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IDFC PRESENTATION TO SMALL BUSINESS DEVELOPMENT PORTFOLIO COMMITTEE. IDFC LEGISLATIVE. Provincial Development Finance Institution ; Established through an act of the KZN Provincial Legislature, i.e. Ithala Development Finance Corporation Act, Act No. 5 of 2013 ;

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Presentation Transcript
slide1

IDFC PRESENTATION TO

SMALL BUSINESS DEVELOPMENT

PORTFOLIO COMMITTEE

slide2

IDFC LEGISLATIVE

  • Provincial Development Finance Institution;
  • Established through an act of the KZN Provincial Legislature, i.e. Ithala Development Finance Corporation Act, Act No. 5 of 2013;
  • Wholly owned by the KZN Provincial Government and reports to the Department of Economic Development, Tourism and Environmental Affairs;
  • Been in existence for over 50 years having assumed various names;
  • Headquartered in Umlazi, a township located South of Durban next to the old airport
slide3

MANDATE, MISSION & VISION

Mandate:

“Promote, support and facilitate social and economic growth in the province of Kwazulu-Natal”

  • Vision:
  • “To be the catalyst for growth, economic development and empowerment”
  • Mission:
  • “To drive economic development and empowerment, whilst remaining financially sustainable”
slide6

REPOSITIONING STRATEGY – THE BACKGROUND

  • IDFC REPOSITIONED THE ORGANISATION TO ADDRESS THE FOLLOWING:
    • Financial sustainability
    • A lack of funding to drive investments
    • Limited number of Ithala-initiated economic development projects
    • Weak business support services reflected in the high failure rates of funded SMME’s and Co-operatives
    • Lack of alignment with government programmes, especially on rural economic development and agricultural revolution
slide7

REPOSITIONING STRATEGY – THE BACKGROUND

  • Objectives of the Repositioning Strategy are to ensure that Ithala:
    • Delivers effectively and efficiently on its mandate in a dynamic and challenging environment
    • Aligns its core business activities to the Provincial Growth and Development Strategy (PGDS)
  • Reclaims its historical relevance and position itself as the premier development agency in the Province
  • Becomes financially sustainable and less reliant on government funding to drive its investment programmes
slide8

REPOSITIONING STRATEGY - PHASES

  • The overarching corporate strategy consists of 3-phases over a 5-year time horizon.
  • Phase 1 seeks to remediate the business;
  • Phase 2 builds on the revised business platform;
  • Phase 3 extends Ithala’s focus and widens its set of activities.
slide9

IDFC STRUCTURE

  • IDFC has three Strategic Business Units (SBU’s)
    • Business Finance – provides financial and non-financial support to SMME’s and Co-operatives
    • Properties– provides physical infrastructure to retail, light industrial, heavy industrial and SMME businesses
  • Ithala Limited – is a ‘ring-fenced’ institution, wholly owned by IDFC that provides financial services to the retail market.
slide10

BUSINESS FINANCE – MODEL OF OPERATION

Value Proposition

Delivery Model

Target Customers

  • Financial support
  • Non-financial support
  • Business Centres located in 5 out of 11 districts in KZN
  • SMME’s
  • Co-operatives

Partners

Core Activities

Cost Structure

  • Provincial Government
  • Service providers
  • Origination
  • Technical evaluation
  • Post Investment Management
  • Business support

65% - 55 employees

15% - professional services

20% - other

Funding

  • Interest Income
  • Service charges
  • Government Grants
slide11

BUSINESS FINANCE – KEY INFORMATION

  • Financial and Investment Performance
  • Profitability: Turnaround from R76m loss in FY 2012/13 to R16m profit in 2013/14.
  • Investment: Book size is +/-R900m and Non-Performing Loans have been reduced from 61% in 2012/13 to 20% in 2013/14.
  • Footprint:
  • Business centres located in Umlazi, Durban, Pietermaritzburg, Richards Bay, Newcastle and Port Shepstone;
  • Financing Products:
  • Micro-Finance
  • Procurement Finance
  • Agri-Finance
  • Asset Finance
  • Franchise Finance
  • Commercial Property Finance
  • Structured/Project Finance
slide12

PROPERTIES – MODEL OF OPERATION

Value Proposition

Delivery Model

Target Customers

  • Premises
  • Implementing Agent
  • Property development
  • Property portfolio (retail, industrial and SMME)
  • Retailers
  • Industrialists
  • SMME’s
  • Government Departments

Partners

Core Activities

Cost Structure

  • Eskom
  • Municipalities
  • Provincial Government
  • Leasing
  • Bulk services
  • Project management

15% - 210 employees

40% - Bulk services,

20% - Rates & Taxes

10% - Maintenance

Funding

  • Rental Income
  • Service recoveries
  • Management Fees
slide13

PROPERTIES –KEY INFORMATION

  • Footprint:
  • Twenty one (21) shopping centres located in rural and peri-urban towns
  • Three (3) industrial estates located in Mandeni (KZN-North), Ladysmith and Newcastle
  • Eight (8) light industrial parks seven (7) located in Durban and one (1) in Richards Bay;
  • Forty (40) SMME parks, eight (8) located in Midlands, thirteen (13) located in Northern region and nineteen (19) located in Southern and Central region
  • Property Portfolio (Size – GLA):
  • Total portfolio – 1,176,279 GLA
  • Retail – 138,443k GLA
  • Industrial Estates – 847,988 GLA
  • Light Industrial Parks – 132,930 GLA
  • SMME Parks – 56,918 GLA
  • Financial:
  • Profitability: Profit of R126m in 2013/14.
  • Investment: The property portfolio is valued at approximately R1.8 billion and yields approximately 5% on average per annum
slide14

ITHALA SOC LIMITED – MODEL OF OPERATION

Value Proposition

Delivery Model

Target Customers

  • Deposits
  • Personal Loans
  • Home Loans
  • Insurance
  • Branch network
  • Retail market

Partners

Core Activities

Cost Structure

  • Service providers
  • Insurance Underwriters
  • Deposit taking
  • Lending
  • Insurance
  • 50% - 444 employees
  • 30% - 49 Branches
  • 20% - Other

Funding

  • Interest Income
  • Service fees
  • Deposits
slide15

ITHALA SOC LIMITED – KEY INFORMATION

  • Footprint:
  • Forty-nine branches spread across the length and breath of KZN and predominantly in rural and peri-urban towns;
  • Financing Products:
  • Deposits
  • Personal Loans
  • Home Loans
  • Insurance – Short and Long term
  • Vehicle and Taxi Finance
  • Financial and Investment Performance
  • Profitability: Loss of R68 million in FY 2013/14
  • Investment: Book size is +/- R2.15 billion
  • Deposits: Customer size is +/- R1.98 billion
slide16

SMME & COOPERATIVES

IMPACT ON SMME & COOPERATIVES

slide17

2013-14 CLOSE-OUT SUMMARY

Approvals

Advances

Districts:

Ethekwini, Ugu, Umgungundlovu, UThukela, UMzinyathi, Amajuba, Zululand, UMkhanyakude, UThungulu, ILembe, Sisonke

slide18

2013-14 CLOSE-OUT SUMMARY

No. of Business Financed

No. of Jobs

Facilitated

Districts:

Ethekwini, Ugu, Umgungundlovu, UThukela, UMzinyathi, Amajuba, Zululand, UMkhanyakude, UThungulu, ILembe, Sisonke

slide22

SMME PORTFOLIO – SUMMARY

473 of the 595 units were occupied as at the end of July 2014.