For further information contact Business Partners or The South African Chamber of Commerce and Industry

1. Business Partners Limited
Leading Investor in SMEs
David Morobe
Regional General Manager
09 October 2013

2. Presentation outline
• Economic Environment Overview
• SME Market Overview
• Who is Business Partners?
• Business Partners’ Finance Offering
• Property Finance Offering
• Concluding Remarks

3. Economic Trends & discontinuities
• Global
– Battling to recover from the 2008 GFC and 2009 recession
– Slow/no growth in North America & Europe
– Growth in Emerging Markets (China, India, Brazil)
– European sovereign debt crisis: Will it precipitate another
recession (in Europe and the rest of the world)?
• Africa
– Booming economies – driven by commodity exports,
demographics, rising per capita disposable income and resultant
consumer spend
– The 21st
century: Is it the dawn of Africa’s era?

4. Economic Trends & discontinuities
• South Africa
– Fragile recovery from the 2008 GFC and 2009 recession
– Recovery largely driven by commodity exports and infrastructure
projects
– Vulnerable to European economic malaise and slow growth in
North America (which, together, accounts for > 50% of SA
exports)
– Several factors could undermine fragile economic recovery:
• General over-indebtedness of households
• Inflationary pressures (especially administered prices)
• Low levels of fixed investment spending (especially by the private sector)
• Over-regulation
• Low and/or inappropriate skills levels
• High unemployment levels possibly leading to social unrest
• Low incidence of entrepreneurship

5. Overview of the SA SME market
• 1,5 – 2.0 million (estimate) small and medium
and micro-sized enterprises (SMMEs) operate in
South Africa
– 600 000 are SMEs
• 35% of GDP ― the estimated contribution by
SMEs in SA
• 42.8% of the total labour force in the private
sector is employed by the SME sector in SA
• 90% of new jobs created in the private sector
should be in new and growing SMEs

6. Overview of the SA SME market

7. Overview of the SA SME market

8. Who is Business Partners?
Business Partners Limited is a specialist
investment group, providing finance and
mentorship for small and medium enterprises in
South Africa.

9. • Founded in 1981 by Anton Rupert – successful entrepreneur,
industrialist & philanthropist
• “Blue chip”, patient shareholders
• Sustainable risk financier of SMEs in South Africa for > 32 years
• S. African & international office network – localized area offices
• ISO 9001: 2008 accredited
• 300 to 600 investments per annum in SA with own funds
• Expansion into Africa: Madagascar, Kenya & Rwanda. Soon
Southern Africa (Malawi, Namibia, Zambia and Zimbabwe)
Business Partners: A risk financier

10. BUSINESS PARTNERS CORE ACTIVITIES

11. Performance since 1981
Businesses financed
Finance rotated
Job opportunities
created
Finance available
for 2013/14
69 000
R12,5 billion
550 000
R1 000 000 000

12. Profiling the target market

16. Dealing with Business Partners
• Procedures we follow:
– Work in small teams (RGM, Area Manager and
Investment Officer)
– Do proper due diligence
– Prepare an approval report
– Committee decision
– Implementation follows
– Post Investment action

17. Business Partners is a Risk Financier
Viability
Entrepreneur
Business

18. Viability based financing
• Focus on business:
• business risk evaluation
• business nature, stage
• gearing of business
• profit potential/history
• growth potential
• Entrepreneurial ability:
• relevant experience: doing skills,
management skills
• track record
• profile
• integrity

19. Focus market
• Business Partners is a RISK FINANCIER:
– Will fund where others would not because:
• Lack of or nature of securities offered
• Policies of financiers
• Lack of own contribution
• Industry regarded as risky
• Track record (profit history, start-up, performance)
– Major focus is on VIABILITY when considering funding
•

20. Business Partners offering
• Largest SME risk financier in SA
– Investment decisions based on viability
• Focus on the entrepreneur
• Evaluate the business
– Will invest R1 000 000 000 this year in SMEs
• Finance full spectrum
– Start-up capital
– Franchising
– Property finance to obtain own premises
– Expansion capital

21. Business Partners Venture Fund
(R400 million)
•Guidelines:
– Early stage investments (after research and
development stage)
– The product or concept must be market ready
– No seed capital investments

