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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

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 progress and prospects presentation to the parlimentary

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%


Nef progress and prospects presentation to the parlimentary

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


Nef progress and prospects presentation to the parlimentary

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


Nef progress and prospects presentation to the parlimentary

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


Nef progress and prospects presentation to the parlimentary

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


Nef progress and prospects presentation to the parlimentary

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 progress and prospects presentation to the parlimentary

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


    Nef progress and prospects presentation to the parlimentary

    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