Strategic Plan 2016-2019 - 29Jan 2016 · National Empowerment Fund Strategic Plan for the years 2016/17 r 19 8 1. Provide finance to business ventures established and managed by black

Strategic Plan

For the years 2016/17 - 19

31 January 2016

N Empowerment Fund

Strategic Plan for the years 2016/17 - 19 2

1. Table of Contents

1. Table of Contents ............................................................................................................................ 2

2. Acronyms and Abbr .......................................................................................................... 3

3. Overview by the Chairman ............................................................................................................. 5

4. Sign- ............................................................................................................................... 6

5. Strategic Overview .......................................................................................................................... 7

6. Products and Services ................................................................................................................... 21

7. Key programmes aligned to Government ..................................................................... 34

8. Financial Plan ................................................................................................................................ 58

9. Strategic Risk Register ................................................................................................................... 62

10. Fraud Preven Plan .................................................................................................................. 69

Appendix A: Financial ........................................................................................................ 73

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2. Acronyms and Abbreviations

AMD : Asset Management Division

APP : Annual Performance Plan

Approved: Final committee approval obtained, legal agreements not signed

B-BBEE: Broad-Based Black Economic Empowerment

BFS : Bankable Feasibility Study

Commitments: Legal agreements signed. (Deals may have been approved in current and previous financial periods.) All Conditions Precedent may not have been met yet.

CP : Construction Phase

CPs : Conditions Precedent

DFIs : Development Finance Institutions

Disbursements: Total cash advancements made against all approved deals (deals may have been approved in current and previous financial periods) subject to all Conditions Precedent having been satisfied by the investee.

Drawdowns: Advances made against disbursed facilities

EC : Eastern Cape

EIA : Environmental Impact Assessments

ETF : Exchange Traded Funds

FC : Financial Closure

FMD : Fund Management Division

FS : Free State

GDP : Gross Domestic Product

IDC : Industrial Development Corporation

IPAP : Industrial Policy Action Plan

IPF : Industrial Policy Framework

IRR : Internal Rate of Return

KZN : KwaZulu-Natal

KPI : Key Performance Indicator

MBO : Management Buy-Out

National Empowerment Fund

Strategic Plan for the years 2016/17 19 4

MOU : Memorandum of Understanding

MP : Mpumalanga

NC : Northern Cape

NCOP : National Council of Provinces

NEF : National Empowerment Fund

NIPF : National Industrial Policy Framework

PFMA : Public Finance Management Act

PFS : Pre-feasibility study

PIU : Pre-Investment Business Support Unit

POIU : Post Investment Business Support Unit

RMC : Risk and Portfolio Management Committee

ROI : Return on Investment

SEDU : Socio-Economic Development Unit

SAIs : State-Allocated Investments

SME : Small and Medium Enterprise

SOCE : State Owned Commercial Enterprise

SPF : Strategic Projects Fund

TC : Technical Completion

WC : Western Cape

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3. Overview by the Chairman

Black economic empowerment remains a national imperative for an inclusive economy. As

a driver and thought-leader in promoting and facilitating black economic participation through

the provision of financial and non-financial support, the NEF has evolved steadily into a

credible and effective development finance institution. Having approved more than 716

transactions worth approximately R6.9 billion, the NEF is positioned to make a meaningful

contribution to the transformation of the economy. In order to continue to deliver on its

mandate, it remains critical that funding is secured in order to ensure the long-term

sustainability of the fund.

This Strategic Plan was developed in the context in which the moratorium on new approvals

was lifted for 2014/15. At that time, the NEF had sufficient capital to support deal activity in

2014/15; and since then, has continued to explore various options to secure the

recapitalisation of the institution.

Since the Strategic Plan was conceptualised in 2014 there are no significant changes to the

strategy of the NEF going forward. The key strategic focus continues to be recapitalisation

and securing new capital from the IDC and/or the government. Another key focus area in the

immediate short term has been the improvement of efficiencies within the fund. This

includes setting up of new/ improved governance structures and increasing the

accountability of investment professionals to ensure the effective monitoring and support of

investees. The NEF’s strategy is aligned to the dti’s strategic priorities as well as the

National Development plan, specifically through our targets to provide finance to business

ventures established and managed by black people, and thereby investing in black

empowered businesses that have employment creation opportunities in priority sectors

identified in the IPAP, as well as in rural areas and the agricultural sector.

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4. Of -Off

Recommended by the CEO for endorsement

Endorsement by the Accounting Authority

Name: Philisiwe Mthethwa

Signature: --------------------------

Rank: CEO

Date: 29 / 01 / 2016 29 / 01 / 2016

Name: Rakesh Garach

Signature: -------------------------------

Rank: Chairman

Date:

----------------------------------- --------------------------------- ----------------

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5. Strategic Overview

5.1. Vision Our vision is to be the leading provider of innovative transformation solutions for an

economically inclusive South Africa. We seek to be the lead financier of B-BBEE

investments in the DFI space.

5.2. Mission The National Empowerment Fund is a catalyst of Broad-Based Black Economic

Empowerment in South Africa.

We enable, develop, promote and implement innovative investment and transformation

solutions to advance sustainable black economic participation in the economy.

5.3. Values The NEF has implemented a values & culture programme which has been developed,

communicated and implemented through various workshops with staff. The values are:

1. Ethics

2. Motivation

3. Performance

4. Ownership

5. Worthy

6. Excellence

7. Respect

5.4. Strategic goals and objectives The NEF’s key strategic outcome oriented goals against which performance is reported are

to:



1. Provide finance to business ventures established and managed by black people.

2. Invest in black empowered businesses that have high employment creating

opportunities.

3. Support the participation of black women in the economy.

4. Facilitate investment across all provinces in South Africa.

5. Encourage and promote savings, investment and meaningful economic participation

by black people.

6. Advance black economic empowerment through commercially sustainable

enterprises.

7. Establish the NEF in the South African economy as a credible and meaningful DFI.

8. Establish the NEF as a sustainable DFI.

In order to achieve these objectives the NEF is structured to deliver against this mandate by

performing the following core activities:

Fund Management, which comprises:

o The Venture Capital & Corporate Finance Division, which is comprised of

Umnotho Fund, the Strategic Projects Fund and the Women Empowerment

Fund.

o The SME & Rural Development Division, which consists of Pre-Investment

Unit, Imbewu Fund, Rural & Community Development Fund, and the regional

offices. The Imbewu Fund focuses on the provision of funding to SME’s while

the Rural & Community Development Fund is committed to supporting the

financing and establishment of sustainable rural enterprises.

General Counsel, which provides

o Legal support,

o Post-investment support,

o Turnaround, workout and restructuring services to the invested portfolio,

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o The Socio-Economic Development Unit and Asset Management, through

which the NEF provides support to communities and aims to foster a culture

of savings and investment among its beneficiaries, as well as promote

Enterprise Development.

Empowerment Dividend The NEF seeks to measure and assess its impact not only on the basis of financial return,

but in accordance with what is referred to as the Empowerment Dividend which is the socio-

economic impact of the NEF’s investment activities, as provided for in the Broad Based

Black Economic Empowerment Act.

The elements of the Empowerment Dividend are measured as follows:

• Contribution to Broad Based Black Economic Empowerment – the NEF

assesses each transaction against the results of the B-BBEE scorecard, before and

after funding, to ensure that each transaction contributes to the advancement of B-

BBEE.

• Participation by black women – the NEF emphasises the empowerment of women

by providing for an additional weighting for black women participation.

• Job Creation – Contribution towards employment creation and the number of jobs

created per rand invested or jobs sustained through investment in expansion type

activities.

• Investment in Priority Growth Sectors – The number of investments facilitating

black ownership and control of existing and new enterprises in the priority sectors of

the economy as identified by the IPAP and the National Development Plan.

• Geographic Spread - Geographic spread of investments and contribution towards

increased economic activity across all provinces, particularly in areas of regional

economic disadvantage.

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• Investment Return - The real return that each Fund realises on capital employed,

after the impairment ratios experienced for that fund, as a combined measure of

debt, equity and quasi equity invested.

5.5. Products and Services

In pursuit of this mandate the NEF provides financial and non-financial support to investees.

The financial support provided comprises the provision of innovative financing products to

black entrepreneurs and black empowered businesses via the five funds of the NEF, which

are Imbewu Fund, Rural & Community Development Fund, Umnotho Fund, the Strategic

Projects Fund and the Women Empowerment Fund.

The non-financial support provided comprises pre-investment services and post-investment

services which include mentorship and training for investees. The Turnaround, Workout and

Restructuring services provides support to investee companies that are in distress; and the

Socio- Economic Development Unit focuses on fostering a culture of savings and investment

among its beneficiaries by offering investor education seminars around the country as well

as by promoting enterprise development.

5.5.1. Financial Support

The NEF provides funding to black empowered businesses and entrepreneurs from

R250 000 to R75 million across a range of sectors, for venture capital, start-up, expansion

and business acquisition purposes. The NEF differentiates itself not only with a focused

mandate for growing black economic participation, but by also assuming a predominantly

equity-based risk to maximise the Empowerment Dividend in that it places little if no reliance

on the credit strength of its applicants with the emphasis being on the investment risk of the

funding advanced. The investment risk associated with transactions that apply for funding is

mitigated against the evaluation of the entrepreneur, their ability to make sound commercial

decisions which are also in support of national priorities and government policy such as that



contained in the National Development Plan and in support of targeted investments as

identified in the dti’s IPAP. The work of the NEF therefore straddles and complements

other DFIs by allowing these organisations to work in close collaboration in the promotion of

B-BBEE with the intervention of the NEF in many cases as the provider of equity funding

allowing for the unlocking of the bulk of the funding required from other sources.

NEF funding is provided via two divisions viz.

1. SME & Rural Development Division, which comprises two funds, viz.

a. iMbewu Fund; and

b. Rural & Community Development Fund.

The division is also comprised of:

c. the Pre-Investment Unit,

d. The regional offices.

2. Venture Capital & Corporate Finance Division, which is comprised of:

a. Umnotho Fund, and

b. Strategic Projects Fund

c. Women Empowerment Fund

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5.5.2. Non- bus ness support

The NEF provides non-financial support through four of its business units, specifically:

• The Pre-Investment Unit, which provides the first line of non-financial assistance to

prospective investees. The unit provides support to applicants seeking funding, in

additional to entrepreneurial development training.

• The Post-Investment Unit, which manages the investment portfolio and assists

investees with mentorship and training.

