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CONTACT US: info@aees.co.za / info@aeen.co.za

2. WELCOME
TO
National Empowerment Fund
KZN REGIONAL OFFICE

3. Presenter
2
Mr. Phakamile Madonsela
Regional Manager -
KwaZulu-Natal

4. 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
3

5. NEF Mandate…
44
“…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

6. 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
5

7. 6

8. R250 000 – R75 million
 Start-up
 Expansion
 Equity Acquisition
NEF Funding
7

9. 8
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& Leveraged
financefinance
 Management buyManagement buy--insins
 ESTEST
 Unlisted entitiesUnlisted entities
 Debt & EquityDebt & Equity
 Black >26%Black >26%
 Max 7yearsMax 7years
Liquidity & WarehousingLiquidity & Warehousing
 Create sustainable BEECreate sustainable BEE
ownershipownership
 Refinancing existing BEERefinancing existing BEE
structuresstructures

Capital MarketsCapital Markets
 Facilitate newFacilitate 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
PreferentialPreferential
ProcurementProcurement
 CC & (Pty) LtdCC & (Pty) Ltd
 Acquire assetsAcquire assets
 Working capitalWorking capital
 Bridging financeBridging finance
 DebtDebt
 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& Leveraged
financefinance
 Management buyManagement buy--insins
 ESTEST
 Unlisted entitiesUnlisted entities
 Debt & EquityDebt & Equity
 Black >26%Black >26%
 Max 7yearsMax 7years
Liquidity & WarehousingLiquidity & Warehousing
 Create sustainable BEECreate sustainable BEE
ownershipownership
 Refinancing existing BEERefinancing existing BEE
structuresstructures

Capital MarketsCapital Markets
 Facilitate newFacilitate new
entrants into JSEentrants into JSE
& Alt& Altxx
 Black >26%Black >26%
Start-Up Expansion Maturity/Decline
High Risk Low Risk
Preferential
Procurement
PreferentialPreferential
ProcurementProcurement
 CC & (Pty) LtdCC & (Pty) Ltd
 Acquire assetsAcquire assets
 Working capitalWorking capital
 Bridging financeBridging finance
 DebtDebt
 Black >75%Black >75%
 Max. 7yearsMax. 7years

10. 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 Entrepreneur
 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.
9

11. RCDF Product Offering
10
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

12. RCDF Strategic Objectives
11
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

13. 12
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

14. 13
Producers
(“Dairy farmers”)
Processing Facility
(“Product Identification
dairy products”)
Identified Potential
Markets
(“established retailers”)
Ultimately Consumers
(“Product Distribution”)
Milk Supplier
Dairy Products
Value Add
Food Security
VALUE CHAIN CREATION
RCDF Target Investment
Primary Investment
Ultimate outcome of RCDF Investment
Sustainable enterprises
RCDF Investment
Secondary Investment
Primary Sector
Secondary Sector Tertiary Sector

15. 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).
14

16. 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.
15

17. 16
RCDF Agriculture Funded
Projects

18. 17
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 R14,8m
R19,4m
CCT IDC NEF TECHNICAL
PARTNER
AMAJUBA
R37m

19. Compliance with R&CD product criteria
Broad based community ownership
Sustainable projects with strong social benefits
Strong technical partners
Skills transfer
Poverty alleviation
Strong empowerment dividend
Broad based economic ownership (1100 beneficiaries)
Job creation (795 jobs including 91 permanent)
Women empowerment ( 60% of workforce)
Project location – rural KZN area
Local Economic benefits
Contribution of R9.8 m pa in salaries to local economy
Electrification of houses
Provision of land for new houses
Partnership with IDC
Leveraging IDC sector knowledge
Contributing NEF know-how in financing rural communities
18

20. 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 neighbouring
farms, mainly small black emerging farmers that are struggling to secure good
quality feed at reasonable prices. Feed represents about 75% of the input cost
to 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

21. 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

23. Greenhouse Agriculture

24. Cucumebr

25. Growing tomatoes in Mathonsi

26. 1st grade tomato

27. Coloured Peppers

28. Lettuce

29. Strawberry

30. Roses

31. Fresh Herbs

32. 31
Other RCDF Funded
Projects

33.  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
32

34. 20
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.
20
R51.8 million for Umlazi Mega City
Turning Township Residents into
Owners

35. 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

36.  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

37. R75 million for Mavundla Square - Greytown

38. Tembe Masizwane / Royal Thonga Safari Lodge

39. Royal Thonga Safari Lodge

40. NEF BUSINESS
SUPPORT
39

41. Business Planning?
www.nefbusinessplanner.co.za
40
 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

42. 41
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

43. NEF PERFORMANCE
42

44. NEF Milestones
43
Black SMEs
R5.1 billion
Job-creation
44 000 jobs
Fund A Woman
22%

45. NEF Investment by Sector
44

46. NEF Investment By Region
45
EC
8%
FS
1%
GP
50%
KN
22%
LP
5%
MP
3%
NC
1%
NW
1%
WC
9%
NEF Invested Portfolio by province by
value for since inception - 31 March
2013
DisbursedinKZN:
- 2013: 10 worthR117.3 m (2012: 9 worthR167.6 m)

47. 46
46
Contact Details
Telephone: (031) 301 1960
Address: Smart X-change Building
Ground Floor
5 Walnut Road
Durban
Email: kzn@nefcorp.co.za
mazibukop@nefcorp.co.za
hlelas@nefcorp.co.za
Web: www.nefcorp.co.za