22. Business Partners Venture Fund
• Criteria:
– Investment period: normally 5 years
– Exit Strategy: preferably trade sale
– Financing format: minority stake share participation
– Financing limit: 1st
round not in excess of R10 million

23. Offering a property transaction

24. • Industrial, offices or retail
• Buying own premises or
moving to own
• Occupies most, if not all of
the building
• Property: well priced, nature
of the building, location and
condition
Fundamentals of Property Financing

25. Buying your own business property?
• NO DEPOSIT - up to 100% funding
• Main criteria
– Owner occupied (> 50% of property)
– Established & profitable business
– Afford loan installments
• Competitive pricing

26. Buying vs. renting

27. Buying vs Renting Scenario
Scenario
Monthly Rental 50 000
Monthly Expenses 7 500
Net Income 42 500
Net Annual Income 510 000
Market Valuation @ CAP Rate - 10% 5 100 000

28. Buying vs Renting Scenario cont…
Norm Transaction
Purchase Price 5 100 000
Costs (Admin / Legal) 100 000
Total 5 200 000
Deposit Required - 30% 1 560 000
Loan Amount 3 640 000
Business Partners Offering
Purchase Price 5 100 000
Costs (Admin / Legal) 100 000
Total 5 200 000
Deposit Required -
Loan Amount 5 200 000
Instalment - 10 Years @ Prime 64 473
35% Shareholding in Prop Co

29. Buying vs Renting Scenario cont…
Buying vs Rental
Monthly Rental Escl @
8%p.a Instalment
Year 1 50 000 64 473
Year 2 54 000 64 473
Year 3 58 320 64 473
Year 4 62 986 64 473
Year 5 68 024 64 473
Year 6 73 466 64 473
Year 7 79 344 64 473
Year 8 85 691 64 473
Year 9 92 547 64 473
Year 10 99 950 64 473

30. Where Business Partners invests
Industry Sectors
• Manufacturing, retailing, services,
franchises, contracts, commercial
property, not primary agriculture
Type of Investment
• Take-overs, MBOs, Expansion,
(working capital, equipment),
Start-ups, Property acquisition
• Investment capital of between
R500 000 and R25 million

31. 31

32. 32

33. What else do we do?
• Property investments
– Multi tenanted properties
– R787 million invested
– 2 000 tenants

34. 34

35. What else do we do?
• Soft issues
– Graduate internship program
– Schools entrepreneurship program
– SME Tool kit
• Global Entrepreneurship
– Business Mechanics and home website
– Entrepreneur of the Year Competition
– Advocacy
– Information
– Post Investment Value Adding

36. BankersAccountants Brokers
nkersConsultants Attorneys Agents
Deal Generation:

37. Where does our deals come from?
Source % of total in
Rands (2012)
% of total in
Rands (2013)
Intermediaries
Accountants, bankers, brokers,
consultants, auditors
52.6% 54.5%
Existing clients 37.6% 36.3%
Marketing action (direct) 9.8% 9.2%
100% 100%

38. The role of the intermediary (in the
life of Business Partners)
• Understand the Business Partners product
offering
• Act as a link between Business Partners and the
client
• Support role in the clients business (e.g.
Accountant)
• Future referrals
• Source of information

39. The role of Business Partners (in the
life of an intermediary)
• A source of funding for the client
• Referral fee
• Share of information

40. In Summary
What makes us different?
• The approach:
– Positively looking for finance opportunities
– The desire to make funding available
• Personal contact
– It is all about relationships
• Funding flexibility
– Seek financing methods that makes sense
• Prepared to take risk
– Wants to be rewarded for it

41. Questions

42. Market conditions: Business Partners
experience
• Tough trading conditions
• Reluctance of entrepreneurs to commit to financial
arrangements
• Period from sourcing to implementation is longer
• Applicants are often in financial trouble (reflect losses,
non-viable, judgements, need for restructuring capital)
• Policies of banks not conducive for SME development
but open doors for BPL.

43. David Morobe
Regional General Manager
012 347-3208
dmorobe@businesspartners.co.za

44. THANK YOU