• The Turnaround, Workout and Restructuring Unit has been a key addition

complimenting the services of the Post-Investment Unit. Its purpose is to provide

support investee businesses that are experiencing operational and financial

challenges. This team works together with the entrepreneurs in assessing and re-

structuring the financial and/or operational aspects of the businesses.

• The Socio-Economic Development and Asset Management Unit, through which the

NEF provides support to communities, aims to foster a culture of savings and

investment among its beneficiaries through such programmes as the national

investor education programme; as well as promoting Enterprise Development.

5.6. Court ngs

There are no recent court rulings which would impact on the NEF’s ability to implement its

strategy.

There is however a recent report of the Public Protector which states that the NEF

committed maladministration by not timeously providing funding to a person who is of

Zimbabwean descent who was naturalised in South Africa in 1999. The NEF is contesting

the ruling in court as the NEF is prohibited by legislation from providing funding to people

who are not of South African descent if they were naturalised after 1994 and due to the fact



that the individual concerned signed a declaration wherein she in false declared that she

was naturalised before 27 April 1994.

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5.7. Updated Situational Analysis

5.7.1. Overview of the NEF’s Performance

The NEF has grown into a credible development finance institution that has managed to

steadily increase approval and disbursement activity over the last few years. The

organisation approved 716 transactions worth approximately R6.9 billion and made

disbursements of up-to R4.8 billion as at 31 December 2015. By the end of the third quarter

of the year 2015/16, the NEF is geared to support 2 099 job opportunities (of which 1034 are

new). This brought the number of job opportunities geared to be supported since inception to

83 987 (59 117 of which are new).

Year to date ending 31 December 2015, the NEF has approved 73 transactions worth a total

of R592 million. The NEF committed to 71 transactions worth R449 million, and disbursed a

total of R479 million1. The Women Empowerment Fund underlies the NEF’s commitment to

women empowerment and in the current financial year 2015/16, women-owned businesses

account for 54% of the new deals disbursed to date, as at 31st December 2015.

The NEF is reassured by the State President’s comments at the Black Industrialists Indaba

on the importance of the organisation, amongst other DFIs in the development of Black

Industrialists. We are also optimistic about the steps that are being taken by the dti and

National Treasury to secure the future funding of the NEF.

The NEF has built strong systems and processes to grow its portfolio, and is able to continue

to increase deal activity once the fund is recapitalised. In doing so, the NEF would be able

to continue making a meaningful contribution to the economy.

1 Please note that the NEF revised the defini tions for deal status for use in operational reporting in al ignment with industry pract ice. The new defini tions were effect ive from 1 April 2013 and are def ined in the section titled “Acronyms”.

N Empowerment Fund


5.7.2. Economic Outlook

With a recorded GDP growth of 1.5% in 2014, South Africa’s growth momentum has been

decelerating over the last few years with 2.5% and 1.9% recorded in 2012 and 2013

respectively. The economic outlook remains relatively weak with GDP growth anticipated to

remain around 1.5% for 2015. Apart from the adverse effects of domestic challenges such

as electricity supply shortages and fading competitiveness, South Africa has also been

negatively impacted by the global economic downturn. The global stock market rout,

uncertainty around the pace of US monetary policy normalisation, risk-averse global

investors, signs of a steeper deceleration in Chinese economic activity and the continual

slide in global commodity prices are likely to hurt domestic confidence, undermine capital

expenditure, aggravate unemployment2, add to inflation, push interest rates higher and limit

economic growth.

Despite the subdued outlook, focus continues to be on growth strategies to accelerate

economic development and job creation, both critical imperatives for South Africa. Analysts

have identified potential growth areas for South Africa that draw focus away from the slower

European and USA markets and are concentrated on the continent. A report by the

McKinsey Global Institute (MGI), published in September 2015, has identified five of the

biggest growth priority areas as:

• Advanced manufacturing – the manufacturing sector has been shrinking for

decades, and only contributes 13% of GDP in 2014 from about 25% in 1990. While

this is on par with developed nations such as the UK and the USA, South Africa lags

far behind developing nations such as Brazil, India and Mexico. MGI report suggests

2 Unemployment remains high, however, according to the Quarterly Labour Force Survey (QLFS), the South African

unemployment rate declined to 25% in Q2 2015, from 26.4% in Q1 2015. There was a slight increase in the unemployment rate in Q3 to 25.2% attributable to job losses in the mining & quarrying, manufacturing, transport and construction sectors.



that South Africa already has a history of global competitiveness in the manufacture

of advanced machinery automobiles, transportation equipment and machinery. The

export of these products has grown in the last decade and accounted for 44% of total

manufactured exports in 2013. Projections suggest that by 2030, exports of these

products could triple to more than R700 billion, and 1.5 million job opportunities could

be created.

Infrastructure development – The government has long had infrastructure

development as a priority area in growth policy. Infrastructure investment has been

hampered by major challenges such as constrained public finances, cost and

schedule overruns on infrastructure projects, as well as a lack of trust between

government and its implementing partners in the private sector. To sustain productive

infrastructure investment, South Africa could implement a number of strategies.

Firstly, it could make maximum use of existing infrastructure through optimising

operational processes and increasing spending on maintenance. The MGI report

suggest that South Africa underspends on maintenance by R49 billion, and

addressing this gap could result in cost savings through the reduction of replacement

and repair of existing infrastructure. Secondly, South Africa could optimise the capital

project to drive social and economic impact. An example of such projects that would

drive social and economic impact includes upgrading or development of water

infrastructure. It is imperative for these water projects to be evaluated and executed

in the order of their level of impact. By improving infrastructure productivity, the South

African GDP would receive a boost of up to R870 billion over the next decade, in turn

supporting the creation of about 1.6 million job opportunities.

Natural gas – natural gas has been touted as South Africa’s answer to the current

energy crisis which has imposed growth constraints. Supply-side pressures such as

aging coal plants planned for decommissioning between 2020 and 2030, reliability

and emissions concerns have raised the need to look to other energy sources. The

government has plans to diversify the country’s energy resources and is looking to



increase energy sources from the planned coal and nuclear projects to include gas

and renewable plants. Whilst gas is currently a more expensive fuel, projected

increases in coal prices, carbon taxes and an eventual reduction in gas prices as it

becomes a more plentiful commodity could see a reversal of the status quo making

gas a viable option for affordable energy solutions. Natural gas development is

projected to boost South Africa’s GDP by up to R251 billion by 2030 and, in turn,

create up to 328 000 direct and indirect job opportunities.

Service exports – South Africa’s service industries are highly developed and

generate 62% of the country’s GDP. However, South Africa’s exports only account

for 2% of the Sub-Saharan region’s service imports. In comparison, Brazil’s exports

account for 26% of the market share in Latin America. South Africa is well positioned

to become a leading service provider on the African continent. The MGI report makes

specific mention of the exporting of services for the construction sector, an area in

which South Africa has enjoyed about 6.6% growth rate per year between 2009 and

2013. Building on this momentum, South Africa is not only well positioned, but also

has the opportunity to target far more construction projects on the African continent.

While South African construction contracts in 2015 are estimated to total about R318

billion rand across the continent, this makes up a mere 7% of construction projects

on the African continent, compared to China’s 32%. Success in the exporting of

these and other services will require partnerships between the private sector and

government i.e. while business must pursue international contracts aggressively, the

government ought to work on establishing a conducive trade environment.

Collaboration between different business sectors could see the creation of joint

packages that will allow the pulling together of resources; for example banks and

mobile network companies could offer mobile banking solutions. MGI analysts

estimate that South Africa could increase its share of Sub-Saharan imports to 15%.

This would add R245 billion rand to GDP and contribute to the creation of about

460 000 job opportunities.



Agricultural value chain – South Africa has productive and internationally

competitive agricultural and agro-processing sectors and the MGI analysts posit that

the country has the potential to triple agricultural exports by 2030. To meet the goal

of increased exports, the country needs to develop strategies to make farming more

productive through investment in cutting-edge technology and farming techniques.

The government will need to clarify land rights issues, consider models for farm

consolidation as well as accelerate development of water resources as well as

strengthening water management. Furthermore, South Africa has a strong

processing industry and the biggest growth opportunities in agro-processing exports

are in fruit, beverages and animal products. This sector is already well positioned for

accelerated growth based on advantages developed through serving fast-growing

markets in Africa and Asia. Investment in agro-processing could add value to up to

R124 billion and create 314 000 new job opportunities.

The MGI analysts maintain that these five areas will benefit multiple sectors of the economy

including the labour-intensive sectors required to create job opportunities as well as those

sectors identified by the government as key in the efforts toward industrialisation.

The NEF strives to remain responsive to the economic environment in which we operate.

Recent discussions at the NEF Board Strategy Sessions, saw the board, executives and

senior management unpack challenges and identify opportunities posed by the current

economic climate. Identifying potential areas for competitiveness, plans were discussed to

conduct a value chain analysis in order to determine possible opportunities in the growth

sectors for future investment.

B-BBEE remains an imperative for the Government as demonstrated by the revision of the

B-BBEE Codes of good practice which have placed more emphasis on the Ownership, Skills

Development, Enterprise and Supplier Development elements. The Codes have refocused

black economic empowerment sharply on ownership. Black Industrialist development has

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also taken centre stage in recent months with on-going dialogue between the dti, the NEF

and other DFIs to develop frameworks for meaningful implementation.

The NEF is acutely aware and welcomes the challenge of ensuring that we continue to strive

toward inclusive economic participation and sustainable growth.

5.7.3. The NEF’s Target market

The NEF provides funding to black entrepreneurs for start-up and expansion companies as

well as for acquiring equity in existing white-owned businesses in line with the transformation

objectives of B-BBEE. The target market is further segmented into the following tiers:

• Black individuals and groups with significant operational experience and an extensive

investment portfolio and accumulated capital (Tier 1).

• Black individuals and groups with operational experience which could include having

concluded a limited number of BEE transactions. This sector typically has limited

accumulated capital with existing Investments still encumbered / “not in the money

yet” (Tier 2).

• Black individuals and groups with limited business or entrepreneurial experience

(Tier 3).

• White individuals and groups who own, manage and/or control economic means and

are potential partners for, or opponents to, economic transformation (Tier 4).

5.7.3.1.Challenges faced by the target market.

In bridging the economic divide the NEF strives to address the following market failures:

• Limited own capital,

• Poor quality of business plans,

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• Lack of accurate and reliable financial information,

• Limited management skills, including financial, marketing and technical expertise,

• Lower bargaining power and strong competition from established businesses with

entrenched market dominance,

• Inadequate access to affordable capital, and

• Lack of access to international markets.

