National Empowerment Fund (NEF)

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Nov 18, 2013 (3 years and 10 months ago)

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National Empowerment Fund (NEF)

“G
ROWING

B
LACK

E
CONOMIC

P
ARTICIPATION


2012 Africa SMME Conference and Awards



Presented by

Mr Chris Louw

Regional Manager: Western Cape

27 September 2012


1

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

2

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 …

2

Culture of savings & investment

Financial & non
-
financial support

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

3

R250 000


R75
million



Start
-
up



Expansion



Equity Acquisition

NEF Funding

4

Offerings in line with Re
-
engineered Processes

5

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
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
:



6

NEF Funding Criteria

Each application is assessed in terms of the following criteria
:


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
.


7

Over
R3.7
billion
approved for black businesses

More than
R2,7
billion disbursed

Over R680 approved for 233 SMEs

Over
29
000 jobs supported and created

Successes To Date

8

R108m
approved for 7
rural community
deals

21.5%
of the NEF’s
portfolio comprises

women
-
owned businesses

9

NEF Approvals & Disbursements by Value

10

NEF Portfolio by Sector by Value …


Business Planning?

www.nefbusinessplanner.co.za

11


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

12

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

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

14

espAFRIKA
:
-


Events management company.
Owners of the world renowned
Cape Town Jazz Festival.

NEF provided R10m revolving
credit facility.



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
.



Pre

-

NEF

Investment



MCPL

(
45
%
),

Seald

Sweet

(
45
%
)

and

Mgro

(
10
.
0
%
)



Post

-

NEF

Investment




MCPL

20
%
,

Mgro

40
%
,

Workers

25
%
,

NEF

(
15
%
)

Community

warehoused



Shareholder loans of R40 million, Interest charged at
prime less 3% repayable over a 10 years
period



R10 million preference shares redeemable over a 10
years period with a 6% coupon rate.



The NEF is targeting a minimum IRR of
15%



Shareholders


Funding Structure


Project
Description


Mgro MCPL Deal



Investment

Rationale



80%
owned by BEE
grouping (Mgro Group) including permanent farm workers, seasonal workers
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)

16


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…

17

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

18

19

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.

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

R13,7 million Limpopo Province

19

Examples of NEF funding

Franchises Funded to Date

Pre
-
approved Franchise Agreements

20

20

21

21

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.


22

22




Limited management time to spend on non
-
core
business


Insufficient knowledge of BEE ED requirements


Insufficient resources and skills to support BEE start
-
ups, 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.

Why Enterprise Development?

23

Approach

NEF ED FUND
IMBEWU
RURAL AND
COMMUNITY
FUND
MEASURED
ENTITY
Accounting Entry
(
No SPV
)
3
%
of NPAT
Up to
40
%
of funding
Risk Capital
(
Pref shares
)
-
Direct ED points on scorecard
-
Socio
-
economic return
-
Financial returns
-
Ease gearing
-
Bridge gap for own
contribution
-
Risk sharing
-
Turnaround


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
?



Have you registered a company?



Do you have a valid RSA
ID?



Will you be
directly, operationally involved
?


24

Come to the NEF today

25

Thank
you

Contact Details

Northern Cape and North West offices to
be opened during 2012

www.nefcorp.co.za