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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. 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

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  1. 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

  2. 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

  3. 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%

  4. 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

  5. CURRENTSTATUS • Acting CEO appointed August 2003 – Mr Sydney Maree • Mandate currently under review • Capitalisation upon finalisation of the mandate • Finalisation of mandate pending

  6. 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

  7. 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

  8. 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

  9. 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

  10. 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

  11. 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.

  12. 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

  13. 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

  14. 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

  15. 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

  16. MARKET MAKING • Prevent dilution of BEE shareholding • Seek strategic investments for BEE investment • Warehouse investment on behalf of appropriate BEE structures

  17. 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

  18. 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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