In response to these challenges, the NEF has developed financial and non-financial services

to assist the target market. The NEF offers funding in the range from R250 000 to

R75 million, and projects are funded and structured individually, with a focus on

sustainability. Suitable applicants therefore have access to affordable capital through the

NEF.

5.7.4. Analysis of Strengths, Weaknesses, Opportunities and Threats (SWOT)

A brief summary of the NEF’s strengths, weaknesses, opportunities and threats is listed

below:

Strengths

• Innovative and solutions-based products. • Institutional and operational maturity. • Maintenance of high standards of corporate

governance. The NEF has rigorous accounting, governance and regulatory frameworks together with sound financial management systems. The NEF also has a good internal control environment.

• Non-financial support provided. • Growing national footprint, together with

increased visibility through local conferences, exhibitions and civil society initiatives, which optimises visibility of the NEF.

• Employee Wellness, training, performance management, together with the Values and Culture Programme is contributing to a healthy and performance-orientated organisational culture.

Opportunities

• Providing access to funding for BEE entrants.

• Thought leadership on B-BBEE. • Ability to contribute towards job support and

creation. • Contribute to closing the gaps in the

economic value chain. • Support of agriculture and other priority

sectors. • Low cost of funding. • Expansion into other parts of Africa.

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• Technically strong and committed staff. • Track record in BEE funding. • Established portfolio with lessons learnt

database.

Weaknesses

• Need to be recapitalised in order to continue fulfilling mandate.

• Need to rebuild staff morale. • Sustainability and quality of deal flow which

impacts impairments and write-offs. Low approval rate on number of applications received due to the poor quality of the applications.

• Need to improve efficiency of information systems.

Threats

• Inability to secure additional capital. • Lower consumer and investor confidence. • Slow pace of transformation across the

economy. • B-BBEE being viewed as a stand-alone

policy with organisations only complying with minimum requirements.

• Potential gearing of the balance sheet could increase the cost of funding for investees.

• Potential loss of key staff.

6. Products and Services

6.1. Financial Support

6.1.1. iMbewu Fund

The iMbewu Fund seeks to address market failures experienced by black-owned SME’s.

The fund has three products, viz. Franchise, Contract and Entrepreneurship products. An

overview of the products is outlined below.

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6.1.

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ims

to in

crea

se th

e ex

tent

to w

hich

wor

kers

, coo

pera

tives

and

othe

r col

lect

ive

ente

rpris

es o

wn

and

man

age

busi

ness

ent

erpr

ises

.

N E

mw

erm

e F

ud

ic

r

e ye

ars

2016

/17

- 19

24

Acq

uisi

tion

New

Ven

ture

Cap

ital

Expa

nsio

n C

apita

l

m05R ot

m1R

m05R ot

m1R

dlohserht tnemtsevnI

R1m

to R

50m

Trig

ger f

or R

CD

F pa

rtic

ipat

ion

Co-

oper

ativ

es, c

omm

unity

gro

upin

gs

arra

nged

as

Trus

t or a

ny le

gal e

ntity

, and

wor

kers

trus

t

Co-

oper

ativ

es, c

omm

unity

gro

upin

gs a

rrang

ed a

s

Trus

t or a

ny le

gal e

ntity

, and

wor

kers

trus

t.

Co-

oper

ativ

es, c

omm

unity

gro

upin

gs

arra

nged

as

Trus

t or a

ny le

gal e

ntity

,

and

wor

kers

trus

t.

Prin

cipa

l goa

lTo

cat

er fo

r rur

al e

ntre

pren

eurs

or

com

mun

ities

see

king

to b

uy e

quity

in e

xist

ing

rura

l and

com

mun

ity e

nter

pris

es

To a

ssis

t rur

al e

ntre

pren

eurs

and

co-

oper

ativ

es

and

com

mun

ities

with

equ

ity c

ontri

butio

n to

war

ds

esta

blis

hmen

t of s

usta

inab

le n

ew v

entu

res

in

agro

-sec

tor.

To fa

cilit

ate

invo

lvem

ent a

nd o

wne

rshi

p

by c

omm

uniti

es in

pro

ject

s pr

omot

ing

soci

al u

plift

men

t

Type

s of

com

pani

es/p

roje

cts

Focu

s on

sm

all t

o la

rge

vent

ures

whe

re

partn

ersh

ips

betw

een

NE

F, B

EE

par

ties

or

com

mun

ity e

ntity

, and

tech

nica

l par

tner

is

invo

lved

Med

ium

siz

ed n

ew v

entu

re p

roje

cts

with

tota

l

fund

ing

requ

irem

ents

of b

etw

een

R1m

and

R50

m

Rur

al a

nd c

omm

unity

pro

ject

s us

ing

entit

ies

such

as

co-o

pera

tives

and

priv

ate

com

pani

es

Type

s of

inst

rum

ent

Deb

t, eq

uity

, qua

si e

quity

and

pre

fere

nce

shar

es

Deb

t, eq

uity

, qua

si e

quity

and

pre

fere

nce

shar

esD

ebt,

equi

ty, q

uasi

equ

ity a

nd

pref

eren

ce s

hare

s

Bla

ck e

quity

thre

shol

dM

inim

um o

f 50.

1%

iD tne

mrewop

mE )-/+( emirP

etaR tseretnI

vide

nd o

r Dev

elop

men

t Im

pact

Influ

ence

d

Term

s of

Inve

stm

ent a

nd

othe

r ter

ms

5

to 1

0 ye

ars

C

lear

exi

t Stra

tegy

U

p to

10

year

s

To

tal p

roje

ct e

quity

4

0%

N

EF

Exp

osur

e 5

0% o

f pro

ject

cos

ts

Up

to 1

0 ye

ars

N E

mw

erm

e F

ud

ic

r

e ye

ars

2016

/17

- 19

25

6.1.

3.Um

noth

o Fu

nd

This

Fun

d is

des

igne

d to

im

prov

e ac

cess

to

BEE

cap

ital

and

has

five

prod

ucts

: A

cqui

sitio

n Fi

nanc

e, N

ew V

entu

res

Fina

nce,

Exp

ansi

on

Fina

nce,

Cap

ital M

arke

ts F

und,

and

Liq

uidi

ty a

nd W

areh

ousi

ng.

Thes

e pr

oduc

ts p

rovi

de c

apita

l to

bla

ck-o

wne

d an

d-m

anag

ed e

nter

pris

es,

blac

k en

trepr

eneu

rs w

ho a

re b

uyin

g eq

uity

sha

res

in e

stab

lishe

d w

hite

-ow

ned

ente

rpris

es, n

ew v

entu

res

finan

ce a

nd B

EE

bus

ines

ses

that

are

or w

ish

to b

e lis

ted

on th

e JS

E. F

undi

ng ra

nges

from

R2

mill

ion

to R

75 m

illio

n. T

he F

und

pric

ing

is to

ach

ieve

retu

rns

that

are

in li

ne w

ith th

e

leve

l of r

isk

take

n by

the

NE

F.

N E

mw

erm

e F

ud

ic

r

e ye

ars

2016

/17

- 19

26

Acq

uisi

tion

Fina

nce

New

Ven

ture

Fin

ance

Ex

pans

ion

Cap

ital

Cap

ital M

arke

ts

Liqu

idity

& W

areh

ousi

ng

Inve

stm

ent

thre

shol

d R

2 m

illion

to R

75 m

illion

R

5 m

illio

n to

R75

mill

ion

R

5 m

illio

n to

R75

mill

ion

R

2 m

illion

to R

75 m

illion

R

2 m

illion

to R

75 m

illio

n

Prod

uct

purp

ose

BE

E a

pplic

ants

see

king

to

fund

equ

ity p

urch

ases

of

betw

een

R2

milli

on a

nd R

75

milli

on in

exi

stin

g

busi

ness

es

BE

E p

artie

s se

ekin

g to

parti

cipa

te in

med

ium

-siz

ed

Gre

enfie

lds

proj

ects

with

tota

l fun

ding

requ

ests

of

betw

een

R10

milli

on a

nd

R20

0 m

illion

.

Fund

ing

prov

ided

to e

ntiti

es

that

are

alre

ady

blac

k-

empo

wer

ed, b

ut s

eek

expa

nsio

n ca

pita

l to

grow

the

busi

ness

.

This

pro

duct

inve

sts

in B

EE

ente

rpris

es, p

artic

ular

ly

thos

e ow

ned

by b

lack

wom

en th

at s

eek

to li

st o

n

the

JSE

or i

ts ju

nior

AltX

mar

ket.

The

Um

noth

o Fu

nd

will

als

o he

lp li

sted

BE

E

com

pani

es to

rais

e ad

ditio

nal

capi

tal f

or e

xpan

sion

.

This

pro

duct

ass

ists

BE

E

shar

ehol

ders

who

nee

d to

sel

l

a po

rtion

or a

ll of

thei

r sha

res

(as

min

ority

sta

kes

in u

nlis

ted

firm

s ar

e ha

rd to

sel

l). A

lso

acqu

ires

and

tem

pora

rily

war

ehou

ses

thes

e sh

ares

befo

re o

n-se

lling

thos

e to

new

BE

E s

hare

hold

ers,

and

refin

ance

s B

EE

sha

reho

ldin

gs

whe

re e

xist

ing

finan

cing

stru

ctur

es a

re c

ostly

and

/or

inef

ficie

nt.

N E

mw

erm

e F

ud

ic

r

e ye

ars

2016

/17

- 19

27

Acq

uisi

tion

Fina

nce

New

Ven

ture

Fin

ance

Ex

pans

ion

Cap

ital

Cap

ital M

arke

ts

Liqu

idity

& W

areh

ousi

ng

Prod

uct

crite

ria

• M

ediu

m to

larg

e

com

pani

es

• Fo

cus

on p

artn

ersh

ips

with

exi

stin

g

man

agem

ent t

eam

s an

d

othe

r equ

ity in

vest

ors

• A

ctiv

e B

EE

man

agem

ent

parti

cipa

tion

• A

ctiv

e B

EE

invo

lvem

ent

in in

vest

ee c

ompa

nies

• B

EE

fina

ncia

l

cont

ribut

ion

on a

cas

e-

by-c

ase

basi

s

• S

ecur

ity to

incl

ude

pers

onal

sur

etys

hip

• M

ediu

m-s

ized

Gre

enfie

lds

proj

ects

with

tota

l fun

ding

requ

ests

of b

etw

een

R10

mill

ion

and

R20

0

milli

on.

