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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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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


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%


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


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


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


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


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


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


    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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