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NEF : PROGRESS AND PROSPECTS PRESENTATION TO THE PARLIMENTARY SELECT COMMITTEE ON ECONOMIC AND FOREIGN AFFAIRS (NATIONAL COUNCIL OF PROVINCES) Sydney Maree and Vijay Ramluckan 2 September 2003. BACKGROUND. History Established by NEF Act 105 of 1998 Part of the DTI Group of DFIs

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slide1

NEF : PROGRESS AND PROSPECTS

PRESENTATION TO THE PARLIMENTARY

SELECT COMMITTEE ON ECONOMIC AND FOREIGN AFFAIRS

(NATIONAL COUNCIL OF PROVINCES)

Sydney Maree and Vijay Ramluckan

2 September 2003

background
BACKGROUND
  • History
  • Established by NEF Act 105 of 1998
  • Part of the DTI Group of DFIs
  • Capitalisation through equity set asides of SOEs
  • NEF designated equity in 12 SOEs
slide3

NEF SOE EQUITY ALLOCATION

  • MTN Group
  • Telkom
  • SAA
  • Uthingo
  • ACSA
  • Connex Travel
  • Viamax
  • SAFCOL
  • Syncat
  • Transwerk Perway
  • Sentech
  • Sun Air

1.5%

5%

5%

5%

10%

10%

10%

10%

10%

10%

10%

15%

slide4

HISTORY

  • MTN Group shares transferred – no other shares transferred
  • Current MTN share valuation approximately R427million
  • R200million general Venture Capital Fund established in 2001, an NEF and IDC joint venture
  • Systems, processes and staff progressing
  • New board of directors appointed in 2003
current status
CURRENTSTATUS
  • Acting CEO appointed August 2003 – Mr Sydney Maree
  • Mandate currently under review
  • Capitalisation upon finalisation of the mandate
  • Finalisation of mandate pending
goals
GOALS
  • Spread ownership to HDPs
  • Encourage and promote savings, investments and meaningful economic participation of HDPs
  • Promote and support the development of businesses pioneered by HDPs
  • Promote the understanding of equity ownership and investments amongst HDPs
  • Contribute towards employment creation in South Africa
  • Encourage Enterprise Development
  • Play a central role in broad-based BEE Financing
slide7

STRATEGY

  • Focus on BEE SMEs, broad-based and mass empowerment
    • Enterprise development
    • Job creation
    • Savings and wealth creation
    • Procurement
    • Market making
    • Routine transactions
    • Financial and investment literacy programmes
  • Guided by the NEF Act and Government policy
  • Focus on transformation sensitive sectors
  • Other Government initiatives
slide8

STRATEGIC OBJECTIVES

  • Facilitate BEE savings, investments and finance
  • Improve the accessibility of finance for BEE groups
  • Provide value added services and products to BEE groups
  • Focus on areas neglected by banks
  • Greater propensity for risk – provider of risk capital
  • Complement current BEE products offered by other DFIs
  • Leverage private institutional funding
  • Create public-private partnerships
  • Seek co-investment opportunities
slide9

PROPOSED FUTURE STRUCTURE

Corporate Centre

Private Equity

Venture Capital

Guarantee products

Investment Advisory Services

Financial products for BEE business development

Investment products for mass & broad-based empowerment

Advice to BEE

Advice to Government & Parastatals

slide10

PRODUCT OFFERINGS(currently under review)

  • Finance for black business
    • Private Equity
    • Venture Capital
  • Financial products for mass-based empowerment
    • Community-based projects
    • Employee share schemes
    • Co-operatives
    • Rural-based projects
  • Guarantee Products
  • Warehousing of equity
  • Investment products for mass empowerment
    • Mass-based savings and investment products
  • Advisory services
  • Market making
slide11

NEF VENTURES

AIM: Finance economic empowerment and black business development

Nature of the Fund

Terms of the Fund’s Investments

  • NEF and IDC joint venture
  • R200 million general VC fund
  • Seed, start up, early stage, expansion capital and M&A deals
  • Finance HDP’s with minimum collateral into viable projects
  • Investment size of R3 million to R10 million,
  • R250 000 to R3 million fund to be introduced in due course
  • Investment instruments:
      • equity
      • quasi equity
      • debt
  • Investment horizon three to seven years
  • Return commensurate with risk
  • Investment of R5m completed
  • Fund transactions where HDP’s have an equity interest and are operationally
  • involved, at senior management level.
  • Invest in unlisted companies.
  • The Fund will seek minority stakes in businesses (up to 49%).
  • Majority stakes in certain instances where there is a clear mechanism to reduce stake to below 49% in the short term.
  • Will invest directly into the underlying operating business rather than in an investment holding company.
  • Invests in South African companies conducting business predominantly within South Africa.
private equity
PRIVATE EQUITY

Private Equity division will provide acquisition and enterprise finance to

support empowerment.

  • Focus will be on medium to large and mature companies

with a profit history.

  • Large transactions
  • Funding will be provided for:
        • Developing growth companies
        • Management buy-ins (MBIs)
        • Management buy-outs (MBOs)
        • Leveraged buy-outs (LBOs); and
        • Recapitalisation of BEE investment structures
  • Awaiting capitalisation
investment advisory services
INVESTMENT ADVISORY SERVICES

Overall aim

Investment Services Offers

To increase HDPs participation in financial markets and

formal savings vehicles.

  • Emphasis is on the development of mass empowerment & broad-based investment and savings products.
  • These will be supported by targeted investor education programmes.
  • Structured investment products designed to limit downside risk without compromising attractive returns
  • Awaiting approvals for first mass empowerment retail offering scheduled for 2004
  • Retail share schemes for broad-based empowerment usingthe NEF balance sheet
  • Retail share schemes for broad-based empowerment usinglisted shares of non-empowerment companies
  • Warehousing of shares for forward sale through massempowerment schemes
  • Provide advisory, management and administrative servicesfor mass empowerment products to private & government companies
  • Empowerment unit trusts
  • Economic and financial literacy campaigns
guarantee products
GUARANTEE PRODUCTS
  • Assistance with performance guarantees
  • Assistance with financial guarantees
  • Product designed to reduce cost of funding for BEEs
  • Improve accessibility of funding for BEEs
  • Leverage private institutional funding
advisory services
ADVISORY SERVICES
  • Assist / Advice for Government & Parastatals
  • Provide assistance with business plan compilation
  • Advise on deal structure, pricing, etc
  • General economic and business advice to community base organisations
market making
MARKET MAKING
  • Prevent dilution of BEE shareholding
  • Seek strategic investments for BEE investment
  • Warehouse investment on behalf of appropriate BEE structures
nef charters working group
NEF CHARTERS WORKING GROUP
  • Assist with BEE financing strategy as part of group of DFI’s
  • NEF products not isolated from charter requirements
  • Provide advice & assistance to government organisations developing charters and empowerment policy and guidelines
  • Interact with other working groups/task teams
  • Develop appropriate investment products for charters
slide18

National Empowerment Fund

23 Melrose Boulevard, Melrose Arch

P O Box 31

Melrose Arch

Melrose North

2076

Tel: 011 772 8000 Fax: 011 772 8100

Website: http://www.nefcorp.co.za

NEF CONTACT DETAILS

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