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Annual Report 2006/7. bridging the divide. Briefing to the NCOP SELECT COMMITTEE ON ECONOMIC AND FOREIGN AFFAIRS : Support of Black Economic Participation, Wealth Creation and Economic Growth by means of Access to Capital. 21 November 2007. 1. Presenters. Ms Philisiwe Buthelezi

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slide1

Annual Report 2006/7

bridging the divide

Briefing to the NCOP SELECT COMMITTEE ON ECONOMIC AND FOREIGN AFFAIRS:

Support of Black Economic Participation, Wealth Creation and Economic Growth by means of Access to Capital.

21 November 2007

1

presenters
Presenters
  • Ms Philisiwe Buthelezi
      • Chief Executive Officer (CEO)
  • Mr. Andrew Wright
      • Chief Operating Officer (COO)
  • Ms. Maria Luke
      • Executive: Corporate Services
  • Mr. Nathan Nadasan
      • Manager: Post Investment

2

slide3

Mission Statement

“The National Empowerment Fund (NEF)

is the catalyst of broad-based Black Economic

Empowermentin South Africa.

We enable, develop, promote and implement innovative investment and transformation solutions to advance sustainable Black economic participation.”

3

slide4

NEF Mandate

Main objective

To be a catalyst in facilitating economic equality and transformation

Driven by

  • Current market needs
  • Broad-based empowerment charters
  • Government policy and sectoral charters (Industrial Policy)
  • Addressing past failures of BEE structures
  • BB BEE Codes of Good Practice

Development focus

Maximise the empowerment dividend

4

slide5

BOARD OF TRUSTEES

AUDIT COMMITTEE

COMPLIANCE & RISK

RISK MANAGEMENT COMMITTEE

CHAIRMAN

INTERNAL AUDIT

HUMAN CAPITAL & REMUNERATION COMMITTEE

CHIEF EXECUTIVE OFFICER

CHIEF EXECUTIVE OFFICER

SECRETARIAT

BOARD INVESTMENT COMMITTEE

EXECUTIVE COMMITTEE

MANAGER: OFFICE OF THE CEO

LEGAL COUNSEL

CORE DIVISIONS

CHIEF INVESTMENT OFFICER

FUND MANAGEMENT

EXECUTIVE:

ASSET MANAGEMENT

CHIEF FINANCIAL OFFICER

CHIEF OPERATING OFFICER

EXECUTIVE: HUMAN RESOURCES

FINANCE

STRATEGY & PLANNING

HUMAN RESOURCES

IMBEWU FUND

BEE RETAIL INVESTMENTS

MANAGEMENT OF SAIs

RETAIL PRODUCT ISSUES

MARKETING & COMMUNICATION

SUPPORT SERVICES

PROCUREMENT

CORPORATE FUND

PRE-INVESTMENT BUSINESS

SUPPORT

SYSTEMS & IT

TREASURY

POST-INVESTMENT BUSINESS

SUPPORT

Executive (member of Exco)

Senior manager

LEGAL SERVICES

Manager

Organisational Structure

5

slide6

Strategic Initiatives

  • NEF, IN 2006/7, reaches two significant and
  • strategic milestones in its history since its establishment:

On-going track record achieved in the Fund Management Division,

with approvals to date now exceeding R500m;

Asset Management Division was able to obtain the overall approval for the NEF’s

first BEE Retail Product, Asonge, subsequently launched on 25 June 2007.

6

slide7

Launched the successful

Asonge Share Scheme

to promote a culture of saving & investment among Black people

7

slide9

Asset Management Division

  • Through its Asset Management Division, the NEF:
    • Promotes the understanding of equity ownership among black people
    • Provides black people with direct and indirect opportunities to acquire shares in State Owned and private business enterprises
    • Encourages and promote investments, savings and meaningful economic participation amongst black people

It is specifically to address the above objectives that the NEF Asonge Share Scheme was conceived, designed, launched, implemented, subscribed for and now allocated to its beneficiaries.