• B

EE

-spe

cific

fina

ncia

l

cont

ribut

ion

asse

ssed

on a

cas

e-by

-cas

e

basi

s

• N

EF

expo

sure

to th

e

prod

uct g

ener

ally

not

to e

xcee

d 50

% o

f the

tota

l pro

ject

cos

ts

• P

rove

n m

anag

emen

t

expe

rienc

e w

ithin

the

cons

ortiu

m

• A

ctiv

e B

EE

invo

lvem

ent i

n in

vest

ee

com

pani

es

• S

ecur

ity to

incl

ude

pers

onal

sur

etys

hip

• A

ctiv

e B

EE

invo

lvem

ent

in in

vest

ee c

ompa

nies

• S

ecur

ity to

incl

ude

pers

onal

sur

etys

hip

and

secu

rity

over

bus

ines

s

asse

ts.

• M

ediu

m to

larg

e

com

pani

es

• Fo

cus

on p

artn

ersh

ips

with

exi

stin

g

man

agem

ent t

eam

s an

d

othe

r equ

ity in

vest

ors

• A

ctiv

e B

EE

man

agem

ent

parti

cipa

tion

• A

ctiv

e B

EE

invo

lvem

ent

in in

vest

ee c

ompa

nies

• B

EE

fina

ncia

l

cont

ribut

ion

on a

cas

e-

by-c

ase

basi

s

• S

ecur

ity to

incl

ude

pers

onal

sur

etys

hip

• M

ediu

m to

larg

e

com

pani

es

• Fo

cus

on p

artn

ersh

ips

with

exis

ting

man

agem

ent

team

s an

d ot

her e

quity

inve

stor

s

• A

ctiv

e B

EE

man

agem

ent

parti

cipa

tion

• A

ctiv

e B

EE

invo

lvem

ent i

n

inve

stee

com

pani

es

• B

EE

fina

ncia

l con

tribu

tion

on a

cas

e-by

-cas

e ba

sis

• S

ecur

ity to

incl

ude

pers

onal

sur

etys

hip

Type

s of

in

stru

men

t

Inve

stm

ent i

nstru

men

t can

incl

ude

a co

mbi

natio

n of

debt

, equ

ity a

nd m

ezza

nine

finan

ce.

Inve

stm

ent i

nstru

men

t can

incl

ude

a co

mbi

natio

n of

debt

, equ

ity a

nd

mez

zani

ne fi

nanc

e.

Inve

stm

ent i

nstru

men

t can

incl

ude

a co

mbi

natio

n of

debt

, equ

ity a

nd m

ezza

nine

finan

ce

Inve

stm

ent i

nstru

men

t can

incl

ude

a co

mbi

natio

n of

debt

, equ

ity a

nd m

ezza

nine

finan

ce.

Inve

stm

ent i

nstru

men

t can

incl

ude

a co

mbi

natio

n of

deb

t,

equi

ty a

nd m

ezza

nine

fina

nce.

N E

mw

erm

e F

ud

ic

r

e ye

ars

2016

/17

- 19

28

Acq

uisi

tion

Fina

nce

New

Ven

ture

Fin

ance

Ex

pans

ion

Cap

ital

Cap

ital M

arke

ts

Liqu

idity

& W

areh

ousi

ng

Bla

ck e

quity

th

resh

old

Min

imum

of 2

5.1%

M

inim

um o

f 25.

1%M

inim

um o

f 50.

1%

Min

imum

of 2

5.1%

Min

imum

of 2

5.1%

iD tne

mrewop

mE )-/+( emirP

etaR tseretnI

vide

nd o

r Dev

elop

men

t Im

pact

Influ

ence

d

Term

s of

In

vest

men

t an

d ot

her

term

s

Typi

cal i

nves

tmen

t hor

izon

of 4

to 7

yea

rs

Typi

cal i

nves

tmen

t hor

izon

of 5

to 1

0 ye

ars.

Typi

cal i

nves

tmen

t hor

izon

of

4 to

7 y

ears

Typi

cal i

nves

tmen

t hor

izon

of

4 to

7 y

ears

Typi

cal i

nves

tmen

t hor

izon

of 4

to 7

yea

s

N Em werme Fu d

ic r e years 2016/17 – 19 29

6.1.4. Strategic Projects Fund

The Strategic Projects Fund will facilitate the acquisition of equity in large strategic projects

where the NEF assumes the role of BEE partner.

The fund aims to play a central role in early stage projects by identifying, initiating, scoping

and developing projects that are in sectors identified by government as the key drivers to

South Africa’s economic growth. These projects will be taken through 6-stages of the project

development phases.

The phases being the following:

Scoping and Concept Study, Pre-Feasibility Study, Bankable Feasibility Study, Financial

Closure, Construction Phase, and Technical Completion.

Through the Strategic Projects Fund, NEF will facilitate B-BBEE in the following ways:

• Warehouse equity for B-BBEE in early stage projects at valuations with little or no

premium paid to access the projects. This enables NEF to distribute its warehoused

equity to B-BBEE at lower valuations once the project is operational;

• Take early stage risk on behalf of black people as early stage projects have higher

execution risks compared to operational companies. The NEF will assume most of

the financing risk and devise instruments to carry or transfer equity to B-BBEE once

project fatal flaws have been mitigated;

• Manage the project and venture capital finance structuring complexities as it is more

complex and difficult to raise capital for new ventures as compared to Umnotho

finance deals where valuations can be ascertained based on historical performance

and risks are clearly understood;

• Enable project promoters to focus on making projects bankable and operational by

giving the B-BBEE status as NEF is the only DFI gazetted as a B-BBEE facilitator;

• Once the initial project risks have been reduced, the NEF will transfer its

shareholding to selected B-BBEE groups through a transparent process.

N Em werme Fu d

ic r e years 2016/17 – 19 30

6.1.5 The Women Empowerment Fund

Purpose of the Women Empowerment Fund programme, established in the financial year

2014/15 is to accelerate the women economic empowerment through the provision of

funding to businesses owned by black women.

• Finance will be provided from R250 000 to R75 million across the whole of the NEF

existing product suite described above.

• Depending on type of funding the horizon of funding provided ranges between 4 and

10 years.

• Minimum of 51% black female ownership is a main criteria

• Black women have to be operationally involved at the managerial and board levels.

• Other empowerment dividend pillars have to be considered

6.2. Non- nc Support

6.2.1. Investor Educ

The NEF’s Investor Education campaign is planned to reach 72 localities across the country,

providing information necessary to make prudent savings and investment decisions. The

initiative has covered all nine provinces during the past two years.

6.2.2. Pre-Investment Bus ness Support

Applicants for funding may be excellent entrepreneurs, but often struggle to navigate the

necessary application procedures and to manage their businesses and this is often evident

during the initial assessment of the funding application. The NEF therefore assists with

funding advice, business planning and general assistance to help ensure that applications

are of sufficient quality to complete all steps in the application process.


Strategic Plan for the years 2016/17 – 19 31

As the first point of contact for many potential clients, the PIU's primary functions are to:

Provide information on NEF products and procedures;

Control and assist in drawing up funding applications;

Identify applications that will qualify for funding;

Keep clients informed on the progress of their applications;

Advise applicants and assist with drawing up business plans.

Where applicable, recommend entrepreneurs for incubation

Entrepreneurship Development Strategy

By 2010 the NEF through its Fund Management Divisions faced a number of challenges in

delivering on its Mandate. These challenges included:

The number of applications received, of up to 100 per month.

The quality of these applications, as evidenced by an approval ratio of less than 3%

of applications received.

The sophistication of the target market in terms of the ability to package bankable

business plans.

The skills of the target market in terms of business experience and industry

knowledge.

High impairments (especially in the SME Fund) where a total impairments ratio

(including write offs) of about 40% was experienced.

The limited own contribution and lack of collateral prevalent in the typical NEF

application.

The NEF’s Pre-Investment Unit then developed the Entrepreneurship Development Strategy

in order to better assess and support the development of black entrepreneurs. The

Rationale for this strategy was to take cognisance of the NEF mandate and operating

environment with a view to:

N Em werme Fu d

ic r e years 2016/17 – 19 32

• Enhancing the NEF’s interventions to aspirant black entrepreneurs in order to

mitigate financial risk for the NEF whilst supporting sustainable black businesses;

• Identify potential tools that can be used by the NEF to better assess the

entrepreneurial readiness of potential applications;

• Propose refinements to the NEF’s investment process in order to provide a more

efficient investment process particularly in the case of SME’s whilst maintaining

sound investment methodologies i.e. provision of SMART capital;

• Explore additional financial interventions aimed at providing black entrepreneurs with

early stage funding to address limited own capital;

• Enhance NEF impact in developing entrepreneurship in South Africa more broadly

with focus on Financial and Non-Financial Support as well as advocacy on issues

pertaining to entrepreneurship;

The Pre-Investment Unit has implemented a business incubation model in order to support

the development of aspirant black entrepreneurs. The NEF realises the value and impact

that can be made through incubation and has established partnerships with various

incubation service providers.

6.2.3. Post-Investment Business Support

Black empowered businesses need to be robust and self-sustaining for B-BBEE to succeed.

In recognition of this fact, the NEF has established structures to monitor its clients for risk

and provide advice when needed. Although start-ups are inherently higher risk, the rewards

for success are jobs and increased capital for further start-ups.

The Post Investment Unit manages this process of client monitoring and support. The unit is

responsible for:

• Monitoring and preparing management information on investments

• Administering investment contracts

• Coordinating mentorship programmes



Facilitating investment valuations with fund managers

Working with distressed assets and recommending solutions such as liquidations,

turnarounds and restructurings

Conducting strategic reviews

The Post-Investment Unit also facilitates access to training for investees according to the

needs of the business.

N Em werme Fu d

ic r e years 2016/17 – 19 34

7. Key programmes aligned to Government Priorities

7.1. Alignment to the dti’s priorities

The NEF actively contributes to the following strategic objectives of the dti.

the dti Strategic Objectives NEF Strategic Objectives Programmes/ Activities

Facilitate transformation of the

economy to promote industrial

development, investment,

competitiveness and

employment creation.

Provide finance to

business ventures

established and managed

by black people.

Approval and Commitment

activities by the funds.

(Imbewu Fund, Rural &

Community Development

Fund, Umnotho Fund,

Women Empowerment Fund

and Strategic Projects Fund)

Invest in black empowered

business’ that have high

employment creating

opportunities.

Approval and Commitment

activities by the funds.

(Imbewu Fund, Rural &

Community Development

Fund, Umnotho Fund,

Women Empowerment Fund

and Strategic Projects Fund)

Black economic

empowerment is advanced

through commercially

sustainable enterprise.

