2.5% of NAV over the past ~10 years . This is below Global peers (Endowment

Funds) spending of between 3.5% and 5% of NAV.

0

5

10

15

20

25

30

35

40

45

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Ra

nd

bil

lio

n

Evolution

Other

Property

Mining Services

Industrials

Telcos

Infrastructure

Financials

Mining

• Health & Social Development

• Royal Bafokeng Enterprise Development

• Arts and Culture• Royal Bafokeng Sports

Asset Management:

Sector allocation

• RBNDT’s equity portfolio

managed to find growth

during a difficult period.

• The Net Asset Value

(“NAV”) increased by

16.2% 2016 outperforming

the JSE ALSI by 15%

As at December 2016

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• Health & Social Development

• Royal Bafokeng Enterprise Development

• Arts and Culture• Royal Bafokeng Sports

Asset Management:

Key investment drivers

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Achieving our vision

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Conclusion

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To ensure that we safeguard the Royal Bafokeng Nation’s heritage and economic future, we remain committed to:

• Visionary & courageous leadership

• Innovation & relevance

• Accountable & transparent stewardship of the community’s assets

Thank you

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