NATIONAL EMPOWERMENT FUND

Presented by Mr Phakamile Madonsela Regional Manager: KZN

About the NEF

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History

Established through the National Empowerment

Fund Act No 105 of 1998

Government Agency under the Department of Trade

and Industry

Capitalised by government in 2005 with R2.4billion

Is represented in 9 Provinces (Gauteng, KZN, EC,

MP, NW, LP, WC, FS, NC)

Largest SME Funder in South Africa with more than

R9,6billion worth of assets under management

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NEF Mandate

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NEF Mandate…

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……..a driver and

a thought-leader in promoting and

facilitating black economic participation

through the provision of financial and

non-financial support to black empowered

businesses, as well as by promoting

a culture of savings and investment

among black people.

The NEF is an agency of the dti and is the

only DFI exclusively mandated to grow

B-BBEE

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NEF Mandate Grow black economic participation

Fund Management

1. Fund black-empowered

businesses

2. Pre-Investment Support

3. Mentorship support

4. Early-stage

investments

Asset Management

1. Investor Education

2. Public Share Offers

3. Enterprise

Development

4. BEE Repository

Unpacking the NEF Mandate

Culture of savings &

investment

Financial & non-financial

support

NEF Financial Support

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R250 000 – R75 million

Start-Up Acquisition Expansions

(Debt, Equity and Mezzanine)

NEF Funding

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NEF Funding Criteria

Each application is assessed in terms of the following criteria:

Commercial Viability of the business

Broad Based Black Economic Empowerment

Black Women Empowerment, Black Managerial and Operational Involvement,

Risk Sharing with Entrepreneur

Job Creation,

Geographic Location of the business (rural/urban/disadvantaged areas),

Community Involvement,

Compliance with all the relevant laws and regulations,

Return on investment, and

The possibility of co-funding with another public or private sector institution.

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Funding Across the Economic Spectrum

Fund Focus Threshold

1 iMbewu Fund

(SMEs)

SME Fund providing

Entrepreneurship, Procurement &

Franchise Finance

R250 000 –

R10 million

2

Women

Empowerment

Fund (WEF)

Accelerate the provision of funding

to enterprises owned and managed

by black women

R250 000 –

R75 million

3

Rural &

Community

Development

Fund

Supporting rural economic

development through New

Ventures, Acquisition, Expansion &

Greenfields Finance

R1 million –

R50 million

4 uMnotho Fund

Funding of New Ventures,

Acquisition, Project Finance,

Expansion, Capital Markets,

Liquidity & Warehousing

R2 million –

R75 million

5 Strategic

Projects Fund

Early-stage investment in industrial /

manufacturing transactions Up to R75

million

5

specialist

funds

Challenges to Funding New Venutures

1. Business Case (Market Driven) - Market

Assessment Study and Market Penetration ,

(Offtake Agreement, SLAs, Orders)

2. Proof of Concept – Technical & Financial

Feasibility Study, Plant Capacity. Raw Materials

Supply, Technical Studies and Regulatory

Approvals (E.g. EIA, SPLUMA, WULA etc)

3. High Set-Up Costs – Most Entrepreneurs want to

start BIG!!

4. High Skill Requirements – High Technical Skill

and Knowledge Requirement

5. Gearing Ratio – Debt vs Equity

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NEF’s Commitment to the Aquaculture Industry

• Partnerships with DAFF, University’s and other Industry Players aimed at:

• Knowledge Generation, Sharing and Management - First mover

advantage required to scope viable species, cultivation Best Practice

Methodologies, processing facilities and business models

• Establishing Enterprise and Supplier Development Fund (ESD Fund)

with Key Players in the Industry

• Cultivation New Markets in Africa, Europe and America

• Implementing Aquaculture Development Zones being considered in SA

• Driving Rural Development and Community Development Projects

• Funding of Early Stage Development Projects of Opportunities in the

Aquaculture Industry (Pre-Feasibility Studies, Feasibility Studies, Technical

Scoping and Assessment Appropriate Plant & Equipment)

• Funding of Commercialization of Projects in respect of New Ventures,

Expansions and Acquisitions in the Aquaculture Industry

• Post Investment Support and Mentorship to Investee Companies

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Funding in the SA Aquaculture Industry

• NEF Key Areas of Interest for Funding

• Fish-Food and/or Marine-Feed Manufacturing Fish

Hatchery

• Agro-Processing and Infrastructure Facilities

(Abattoirs, Food Processing & Packaging Plants,

Pet Food Manufacturing. Cold Chain Logistics,

Cold Storage Facilities, etc.)

• IT Support Infrastructure Tools, Plant & Equipment

• Boat Building, Manufacturing of Cages, Nets and

other supporting infrastructure

• Liquid Fertiliser Manufacturing Plants

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SPF Mandate

Strategic Projects Fund (SPF)

A unit of the NEF established with a mandate to

increase the participation of black people in

early-stage projects

Aligned to national Government policy.