Non-financial support

activities including

mentorship, entrepreneurial

development, and portfolio

management activities.

Facilitate broad-based

economic participation through

targeted interventions to

achieve more inclusive growth.

Encourage and promote

savings, investment and

meaningful economic

participation by black

people.

Investor education

campaign.

N Em werme Fu d

ic r e years 2016/17 – 19 35

7.2. Alignment to the National Development Plan

Enabling milestones listed in the National Development Plan to which the NEF can

contribute include:

• Increasing employment from 13 million in 2010 to 24 million in 2030.

• Broaden ownership of assets to historically disadvantaged groups.

By focusing on its mandate which is to promote and facilitate black economic participation in

the economy, the NEF is able to contribute towards the transformation of the economy. In

particular, the NEF can contribute towards the achievement of these milestones by

contributing to the creation of employment through the financial and non-financial support of

entrepreneurs.

Through the funding of sustainable local black-owned ventures, the NEF would be actively

contributing towards supporting local, black-owned, small and medium sized enterprises,

and in doing so, supporting the job creation abilities of these firms. The NEF also strives to

contribute towards the promotion of labour absorbing industries by funding transactions in

the priority sectors. In addition, the funding provided by the NEF can support local business

and contribute towards attract funding from private investors through co-funding

arrangements.

“Employment scenarios prepared by the Commission suggest that

most new jobs are likely to be sourced in domestic-orientated

businesses, and in growing small- and medium-sized firms.”

(Page 39, National Development Plan)



The NEF is able to contribute towards the creation of an integrated rural economy through its

Rural & Community Development Fund, which focuses on funding agricultural projects in

rural areas. In doing so, the fund contributes to the development of rural economies, as well

as the development of agriculture and agro-processing and tourism in rural areas.

Through the continuation of its Investor Education Programme, the NEF endeavours to

inculcate a spirit of entrepreneurship, as well as savings and investment.

N E

mw

erm

e F

ud

ic

r

e ye

ars

2016

/17

– 19

37

7.3.

Alig

nmen

t wit

h O

utco

me

4 of

the

Med

ium

Ter

m S

trat

egic

Fra

mew

ork

e

f N

EF’s

su

- is

pre

seed

Sub-

Out

com

e A

ctio

ns

Indi

cato

rs

NEF

Tar

get &

Act

ions

1. P

rodu

ctiv

e in

vest

men

t is

effe

ctiv

ely

crow

ded

in th

roug

h th

e in

fras

truc

ture

bui

ld

prog

ram

me

Supp

ort f

or lo

cal

supp

liers

for

infr

astr

uctu

re

prog

ram

me

% s

hare

of l

ocal

in

puts

in

gove

rnm

ent

infr

astr

uctu

re

The

NE

F su

ppor

ts lo

cal s

uppl

iers

to g

over

nmen

t’s in

frast

ruct

ure

prog

ram

mes

by s

uppo

rting

loca

l sup

plie

rs.

For i

nsta

nce,

the

NE

F ha

s fu

nded

loca

l B-B

BE

E

supp

lier i

nvol

ved

in th

e P

RA

SA

rolli

ng s

tock

sup

ply

cont

ract

. Th

e pr

ojec

t als

o

aim

s to

pro

vide

Bla

ck w

omen

ow

ned

busi

ness

es w

ith a

n ef

fect

ive

plat

form

from

whi

ch th

ey c

an tr

ansi

tion

into

inde

pend

ent b

usin

esse

s.

Pas

seng

er R

ail A

genc

y of

Sou

th A

frica

(PR

AS

A) (

R90

milli

on c

omm

itted

)

• P

RA

SA

initi

ated

a ro

lling

sto

ck fl

eet r

enew

al p

rocu

rem

ent p

rogr

am w

orth

R50

bn w

ith e

xpec

ted

mai

nten

ance

con

tract

of R

10bn

ove

r 10

year

s to

repl

ace

the

agin

g st

ock

• P

RA

SA

inte

nd fo

r loc

al B

lack

ent

repr

eneu

rs to

par

ticip

ate

econ

omic

ally

in

the

roll

out o

f the

rolli

ng s

tock

Dur

ing

the

initi

al s

tage

s, th

e N

EF

war

ehou

sed

the

shar

es in

tend

ed to

ben

efit

Act

ive

Bla

ck E

nter

pris

es, I

nves

tor B

lack

Ent

erpr

ises

, Em

ploy

ee T

rust

s, a

nd

the

Edu

catio

n Tr

ust w

hich

will

bene

fit a

ppro

xim

atel

y 12

0 pe

ople

.

Nat

iona

lEm

pow

erm

entF

und

Stra

tegi

cPl

anfo

rth

eye

ars

2016

/17

–19

38

Sub-

Out

com

e A

ctio

ns

Indi

cato

rs

NEF

Tar

get &

Act

ions

The

proj

ect a

ims

to a

chie

ve a

min

imum

of 6

6% a

vera

ge lo

cal c

onte

nt.

Th

e bu

ildin

g of

st

rate

gic

infr

astr

uctu

re

stim

ulat

es c

row

ding

in

of p

rodu

ctiv

e in

vest

men

t.

New

pro

duct

ive

inve

stm

ents

util

ise

the

infr

astr

uctu

re

prov

ided

by

ever

y SI

P.

By

supp

ortin

g ho

spita

l and

tele

com

mun

icat

ions

pro

ject

s, th

e N

EF

is in

vest

ing

in s

trate

gic

infra

stru

ctur

e th

at h

as th

e ab

ility

to a

ttrac

t pro

duct

ive

inve

stm

ent.

Two

of th

ese

inve

stm

ents

are

out

lined

bel

ow:

Bus

aMed

(R

260

milli

on in

vest

ed)

Th

e N

EF,

in p

artn

ersh

ip w

ith a

bla

ck e

ntre

pren

eur,

is d

evel

opin

g th

e

four

th la

rges

t hos

pita

l gro

up (B

usaM

ed),

offe

ring

spec

ialis

t ser

vice

s

(orth

opae

dic,

spo

rts m

edic

ine

and

card

iolo

gy) i

n S

outh

Afri

ca

B

usam

ed (

PTY

) Lt

d is

a 1

00%

bla

ck-o

wne

d an

d co

ntro

lled

priv

ate

hosp

ital g

roup

.

Th

e gr

oup

is d

evel

opin

g fo

ur h

ospi

tals

acr

oss

thre

e pr

ovin

ces

in

Sou

th A

fric

a. T

he fi

rst h

ospi

tal,

loca

ted

in P

aard

evle

i (W

este

rn C

ape)

is n

ow o

pera

tiona

l and

was

offi

cial

laun

ched

in M

ay 2

015.

The

Mod

derf

onte

in h

ospi

tal i

s cu

rren

tly u

nder

con

stru

ctio

n, w

ith

com

mer

cial

ope

ratio

n ex

pect

ed to

com

men

ce e

arly

in 2

016.

Ear

thw

orks

on

the

Har

rism

ith a

nd B

loem

font

ein

hosp

itals

are

unde

rway

.

Nat

iona

lEm

pow

erm

entF

und

Stra

tegi

cPl

anfo

rth

eye

ars

2016

/17

–19

39

Sub-

Out

com

e A

ctio

ns

Indi

cato

rs

NEF

Tar

get &

Act

ions

Th

e N

EF

had

unlo

cked

val

ue in

the

proj

ect b

y in

vest

ing

a to

tal o

f

R26

0 m

illio

n in

Bus

amed

Gro

up. C

urre

ntly

the

NE

F’s

inve

stm

ent h

as

been

dilu

ted

to a

ppro

xim

atel

y 21

% (

earn

ing

the

NE

F an

IRR

of

15%

) w

ith th

e ba

lanc

e of

the

owne

rshi

p he

ld b

y pr

ojec

t pro

mot

er. O

n

com

plet

ion,

the

proj

ect w

ould

hav

e cr

eate

d a

tota

l of a

ppro

xim

atel

y

7 00

0 jo

b op

port

uniti

es.

Link

Afri

ca (R

100

milli

on in

vest

ed)

Th

e pr

ojec

t aim

s to

dep

loy

last

mile

fibr

e op

tic c

able

s ac

ross

the

natio

nal l

ands

cape

of S

outh

Afr

ica

via

a lic

ense

d an

d pa

tent

ed

tech

nolo

gy th

at u

ses

exis

ting

sew

er a

nd o

ther

cur

rent

ly e

xist

ing

infr

astru

ctur

e

Th

e pr

imar

y ob

ject

ives

of t

he p

roje

ct a

re to

: est

ablis

h op

en a

cces

s

tele

com

mun

icat

ions

infra

stru

ctur

e th

at m

ay b

e us

ed b

y an

y lic

ense

d

tele

com

mun

icat

ion

sect

or s

ervi

ce p

rovi

der,

dism

antle

the

inte

nsiv

e ca

pex

and

infra

stru

ctur

e ba

rrie

rs to

ent

ry in

the

tele

com

mun

icat

ion

sect

or a

nd

avai

l mor

e af

ford

able

and

eas

ily a

vaila

ble

com

mun

icat

ion

serv

ices

to S

ME

mar

ket.

Th

e N

EF

has

succ

essf

ully

dis

pose

d of

its

shar

ehol

ding

in th

e pr

ojec

t

and

this

has

see

n th

e in

trodu

ctio

n of

a S

wis

s eq

uity

pla

yer a

s fo

reig

n

dire

ct in

vest

or.

Li

nk A

fric

a is

now

in th

e pr

oces

s of

rai

sing

a w

orki

ng c

apita

l fac

ility

in

orde

r to

del

iver

on

a R

1bn

secu

red

orde

r bo

ok.

Nat

iona

lEm

pow

erm

entF

und

Stra

tegi

cPl

anfo

rth

eye

ars

2016

/17

–19

40

Sub-

Out

com

e A

ctio

ns

Indi

cato

rs

NEF

Tar

get &

Act

ions

The

NE

F ha

s in

vest

ed a

tota

l of R

105

mill

ion

in in

frast

ruct

ure

proj

ects

and

is

cons

ider

ing

othe

r inf

rast

ruct

ure

deve

lopm

ent i

nitia

tives

in th

e w

ater

and

ener

gy s

ecto

rs.

2.

The

prod

uctiv

e se

ctor

s ac

coun

t for

a

grow

ing

shar

e of

pr

oduc

tion

and

empl

oym

ent.

IPA

P im

plem

ente

d an

d re

view

ed re

gula

rly in

te

rms

of im

pact

s on

gr

owth

, em

ploy

men

t, in

vest

men

t, ou

tput

, ex

port

s an

d A

fric

an

regi

onal

dev

elop

men

t.