9

to promote the understanding of equity ownership among black people
To promote the understanding of equity ownership among black people

Rollout, Education and Mobilisation

  • 64 mobilisers were educated around the country
  • Mobilisers touched 10 000 groups and 150 000 individuals by one-on-one education efforts
  • Collaboration with Stokvel associations
  • Ongoing monitoring of education process by NEF before closure on 16 August
  • Further education around investing and financial markets was done through TV and radio, features and drama
  • A dedicated Call Centre assisted with all queries in all languages
  • Mass groups were reached by 9 regional road-shows; TV, local radio and print advertising; commuter activity, and activity at Post Offices nationally

10

slide11
Provide black people with direct and indirect opportunities to acquire shares in State Owned and private business enterprises

State Allocated Investments: Recap

  • In November 2000, the Government provided for State Allocated Investments to be housed under custody of the NEF
  • The intention was for these to be eventually transferred to Black people
  • As a result the NEF since held 1,5% of the MTN Group’s shareholding
  • Asset Management Division developed a retail product known as the Asonge Share Scheme
  • Asonge was the NEF’s vehicle of fulfilling Government’s original intention of transferring State investments to Black people

11

slide12

Encourage and promote investments, savings and meaningful economic participation amongst black people

“The NEF ASONGE Share Scheme”

  • 50% of the offer was aimed at black individuals (half had to be women)
  • 50% of the offer was aimed at black savings and investment groups
  • Predetermined allocation to the target audiences across all provinces
  • Applications were facilitated by the SA Post Office, ensuring wide distribution through their infrastructure
  • Offer opened on 23rd July and closed on 16th August
  • The Offer Price was set at R73,84 based on the market closing price

… and as at 19 November 2007, this translated into a 69% appreciation on investment for subscribers at current market value based on:

- the upfront 20% discount offered plus

- current market price of R124.50 per share

12

slide13

Who was Eligible?

  • Allocation planned to be 50% for individuals and 50% for savings and investment groupings across South Africa.
  • Black individuals:
    • At least 18 years of age
    • With a valid South African ID
    • Bank account
    • Half had to be women
    • Minimum subscription was R2 000, maximum R50 000
  • Black savings and investment groups
    • E.g. Stokvels, burial services, trusts, co-ops, church savings groups
    • Minimum subscription was R2 000, max R100 000

13

slide18

Province

Allocation %

Subscriptions

Subscriptions %

Over / Under Subs (-)

Eastern Cape

13.5%

R 35,283,118

4.0%

-71%

Free State

6.3%

R 22,073,204

2.5%

-60%

Gauteng

21.5%

R 434,221,613

48.8%

127%

KwaZulu-Natal

21.4%

R 191,039,774

21.5%

1%

Limpopo

10.5%

R 44,372,407

5.0%

-52%

Mpumalanga

7.3%

R 33,205,804

3.7%

-49%

Northern Cape

2.2%

R 7,495,183

0.8%

-62%

North West

7.5%

R 29,947,841

3.4%

-55%

Western Cape

9.8%

R 91,594,913

10.3%

5%

100.0%

R 889,233,857

100.0%

“The NEF Asonge Share Scheme”

Subscriptions by Province

  • Allocations from undersubscribed provinces were transferred to oversubscribed provinces
          • Due to overwhelming interest shown in Asonge, the NEF has approved a further

1,376,058 shares for the share scheme worth R103 million to match the

13% oversubscription level.

18

slide19

“The NEF Asonge Share Scheme”

Subscriptions by Province

19

slide20

“The NEF Asonge Share Scheme”

Subscriptions by Province

20

consolidated allocation results
Consolidated Allocation Results
  • 10 640 000 MTN shares, worth R1,14bn, were offered to qualifying investors plus one bonus share for every 10 held after 24 months
  • A further 1 376 058 shares, worth R147m, were allocated to accommodate oversubscriptions plus one bonus share for every 10 held after 24 months
  • Over 87 000 applications were received in total
  • Value of allocations = R890m vs. R1,3bn market value at allocation date

All valid applications within the allocation value thresholds will receive the full allocation.

21

consolidated allocation results1
Consolidated Allocation Results
  • Groups allocated 9% of total value vs. 50% target

It appears that investors preferred to invest as individuals as opposed to within groups who may have a limited investment horizon.