Seeks competitive opportunity for the South

African economy and the inclusion of black

participation in opportunities at the outset of

projects, as opposed to doing so during equity

closure

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• Creation of new manufacturing and industrial

capacity

• Creation of new jobs as opposed replacement capital

finance

• Investment of new fixed capital into economically

depressed areas or poverty nodes

• Creation of an inclusive economy by increasing

South African participation

• Increase RSA export earning potential and reduce

import dependency

• Increase co-investment and linkage with foreign

direct investment

Creating Black Industrialists

Strategic Industrial Sectors

RENEWABLE

ENERGY

MINERAL

BENEFICIATION

AGRO-

PROCESSING

INFORMATION &

COMMUNICATIONS

TECHNOLOGY

INFRASTRUCTURE TOURISM

Biofuels

Biomass

Biogas

Solar

Wind

Hydro

Mining &

Mineral

Beneficiation

Chemicals

Agriculture

Aquaculture

Telecoms

Broadcasting

Roads

Dams and Bridges

Sewer and Bulk

Services

B&Bs

Hotels

Guest

Houses

(Women-

owned)

Real Estate

Together with local & international partners the NEF has developed 20 strategic and

industrial projects worth R30bn, with the potential to support over 80 000 jobs.

The NEF’s future equity rights will total R4.2bn at financial close.

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RCDF Product Offering

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Acquisition Finance New Venture Expansion Capital

Investment Threshold R1m to R50m R1m to R50m R1m to R50m

Trigger for RDCF participation

Co-operative, community groupings arranged as a Trust or any legal entity, and workers trust

Co-operative, community groupings arranged as a Trust or any legal entity, and workers trust

Co-operative, community groupings arranged as a Trust or any legal entity, and workers trust

Principal goal To cater for rural entrepreneurs or communities seeking to buy equity in existing rural & community enterprises.

To assist rural entrepreneur's and communities with equity contribution towards establishment of sustainable new ventures in agri-sector.

To facilitate involvement and ownership by communities in projects promoting social upliftment.

Types of companies/projects

Focus on small to large ventures where Partnerships between NEF, BEE party or community entity, and technical Partner is involved.

Medium sized new venture projects with total funding requirements of between R1m and R50m.

Rural and community projects using entities such as Coops and private companies.

Types of instruments Debt, Equity, quasi-equity and Preference Shares

Debt, equity, quasi-equity Debt, equity, quasi-equity and preference shares

Black equity thresholds

Minimum of 50.1%

Interest Rate Prime (+/-) Empowerment Dividend or Development impact influenced

Term of Investments / other terms

5 to 10 years

Clear exit strategy

Up to 10 years

Total project equity ≥ 40%

NEF exposure ≤ 50% of project costs

Up to 10 years

iMbaza Mussels (Pty) Ltd

iMbaza Mussels is a majority black-owned

company (67%) established in Saldanha Bay in

2012. It is one of the country’s largest mussel

farms and a successful empowerment project.

The project started as an Enterprise Development

project for Blue Ocean Mussels, who are off

takers to the project, holds the title of one the

largest Aquaculture farms in South Africa by

volume.

It is 30ha in size, with one raft per hectare

harvesting over 1 000t/year. The farm’s entire

production is marketed in SA.

NEF injected R9.9m towards a co-operative which

has 17 Aspiring Black Rural Entrepreneurs.

Empowerment Dividend from the project is over a

100 jobs in the processing factory

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NEF Non-Financial Support

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Non-Financial Support

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Pre-investment

As the first-point-of-contact the unit provides product advisory services, manages the online business-plan solution, manages the administration of applications, incubation and entrepreneurial training.

Socio Economic Development

Empower black people in existing NEF transactions and other broad based groups through various interventions such as promotion of saving and investments, social facilitation, entrepreneurial training, investor education, corporate governance training and market access for the acceleration of meaningful participation.

Post-investment support

Monitor investments, provide ongoing portfolio management, manage mentorship support and collections as well as legal compliance

Turnarounds, Workouts and Restructuring

Rehabilitate distressed transactions and reduce impairments Through a combination of measures including balance sheet restructuring, equity and /or working capital injection, operational restructuring, introduction of a strategic equity partner and / or turnaround specialist and business rescue.

Mentorship Provided By The NEF

The NEF provides mentorship to the majority of its SMME investments – to

nurture and enhance capabilities of investees ;

Mentorship provided is either technical or financial in nature;

Investee needs are first identified by the NEF and a suitable mentor is then

identified;

Transfer of skills to investee companies particularly in:

General technical assistance in relevant industry;

Business analysis and interpretation;

Financial;

Marketing;

System and controls;

Turnaround and Restructuring of investments;

Training of investee company management and/or key staff;

Assistance in due diligence for new deals and further advances of existing

deals.

Mentorship is currently paid for by the NEF.

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Contact Details

Telephone: (031) 301 1960

Address: 4th Floor

Grindrod Bank Building

5 Arundel Close

Kingsmead Office Park

Durban

Email: madonselap@nefcorp.co.za

manamelad@nefcorp.co.za

hlelas@nefcorp.co.za

Web: www.nefcorp.co.za