IPA

P se

ctor

in

terv

entio

ns

tow

ards

gro

wth

, em

ploy

men

t cr

eatio

n an

d m

ore

equi

tabl

e in

com

es

unde

rway

.

In 2

007,

the

Nat

iona

l Em

pow

erm

ent F

und

(NEF

) est

ablis

hed

the

Stra

tegi

cPr

ojec

ts F

und

(SPF

), to

pro

vide

ven

ture

cap

ital e

ntre

pren

eur f

undi

ng in

ear

ly

deve

lopm

ent s

tage

pro

ject

s w

ithin

stra

tegi

c S

outh

Afri

can

econ

omy-

driv

ing

sect

ors

as p

er g

over

nmen

t’s In

dust

rial P

olic

y A

ctio

n Pl

an (I

PA

P).

In li

ne w

ith IP

AP

, SP

F w

as e

stab

lishe

d to

: cre

ate

new

man

ufac

turin

g an

d

indu

stria

l cap

acity

, cre

ate

an in

clus

ive

econ

omy

and

new

job

oppo

rtuni

ties,

incr

ease

Sou

th A

frica

’s e

xpor

t ear

ning

pot

entia

l and

redu

ce im

port

depe

nden

cy, a

s w

ell a

s to

incr

ease

co-

inve

stm

ent a

nd li

nkag

e w

ith fo

reig

n

dire

ct in

vest

men

t.

SP

F fo

cuse

s its

inve

stm

ents

in th

e st

rate

gic

Sou

th A

frica

n ec

onom

y-dr

ivin

g

sect

ors,

incl

udin

g bu

t not

lim

ited

to; m

iner

al a

nd re

sour

ces

bene

ficia

tion,

Nat

iona

lEm

pow

erm

entF

und

Stra

tegi

cPl

anfo

rth

eye

ars

2016

/17

–19

41

Sub-

Out

com

e A

ctio

ns

Indi

cato

rs

NEF

Tar

get &

Act

ions

infra

stru

ctur

e, g

reen

/rene

wab

le in

dust

ries,

man

ufac

turin

g, a

gro-

proc

essi

ng,

busi

ness

pro

cess

ser

vice

s an

d to

uris

m.

SP

F cu

rrent

ly h

as a

bout

24

proj

ects

und

er d

evel

opm

ent.

The

tota

l pot

entia

l num

ber o

f job

opp

ortu

nitie

s to

be

crea

ted

is 8

0,00

0 (1

4,00

0

dire

ct/6

6,00

0 in

dire

ct)

The

impl

emen

tatio

n of

the

proj

ects

requ

ires

appr

oxim

atel

y R

25 b

illion

in

capi

tal,

of w

hich

app

roxi

mat

ely

R4

billio

n is

due

by

the

NE

F, in

resp

ect o

f its

equi

ty in

tere

sts

held

in th

e pr

ojec

ts.

A

gric

ultu

ral P

olic

y A

ctio

n Pl

an (A

PAP)

de

velo

ped,

im

plem

ente

d an

d re

view

ed re

gula

rly in

te

rms

of im

pact

on

grow

th, e

mpl

oym

ent,

rura

l inc

omes

, in

vest

men

t, ou

tput

,

APA

P se

ctor

and

cr

oss-

cutti

ng

inte

rven

tion

tow

ards

gro

wth

, em

ploy

men

t cr

eatio

n an

d hi

gher

ru

ral i

ncom

es

unde

rway

.

The

Rur

al &

Com

mun

ity D

evel

opm

ent F

und

focu

ses

on th

e pr

ovis

ion

of

finan

ce to

rura

l and

agr

icul

tura

l com

mun

ities

, whi

ch s

uppo

rts e

mpl

oym

ent

crea

tion

in ru

ral a

reas

and

the

agric

ultu

ral s

ecto

r. T

his

is a

chie

ved

by:

1.

Pro

mot

ing

acce

ss to

fina

nce

for b

lack

ent

repr

eneu

rs.

2.

Pro

mot

ing

econ

omic

tra

nsfo

rmat

ion

in

orde

r to

en

able

m

eani

ngfu

l

parti

cipa

tion

of b

lack

peo

ple

in th

e ec

onom

y.

Nat

iona

lEm

pow

erm

entF

und

Stra

tegi

cPl

anfo

rth

eye

ars

2016

/17

–19

42

Sub-

Out

com

e A

ctio

ns

Indi

cato

rs

NEF

Tar

get &

Act

ions

expo

rts

and

Afr

ican

re

gion

al d

evel

opm

ent.

3.

In

crea

se t

he p

artic

ipat

ion

of c

omm

uniti

es,

wor

kers

, co

-ope

rativ

es a

nd

othe

r col

lect

ive

Ent

erpr

ises

ow

n an

d m

anag

ed b

y bl

ack

peop

le.

4.

Cre

atin

g su

stai

nabl

e ru

ral e

nter

pris

es a

nd th

ereb

y as

sist

ing

in th

e cr

eatio

n

of jo

b op

portu

nitie

s an

d su

stai

nabl

e in

com

es.

A p

ropo

sed

new

pro

duct

offe

ring

whi

ch w

ill ta

rget

the

fol

low

ing

sect

ors,

thro

ugh

the

esta

blis

hmen

t of

spe

cific

foc

used

fun

ds i

s cu

rren

tly u

nder

way

.

This

will

incl

ude:

A

gro

proc

essi

ng F

und

Fo

rest

ry F

und

The

Rur

al &

Com

mun

ity D

evel

opm

ent F

und

forg

es r

elat

ions

hips

with

var

ious

depa

rtmen

ts a

nd a

genc

ies

that

are

act

ive

in t

he s

ecto

r. W

e in

tend

to

conc

lude

thre

e M

OU

s to

sup

port

our i

nter

vent

ions

and

a jo

int p

ropo

sed

fund

to

addr

ess

the

key

elem

ents

of s

ecto

r de

velo

pmen

t, es

peci

ally

Agr

o pr

oces

sing

and

Fore

stry

tran

sfor

mat

ion.

Exa

mpl

es o

f NE

F in

vest

men

ts in

the

agro

-pro

cess

ing

sect

or in

clud

e M

ohal

e

Agr

icul

tura

l Co-

oper

ativ

e (R

13.7

milli

on),

an a

gro-

proc

essi

ng p

roje

ct is

cont

ribut

ing

to th

e po

ultry

val

ue c

hain

, and

em

ploy

s 30

peo

ple.

The

NE

F ha

s

A

gric

ultu

re, F

ores

try

and

Fish

erie

s M

arke

t an

d Tr

ade

Dev

elop

men

t St

rate

gy

Trad

e an

d D

evel

opm

ent

Stra

tegy

and

cro

ss-

cutti

ngin

terv

entio

ns

tow

ards

gro

wth

, em

ploy

men

t cr

eatio

n an

d hi

gher

ru

ral i

ncom

es

unde

rway

.

Nat

iona

lEm

pow

erm

entF

und

Stra

tegi

cPl

anfo

rth

eye

ars

2016

/17

–19

43

Sub-

Out

com

e A

ctio

ns

Indi

cato

rs

NEF

Tar

get &

Act

ions

also

inve

sted

R26

.8 m

illion

in B

erlin

Bee

f, th

e fir

st b

lack

-ow

ned

feed

lot i

n th

e

Eas

tern

Cap

e.

M

inin

g B

enef

icia

tion

Act

ion

Plan

(MB

AP)

de

velo

ped

impl

emen

ted

and

revi

ewed

regu

larly

in

term

s of

impa

ct o

n gr

owth

, em

ploy

men

t, ru

ral i

ncom

es,

inve

stm

ent,

outp

ut,

expo

rts

and

Afr

ican

re

gion

al d

evel

opm

ent.

MB

AP

deve

lope

d an

d im

plem

ente

d.

In s

uppo

rt of

the

MB

AP

, SP

F ha

s se

vera

l min

eral

ben

efic

iatio

n-re

late

d

proj

ects

und

er d

evel

opm

ent.

Rar

e M

etal

Indu

strie

s (R

MI)

(R13

.5 m

illion

inve

sted

)

R

MI i

nten

ds to

est

ablis

h th

e w

orld

-firs

t int

egra

ted

chem

ical

refin

ery

plan

t

prod

ucin

g pu

re T

itani

um, Z

ircon

ium

, Haf

nium

and

PV

gra

de S

ilico

n

Th

e pr

ojec

t is

curre

ntly

at t

he B

anka

ble

Feas

ibilit

y S

tage

(BFS

) and

will

crea

te c

irca

7,00

0 jo

b op

portu

nitie

s (2

,800

dire

ct/4

,200

indi

rect

)

SA

Met

als

(SA

ME

) (R

40 m

illion

inve

sted

)

Th

e S

AM

E p

roje

ct is

for t

he p

oten

tial e

stab

lishm

ent o

f a p

ig ir

on

prod

uctio

n pl

ant w

ith a

pro

duct

ion

capa

city

of c

irca

500,

000

mtp

a of

pig

iron,

incl

udin

g tit

aniu

m a

nd v

anad

ium

sla

gs a

s by

pro

duct

s

Th

e pr

ojec

t is

curre

ntly

at t

he B

anka

ble

Feas

ibilit

y S

tage

(BFS

) and

will

crea

te c

irca

1,30

0 jo

b op

portu

nitie

s (6

00 d

irect

/700

indi

rect

)

Nat

iona

lEm

pow

erm

entF

und

Stra

tegi

cPl

anfo

rth

eye

ars

2016

/17

–19

44

Sub-

Out

com

e A

ctio

ns

Indi

cato

rs

NEF

Tar

get &

Act

ions

The

NE

F ha

s in

vest

ed a

tota

l of R

66.5

milli

on in

min

eral

ben

efic

iatio

n pr

ojec

ts.

D

eter

min

e vi

able

sha

le

gas

Ex

plor

atio

n pl

an

deve

lope

d

A

ppro

pria

te

legi

slat

ion

deve

lope

d

Econ

omic

ally

vi

able

sha

le g

as

rese

rves

de

term

ined

Alth

ough

not

invo

lved

in s

hale

gas

exp

lora

tion,

by

supp

ortin

g a

nucl

ear

indu

stry

trai

ning

initi

ativ

e th

e N

EF

seek

s to

con

tribu

te to

war

ds c

lean

ene

rgy

deve

lopm

ent i

n S

outh

Afri

ca.