  • Of individual subscription by value, Female = 43% and Male = 57%
  • Geographical spread
    • 6 Under-subscribing provinces at between 49% - 71% of initial allocation
    • KZN and WC allocated 101% and 105% of initial allocation respectively

22

exceptions
Exceptions
  • As with all subscription processes, certain applications were not valid or were rejected
  • The subscription value of such rejections was R2,508,463
  • We also have many potential duplicate applications, potentially to the value of R7,216,166
  • Each will have to be further analyzed on merit and a decision made to include or exclude them from the offer
  • These have been EXCLUDED from the share allocation model together with the SAPO rejections of R11,7 million

23

an overall success
An Overall Success!
  • Asonge oversubscribed by 13% – meets existing public demand and sets an historic landmark for future share offers
  • Over 85 000 Black investors now own shares in a blue-chip company
  • Contributed to a growing culture of Savings and Investment amongst Black people
  • Women shareholders = 49% by number, 39% by value (overall), 51% by number and 43% by value (within individuals)

In excess of targets set by BB BEE Codes of Good Practice

  • All provinces were allocated shares and involved in the marketing campaign to enable participation to their full capacity
  • Unencumbered economic benefit is fully vested in Black hands
  • Government fulfilling a critical national imperative through NEF

24

slide25

Fund

Management Division

On-going track record achieved in the Fund Management Division, with approvals to date now exceeding R500m.

25

slide26

38

worth

R471m

29

worth

R265m

16

worth

R196m

86

worth

R496m

Approx.

24,685

4,780

Deal Pipeline: 31 March 2007

ENQUIRIES

APPLICATIONS

NEW DEALS

ACCEPTED

DUE DILIGENCE

APPROVED

DISBURSED

(INCLUDING

UNDRAWN CAPITAL)

26

slide27

NEF INVESTED PROCESS REPORT 31ST MARCH 2007

NEW DEALS ACCEPTED

DUE DILIGENCE

APPROVED

DISBURSED

TOTAL

Since Inception

to 31st March 2007

38

worth

R471m

29

worth

R265m

16

worth

R196m

86

worth

R496m

169

worth

R1,428m

iMbewu Fund

24

worth

R126m

23

worth

R143m

8

worth

R34m

58

worth

R97m

113

worth

R400m

Corporate Fund

14

worth

R345m

16

worth

R122m

8

worth

R162m

28

worth

R399m

56

worth

R1,028m

Fund Management Division

27

slide28

NEF INVESTED PORTFOLIO BY SIZE OF TRANSACTION

31ST MARCH 2007

(R) VALUE

% BY VALUE

BY NUMBER

% BY NUMBER

Greater than R5m

R372m

75%

18

20.9%

Less than R5m

R124m

25%

68

79.1%

R496m

100%

86

100%

Fund Management Division

28

slide29

NEF INVESTED PORTFOLIO BY FUNDING PROJECT

31ST MARCH 2007

% BY VALUE

BY NUMBER

% BY NUMBER

Acquisition Funding

Capital Market

Start-Up

Liquidity & Warehousing

Expansion

Contracts

Rural & Community

R237m

R74m

R64m

R60m

R40m

R20m

R1m

47.7%

14.9%

12.9%

12.1%

8.1%

4.0%

0.3%

12

4

42

3

18

6

1

14.0%

4.7%

48.8%

3.5%

20.9%

7.0%

1.1%

R496m

100%

86

100%

Fund Management Division

29

slide30

Start-up 12.9%

Acquisition Funding 47.7%

Rural & Community 0.3%

Liquidity &

Warehousing 12.1%

Expansion 8.1%

Contracts 4%

Capital Market 14.9%

Fund Management Division

NEF – Invested portfolio by funding product by value 31st March 2007

30

slide31

Rural &

Community 1.3%

Liquidity &

Warehousing 3.5%

Start-up 48.8%

Expansion 20.9%

Contracts 7%

Capital Market 4.7%

Acquisition Funding 14%

Fund Management Division

NEF – Invested portfolio by funding product by number 31st March 2007

31

slide33

CCT

NEF

IDC

TECHNICAL

PARTNER

CR

R14,8m

R19,4m

AMAJUBA

R37m

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

33

slide34

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

34

slide35

JOB CREATION 31ST MARCH 2007

RAND

INVESTED

NUMBER

OF JOBS

EXISTING

JOBS

NEW

JOBS

RAND

PER JOB

Start-Up

Expansion

Acquisition Funding

Contracts

Rural & Community

Capital Market

Liquidity & Warehousing

R64,2m

R40,1m

R236,7m

R19,8m

R1,4m

R73,8m

R60m

817

784

2,519

500

12

3,930

542

3

279

1,492

210

0

3,830

362

814

505

1,027

290

12

100

180

R78,5k

R51,2k

R93,9k

R39,6k

R120,8k

R18,8k

R110,7k

TOTAL PORTFOLIO:

R496m

9,104

6,176

2928

R54,5k

68%

32%

Average

Fund Management Division

35

slide36

Wood & Paper

Industry 2.9%

Chemicals & Pharmaceuticals 6.7%

Other 0.5%

Transportation 1.3%

Construction 23.1%

Tourism & Entertainment 9.4%

Textile Industry 2.3%

Engineering 2%

Printing Services 3.1%

Financial

Services 1.5%

Motor Industry 2.2%

Food & Agro

Processing 11%

Mining Services 9.2%

Manufacturing 9.1%

Financial Services 1.5%

ICT & Media 15.2%

Fund Management Division

NEF – Invested portfolio by sector by value 31st March 2007

36

slide37

NEF INVESTED PORTFOLIO BY REGION 31ST MARCH 2007

% VALUE

PROVINCE

CONTRIBUTION

TO GDP

(R)

VALUE

%

BY VALUE

BY

NUMBER

%

BY NUMBER

Gauteng

Eastern Cape

Western Cape

Kwa-Zulu Natal

Mpumalanga

Limpopo

Free State

Northern Cape

North West

R227,6m

R108,2m

R95,5m

R34,9m

R26,7m

R2,8m

R0,3m

-

-

54.9%

21.8%

19.3%

7%

5.4%

0.6%

0.1%

0%

0%

50

8

14

8

2

3

1

0

0

58.1%

9.3%

16.3%

9.3%

2.3%

3.5%

1.2%

0%

0%

33.7%

7.9%

14.7%

16.3%

6.7%

6.7%

5.5%

2.2%

6.3%

R496m

100%

86

100%

100%

Fund Management Division

37

slide38

With effect from October 2007, NEF to launch Provincial Roundtables with stakeholders in the

following provinces:

          • KZN
          • North West
          • Limpopo
  • Objective is to optimise regional invested portfolio through intensive local interaction and

communication

  • Stakeholders will include:
    • Premiers, MECs for Finance & Economic Affairs, as well as MECs for Agriculture, to encourage rural and community development
    • Constituency Members of Parliament
    • Local Development Finance Institutions (DFIs)
    • Local entrepreneurs and co-operatives
    • Mass Media
  • Mpumalanga
  • Northern Cape
  • Free State

Provincial Roundtables

38

slide39

Annual Financial

Statements

39

slide40

2007

Consolidated

2006

R’ 000s

R’ 000s

Consolidated Statement of Financial Position

as at 31st March 2007

Non-current Assets

Property & Equipment

Intangible Assets

Investment in Joint Venture

Investment in Associates

Investments available-for-sale

Originated Loans

Investments held-to-maturity

Capital & Reserves

Trust Capital

Fair Value Reserves

Accumulated Surplus

2,669,406

2,296

125

-

24,317

2,303,924

338,744

-

3,551,018

1,233,903

2,219,908

187,207

1,615,442

2,777

194

-

5,407

1,444,022

15,042

10,000

2,087,339

740,600

1,270,006

76,732

40

slide41

Consolidated

2007

2006

R’ 000s

R’ 000s

Consolidated Statement of Financial Performance

as at 31st March 2007

Revenue

Grants Received to fund Operations

Grants Received for Retail Prod. Development

Dividends from Investments

Interest Received from Banks

Interest Received from Original Loans

Other Revenue

Other Income

Fair Value Gains/Losses

Held-for-trade Investments

Investments in Associates

Total Income

Administration Expenses

Impairment of Originated Loans

Impairment – Held-to-maturity Investments

Surplus for the Year

170,785

66,.24

1,800

30,411

43,643

27,152

1,755

-

30,666

12,352

17,714

200,851

(62,385)

(26,491)

(14,936)

(11,555)

111,975

105,370

40,000

-

38,405

23,197

3,501

267

6

16,882

21,476

(4,594)

122,258

(40,633)

(38,151)

(38,151)

-

43,474

41