(Regional Manager Western Cape: National Empowerment Fund).

Report
National Empowerment Fund (NEF)
“GROWING BLACK ECONOMIC P ARTICIPATION”
2012 Africa SMME Conference and Awards
Presented by
Mr Chris Louw
Regional Manager: Western Cape
27 September 2012
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
1
Unpacking the NEF Mandate …
NEF Mandate
Grow black economic participation
Financial & non-financial support
Culture of savings & investment
Fund Management
Asset Management
1.
2.
3.
4.
1. Fund black-empowered
businesses
2. Business plan toolkit
3. Mentorship support
4. Early-stage investments
2
2
Investor Education
Public Share Offers
Enterprise Development
BEE Repository
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
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NEF Funding
R250 000 – R75 million

Start-up
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Expansion

Equity Acquisition
4
Offerings in line with Re-engineered Processes
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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 (*) below:
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
*New Ventures 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
R1 million – R50 million
etc
*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.
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R1 million – R75 million
NEF Funding Criteria
Each application is assessed in terms of the following criteria:
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commercial viability of the business,
minimum percentage of black ownership or interest,
black women empowerment,
black managerial and operational involvement,
job creation,
specific product criteria,
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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Successes To Date
Over R3.7 billion approved for black businesses
More than R2,7 billion disbursed
Over R680 approved for 233 SMEs
R108m approved for 7 rural community deals
Over 29 000 jobs supported and created
21.5% of the NEF’s portfolio comprises
women-owned businesses
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NEF Approvals & Disbursements by Value
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NEF Portfolio by Sector 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
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Mentorship
Ongoing mentorship support
across the country
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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
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Enterprises Owned and Managed by Women
Funded portfolio to date
= 25%
Target
= 40%
Women, be a part of this growth
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
espAFRIKA:Events management company.
Owners of the world renowned
Cape Town Jazz Festival.
NEF provided R10m revolving
credit facility.
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Project Description – Mgro MCPL Deal
• The transaction relates to the acquisition of 4 (four) farms that will cater for Citrus products from South Africa worldwide.
• This investment will create an opportunity for the Emgro Properties (BEE Group) to own productive farms with established
markets in place.
• The facilities will be through the guidance of Mouton Citrus (Pty) Ltd and assistance of daily running, operations, marketing,
technical know-how, distribution etc.
Shareholders
Funding Structure
• Shareholder loans of R40 million, Interest charged at
prime less 3% repayable over a 10 years period
Pre - NEF Investment
• MCPL (45%), Seald Sweet (45%) and Mgro (10.0%)
• R10 million preference shares redeemable over a 10
years period with a 6% coupon rate.
Post - NEF Investment
• MCPL 20%, Mgro 40%, Workers 25%, NEF
Community warehoused
• The NEF is targeting a minimum IRR of 15%
(15%)
• 80% owned by BEE grouping (Mgro Group) including permanent farm workers, seasonal workers
Investment
Rationale
and community of Citrusdal.
• Located in poverty stricken area of Citrusdal, Western Cape.
• Supporting a black company to own productive citrus farms with established global markets.
• Retention of 40 jobs and creation of 110 new jobs at primary farming level & 540 seasonal jobs
during harvesting
15
Masiza Mussel Farm
(R9.9 million, Western Cape)
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Masiza Mussel Farm…
Project Description
• 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)
Shareholders
Pre - NEF Investment
Funding Structure
• NEF 7 year Senior Loan of R4.95 million @ 8%
interest with a 1 year interest and capital
moratorium
• Masiza Trust (6 farmers) & Blue Bay Aqua Farm
• NEF 7 year Shareholders Loan of R4.95 million
@ 8% interest with a 1 year interest and capital
moratorium
Pre - NEF Investment
• Masiza Trust, Blue Bay Aqua Farm, LaVie and
Blue Bay Workers Trust, Technical Partner
(Mentor) and NEF
• The NEF is targeting a minimum IRR of 8%
• 62% owned by BEE and Located in poverty stricken area
Investment
Rationale
• 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
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iMbewu Fund deal summaries
Sale’s Hire
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.
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Examples of NEF funding
R13,7 million Limpopo Province
Mohale Agricultural Cooperative approached the NEF
for funding assistance to the tune of R 13,7 million for
the purchase of poultry and vegetable farm. Their
product line includes chickens, cabbages and maize.
The farm is located in Soekmekaar, Limpopo Province.
Supporting operationally involved entrepreneurship,
the growth prospects of the land will yield 15 additional
jobs and saving 30 current permanent jobs.
R9, 9 million in Middledrift
The community of Middledrift formed the Gwebindlala Trust,
through which they provided land for dairy farming. Through
funding provided by the NEF to the value of R9, 920, 000,
Middledrift Dairy established a commercial dairy farm. The
funds have been utilised for start-up costs, acquisition of assets,
machinery and working capital. Middledrift Dairy has an off-take
agreement with Clover.
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Franchises Funded to Date
Pre-approved Franchise Agreements
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Enterprise Development
Fund
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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Why Enterprise Development?
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Limited management time to spend on non-core
business
Insufficient knowledge of BEE ED requirements
Insufficient resources and skills to support BEE startups, which require significant skills injection to achieve
economic viability
Poor economies of scale achieved based on number
of initiatives
Lack of time and resources to identify sustainable
Beneficiaries;
Lack of a business model to maximise recognition of
contribution;
Lack of a process to monitor progress on projects and
to introduce corrective measures, where necessary;
Delaying implementation until the right partner comes
along; and
Reservation of spending lump sum due to fear that
money will be wasted or misused.
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Approach
-Direct ED points on scorecard
-Socio-economic return
-Financial returns
3% of NPAT
NEF ED FUND
Risk Capital
(Pref shares)
MEASURED
ENTITY
Accounting Entry
(No SPV)
Up to 40% of funding
RURAL AND
COMMUNITY
FUND
IMBEWU
-Ease gearing
-Bridge gap for own
contribution
-Risk sharing
-Turnaround
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Come to the NEF today
•
Are you a black entrepreneur?
•
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?
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Have you registered a company?
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Do you have a valid RSA ID?
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Will you be directly, operationally involved?
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Thank you
Contact Details
Northern Cape and North West offices to be opened during 2012
www.nefcorp.co.za
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