Nuc

lear

Lea

rnin

g To

ur (F

ranc

e, 2

012)

In a

ntic

ipat

ion

of th

e ro

ll-ou

t of t

he N

ucle

ar B

uild

Pro

gram

me

in S

outh

Afri

ca,

the

Nat

iona

l Em

pow

erm

ent F

und

(NE

F) s

ough

t to

educ

ate

itsel

f and

bla

ck

entre

pren

eurs

on

the

nucl

ear e

nerg

y se

ctor

val

ue c

hain

rela

ted

to n

ucle

ar

plan

ts h

ence

it s

ent a

del

egat

ion

of 1

4 to

Fra

nce

in 2

012

to a

ttend

the

Are

va

Nuc

lear

Lea

rnin

g To

ur

Th

e N

EF,

in c

olla

bora

tion

with

the

Nuc

lear

Indu

stry

Ass

ocia

tion

of S

outh

Afri

ca (N

IAS

A),

host

ed th

e N

ucle

ar In

dust

ry E

mpo

wer

men

t Con

fere

nce

in

Oct

ober

201

2 in

pre

para

tion

for a

nd to

mar

ket t

he N

ucle

ar B

uild

Pro

gram

me,

as

wel

l as

to p

rovi

de a

net

wor

king

pla

tform

for n

ucle

ar

indu

stry

sta

keho

lder

s, in

clud

ing

nucl

ear p

lant

OE

Ms,

fund

ing

inst

itutio

ns

and

blac

k en

trepr

eneu

rs (s

ervi

ce p

rovi

ders

, equ

ipm

ent s

uppl

iers

,

inve

stor

s et

c.)

Nat

iona

lEm

pow

erm

entF

und

Stra

tegi

cPl

anfo

rth

eye

ars

2016

/17

–19

45

Sub-

Out

com

e A

ctio

ns

Indi

cato

rs

NEF

Tar

get &

Act

ions

Th

e N

EF

faci

litat

ed fo

r a to

tal o

f 14

dele

gate

s to

atte

nd th

e A

reva

Nuc

lear

Lear

ning

Tou

r in

Fran

ce in

201

2. T

he o

bjec

tives

of t

he to

ur in

clud

ed;

crea

ting

an u

nder

stan

ding

of n

ucle

ar b

asic

s an

d ph

ysic

s, e

stab

lishi

ng a

n

appr

ecia

tion

of th

e nu

clea

r ind

ustry

from

ura

nium

min

ing

to n

ucle

ar p

ower

plan

t equ

ipm

ent p

rodu

ctio

n, in

clud

ing

deve

lopi

ng a

n un

ders

tand

ing

of

proj

ect f

inan

cing

nuc

lear

pla

nts

and

risk

miti

gatio

n

Fu

rther

mor

e, it

was

exp

ecte

d of

the

blac

k S

ME

’s w

ho p

artic

ipat

ed in

the

lear

ning

tour

that

they

wou

ld id

entif

y an

d ex

plor

e fo

r exp

loita

tion,

entre

pren

euria

l opp

ortu

nitie

s w

ithin

the

valu

e ch

ain

of th

e pr

opos

ed S

outh

Afri

can

Nuc

lear

bui

ld P

rogr

amm

e, in

clud

ing

iden

tifyi

ng p

oten

tial f

undi

ng

mea

ns fo

r any

inve

stm

ent p

rosp

ects

.

The

ultim

ate

goal

of t

he p

rogr

amm

e is

to s

uppo

rt bl

ack

SM

E’s

and

entre

pren

eurs

who

may

wan

t to

posi

tion

them

selv

es in

this

sec

tor.

Im

plem

ent N

atio

nal

Tour

ism

Str

ateg

y an

d re

view

impa

ct re

gula

rly

in te

rms

of im

pact

on

grow

th, e

mpl

oym

ent,

inve

stm

ent,

outp

ut,

expo

rts

and

Afr

ican

Tour

ism

Str

ateg

y in

terv

entio

ns

tow

ards

gro

wth

, em

ploy

men

t cr

eatio

n an

d hi

gher

in

com

es fo

r poo

r ho

useh

olds

The

NE

F’s

inte

rven

tions

in to

uris

m in

clud

e th

e fu

ndin

g of

hot

els

and

gam

e

lodg

es.

Thes

e in

clud

e in

vest

men

ts in

Tal

a G

ame

Res

erve

, Rhi

no L

odge

and

Jozi

ni C

ount

ry L

odge

.

The

follo

win

g tra

nsac

tion

wer

e un

derta

ken

in a

n ef

fort

to a

ddre

ss th

e im

pact

of

grow

th a

nd s

usta

inab

le e

mpl

oym

ent i

n th

e to

uris

m s

ecto

r

Nat

iona

lEm

pow

erm

entF

und

Stra

tegi

cPl

anfo

rth

eye

ars

2016

/17

–19

46

Sub-

Out

com

e A

ctio

ns

Indi

cato

rs

NEF

Tar

get &

Act

ions

regi

onal

dev

elop

men

t. un

derw

ay.

TALA

Priv

ate

Gam

e R

eser

ve (R

14.1

mill

ion)

is a

wild

life

cons

erva

ncy

hidd

en

in th

e hi

lls o

f a q

uiet

farm

ing

com

mun

ity n

ot fa

r fro

m D

urba

n in

Kw

aZul

u-N

atal

.

TALA

is

si

tuat

ed

betw

een

Dur

ban

and

Pie

term

aritz

burg

, co

nven

ient

ly

acce

ssib

le o

ff th

e N

3 th

roug

h th

e C

ampe

r-do

wns

off-

ram

p on

the

R60

3.

Spa

nnin

g ov

er

2092

he

ctar

es

and

inco

rpor

atin

g m

any

dive

rse

natu

ral

envi

ronm

ents

, the

rese

rve

feat

ures

wel

l ove

r 380

bird

spe

cies

, with

gam

e su

ch

as r

hino

, kud

u, h

ippo

, gira

ffe a

nd th

e ra

re s

able

ant

elop

e. S

ever

al d

istin

ctiv

e

and

rem

arka

ble

plan

t sp

ecie

s ar

e al

so t

o be

fou

nd o

n TA

LA.

The

gam

e

rese

rve

is o

wne

d 10

0% b

y th

e N

kum

bule

ni C

omm

unity

Tru

st.

Rhi

no L

odge

KZN

(R23

.7 m

illion

)

The

proj

ect e

ntai

ls th

e es

tabl

ishm

ent o

f a 4

4 be

d S

afar

i Lod

ge lo

cate

d in

the

Mpe

mbe

ni

Gam

e R

eser

ve.

The

man

agem

ent

of

the

lodg

e ha

s be

en

cont

ract

ed to

Tou

rves

t and

they

will

offe

r Big

5 g

ame

driv

es a

nd w

alks

, bird

ing

and

spa

treat

men

t.

The

Mpe

mbe

ni C

omm

unity

Tru

st r

epre

sent

s th

e in

tere

sts

of a

ppro

xim

atel

y

600

hous

ehol

ds w

ho fa

ll un

der

the

Trib

al A

utho

rity

of iN

kosi

Hla

bisa

and

the

Em

pem

beni

Trib

al C

ounc

il.

Nat

iona

lEm

pow

erm

entF

und

Stra

tegi

cPl

anfo

rth

eye

ars

2016

/17

–19

47

Sub-

Out

com

e A

ctio

ns

Indi

cato

rs

NEF

Tar

get &

Act

ions

The

proj

ect h

as b

een

endo

rsed

by

the

Eze

mve

lo K

ZN W

ildlif

e, K

ZN T

ouris

m

Aut

horit

y an

d th

e of

fice

of th

e M

EC

of E

cono

mic

Dev

elop

men

t and

Tou

rism

Jozi

ni T

iger

Lod

ge (R

28.3

milli

on)

The

Jozi

ni T

iger

Lod

ge is

a f

our-

star

hot

el in

Kw

aZul

u N

atal

whe

re t

he N

EF

inve

stm

ent o

f R28

.3 m

illion

has

hel

ped

a co

mm

unity

trus

t rep

rese

ntin

g 22

000

bene

ficia

ries

to a

cqui

re 3

3.4%

of t

he s

hare

s in

the

busi

ness

.

The

NE

F ha

s so

ught

to e

mpo

wer

the

loca

l com

mun

ity, w

hich

has

form

ed c

o-

oper

ativ

es t

o pr

ovid

e ne

cess

ary

serv

ices

(e.

g. a

Day

Spa

, la

undr

y se

rvic

es)

and

supp

lies

to th

e ho

tel.

Pr

ovid

e co

achi

ng

incu

batio

n, in

tens

ive

supp

ort a

nd fi

nanc

ing

to g

row

the

smal

l bu

sine

ss a

nd

% o

f gro

wth

in th

e nu

mbe

r of s

mal

l bu

sine

ss a

nd

coop

erat

ives

The

Ent

repr

eneu

rial D

evel

opm

ent S

trate

gy in

tend

s to

enh

ance

the

NE

F’s

impa

ct in

dev

elop

ing

entre

pren

eurs

hip

in S

outh

Afri

ca, m

ore

broa

dly

with

focu

s on

Fin

anci

al a

nd n

on-F

inan

cial

Sup

port

as w

ell a

s ad

voca

cy o

n is

sues

perta

inin

g to

ent

repr

eneu

rshi

p. W

e fu

rther

see

k to

incr

ease

the

parti

cipa

tion

by w

omen

and

you

th in

the

mai

n st

ream

eco

nom

y th

roug

h en

trepr

eneu

rshi

p.

Nat

iona

lEm

pow

erm

entF

und

Stra

tegi

cPl

anfo

rth

eye

ars

2016

/17

–19

48

Sub-

Out

com

e A

ctio

ns

Indi

cato

rs

NEF

Tar

get &

Act

ions

coop

erat

ive

sect

or

tow

ards

a m

ore

incl

usiv

e ec

onom

y.

% o

f sm

all

busi

ness

and

co

oper

ativ

es th

at

are

supp

orte

d an

d th

at a

re s

till

oper

atin

g on

e ye

ar

afte

r sup

port

pr

ovid

ed.

The

follo

win

g in

itiat

ives

hav

e al

read

y be

en im

plem

ente

d as

par

t of t

he 3

-yea

r

impl

emen

tatio

n pl

an:

B

usin

ess

Trai

ning

In

cuba

tion

G

over

nanc

e Tr

aini

ng

M

ento

rshi

p (P

re a

nd P

ost I

nves

tmen

t)

Th

e B

usin

ess

Pla

nner

tool

is o

n an

onl

ine

softw

are

tool

, int

ende

d to

ass

ist

entre

pren

eurs

to d

evel

op th

eir o

wn

busi

ness

pla

n an

d fin

anci

al p

roje

ctio

ns.

The

tool

is a

cces

sibl

e fre

e of

cha

rge

to a

ll en

trepr

eneu

rs (n

ot o

nly

entre

pren

eurs

wan

ting

to a

pply

for f

undi

ng fr

om N

EF)

to d

evel

op th

eir

busi

ness

pla

ns in

an

easy

and

use

r frie

ndly

man

ner.

To

date

, mor

e th

an

19,0

00 e

ntre

pren

eurs

hav

e ac

cess

ed th

e B

usin

ess

Pla

nner

Too

l.

B

usin

ess

train

ing

is p

rovi

ded

prim

arily

to e

ntre

pren

eurs

ope

ratin

g in

outly

ing

area

s, in

clud

ing

NE

F br

oad

base

d in

vest

ee g

roup

s. T

his

is m

ade

up o

f 4-d

ay a

nd 2

-day

sim

ulat

ed tr

aini

ng s

essi

ons

inte

nded

to d

eliv

er

lear

ning

exp

erie

nces

on

busi

ness

man

agem

ent p

rinci

ples

and

bas

ic

know

ledg

e an

d un

ders

tand

ing

on fi

nanc

ial s

yste

ms,

repo

rting

and

con

trols

.

A m

inim

um o

f 18

train

ing

sess

ions

are

targ

eted

to b

e pr

ovid

ed p

.a.,

90%

of

thes

e in

rura

l are

as a

nd m

ore

than

70%

of t

he d

eleg

ates

are

wom

en.

A

cces

s to

bus

ines

s in

cuba

tion

is fa

cilit

ated

for s

tart-

up a

nd e

xist

ing

Nat

iona

lEm

pow

erm

entF

und

Stra

tegi

cPl

anfo

rth

eye

ars

2016

/17

–19

49

Sub-

Out

com

e A

ctio

ns

Indi

cato

rs

NEF

Tar

get &

Act

ions

ente

rpris

es. K

ey e

xit o

utco

mes

inco

rpor

ate

finan

cial

gro

wth

, job

cre

atio

n

and

full

com

plia

nce

with

lega

l and

regu

lato

ry re

quire

men

ts.

The

NE

F is

targ

etin

g 75

ent

erpr

ises

to b

e re

ferr

ed fo

r inc

ubat

ion

in 2

016/

17.

Tr

aini

ng o

n co

rpor

ate

gove

rnan

ce a

nd a

ssis

tanc

e w

ith th

e im

plem

enta

tion

ther

eof i

s pr

ovid

ed to

the

NE

F’s

broa

d-ba

sed

inve

stee

gro

ups

and

bene

ficia

ries.

Tra

inin

g is

pro

vide

d to

all

qual

ifyin

g in

vest

ee g

roup

s w

ithin

6-m

onth

s of

pro

ject

impl

emen

tatio

n an

d co

mpl

ianc

e to

cor

pora

te

gove

rnan

ce re

quire

men

ts in

12-

mon

ths.

Th

e N

EF

esta

blis

hed

a m

ento

rshi

p pa

nel c

ompr

isin

g m

ore

than

110

indu

stry

and

tech

nica

l exp

erts

loca

ted

thro

ugho

ut th

e co

untry

. Key

obje

ctiv

es o

f the

men

tors

hip

prog

ram

me

incl

ude

the

deve

lopm

ent a

nd

mai

nten

ance

of s

usta

inab

le b

usin

esse

s w

hich

will

in tu

rn c

ontri

bute

to th

e

sust

aina

ble

grow

th o

f the

eco

nom

y, a

ssis

t with

the

turn

arou

nd

man

agem

ent o

f dis

tress

ed c

ompa

nies

and

bus

ines

s co

achi

ng.

A m

inim

um 3

-mon

th m

ento

rshi

p is

pro

vide

d to

all

smal

l bus

ines

s an

d

coop

erat

ives

fund

ed to

ass

ist p

rimar

ily w

ith th

e im

plem

enta

tion

of

adeq

uate

fina

ncia

l sys

tem

s an

d co

ntro

ls.

This

is p

rovi

ded

is a

dditi

on to

othe

r rel

evan

t pre

- and

pos

t-fun

ding

non

-fina

ncia

l sup

port.

Jo

b dr

iver

s on

su

ppor

ting

the

Sect

or a

nd c

ross

-cu

tting

The

NE

F ac

tivel

y se

eks

to s

uppo

rt pr

ojec

ts w

ith h

igh

job-

crea

tion

oppo

rtuni

ties,

esp

ecia

lly th

roug

h its

Stra

tegi

c P

roje

cts

Fund

. A

few

pro

ject

s in

Nat

iona

lEm

pow

erm

entF

und

Stra

tegi

cPl

anfo

rth

eye

ars

2016

/17

–19

50

Sub-

Out

com

e A

ctio

ns

Indi

cato

rs

NEF

Tar

get &

Act

ions

inve

stm

ent i

n th

e gr

een

econ

omy,

the

soci

al

econ

omy

and

publ

ic

serv

ices

as

wel

l as

Afr

ican

regi

onal

de

velo

pmen

t to

be

impl

emen

ted

and

revi

ewed

regu

larly

in

term

s of

impa

ct o

n gr

owth

, inv

estm

ent,

outp

ut, e

xpor

ts a

nd

Afr

ican

regi

onal

de

velo

pmen

t.

inte

rven

tions

to

war

ds g

row

th,

empl

oym

ent

crea

tion

and

high

er

inco

mes

for p

oor

hous

ehol

ds

unde

rway

in

spec

ified

jobs

dr

iver

s.

the

rene

wab

le e

nerg

y se

ctor

with

job

crea

tion

pote

ntia

l are

out

lined

bel

ow.

KC

Ene

rgy

(R67

milli

on in

vest

ed)

K

C e

nerg

y is

dev

elop

ing

a co

-gen

erat

ion

(Com

bine

d H

eat a

nd P

ower

,

CH

P) p

lant

, whi

ch is

cur

rent

ly u

nder

con

stru

ctio

n

Th

e C

HP

pla

nt w

ill pr

oduc

e ci

rca

60 tp

h of

ste

am a

nd g

ener

ate

6MW

p of

pow

er

A

tota

l of c

irca

250

job

oppo

rtuni

ties

(35

dire

ct/2

15 in

dire

ct) w

ill b

e cr

eate

d

The

tota

l val

ue in

vest

ed in

rene

wab

le e

nerg

y pr

ojec

ts is

app

roxi

mat

ely

R20

5

milli

on.

Pa

ckag

e su

ppor

t for

su

pplie

r dev

elop

men

t es

peci

ally

sta

te

proc

urem

ent

Prog

ress

ivel

y ris

ing

loca

l con

tent

le

vels

in to

tal s

tate

pr

ocur

emen

t.

The

Pro

cure

men

t fin

ance

pro

duct

pro

vide

s fu

ndin

g fo

r equ

ipm

ent a

nd w

orki

ng

capi

tal t

o as

sist

SM

Es

with

gua

rant

ee re

quire

men

ts in

con

stru

ctio

n pr

ojec

ts.

The

NE

F al

so p

rovi

des

shor

t-ter

m re

volv

ing

faci

litie

s to

ass

ist S

ME

s to

fulfi

l

once

-off

orde

rs fr

om s

tate

ow

ned

ente

rpris

es.

The

NE

F is

in th

e pr

oces

s of

forg

ing

dire

ct re

latio

ns w

ith s

tate

-ow

ned

ente

rpris

es a

nd g

over

nmen

t dep

artm

ents

to in

crea

se v

olum

es a

nd s

uppo

rt fo

r

Nat

iona

lEm

pow

erm

entF

und

Stra

tegi

cPl

anfo

rth

eye

ars

2016

/17

–19

51

Sub-

Out

com

e A

ctio

ns

Indi

cato

rs

NEF

Tar

get &

Act

ions

proc

urem

ent s

et a

side

s, e

.g. R

and

Wat

er; E

skom

; Tra

nsne

t.

To d

ate:

R

422.

7 m

illio

n of

inve

stm

ents

wer

e m

ade

in 2

37 S

ME

s to

acc

ess

proc

urem

ent o

ppor

tuni

ties

with

Sta

te-o

wne

d en

terp

rises

and

gov

ernm

ent

depa

rtmen

ts.

R

310

mill

ion

has

been

dis

burs

ed to

dat

e in

190

SM

Es

43

% in

Gau

teng

Pro

vinc

e an

d 57

% s

prea

d ac

ross

Sou

th A

frica

34

% in

val

ue o

f inv

estm

ent a

re in

SM

Es

owne

d an

d m

anag

ed b

y B

lack

wom

en

The

targ

et fo

r Pro

cure

men

t Fin

ance

form

s pa

rt of

the

broa

der t

arge

t to

“Pro

vide

fina

nce

to b

usin

ess

vent

ures

est

ablis

hed

and

man

aged

by

Bla

ck

peop

le.”

The

NE

F ta

rget

for t

he P

rocu

rem

ent F

inan

ce p

rodu

ct in

the

curre

nt fi

nanc

ial

year

: R70

milli

on a

nd 3

0 S

ME

s

3. .

Elim

inat

ion

of

unne

cess

ary

Not

app

licab

le

Nat

iona

lEm

pow

erm

entF

und

Stra

tegi

cPl

anfo

rth

eye

ars

2016

/17

–19

52

Sub-

Out

com

e A

ctio

ns

Indi

cato

rs

NEF

Tar

get &

Act

ions

regu

lato

ry b

urde

ns

and

low

er p

rice

incr

ease

s fo

r key

in

puts

fost

ers

inve

stm

ent a

nd

econ

omic

gro

wth

. 4.

Wor

kers

’ edu

catio

n an

d sk

ills

incr

easi

ngly

mee

t ec

onom

ic n

eeds

.

Not

app

licab

le

5. E

xpan

ded

empl

oym

ent i

n ag

ricul

ture

Dev

elop

men

t of

smal

lhol

der p

rodu

ctio

n in

con

text

of i

mpr

oved

di

stric

t pla

nnin

g an

d lin

k to

land

refo

rm,

exte

nsio

n, m

arke

ting

and

othe

r sys

tem

s.

Plan

to s

uppo

rt

smal

lhol

ders

de

velo

ped

and

inco

rpor

ated

in

APA

P, w

ith c

lear

an

nual

targ

ets.

Dev

elop

men

t of s

mal

lhol

der p

rodu

ctio

n:

Thro

ugh

the

prov

isio

n of

fu

ndin

g w

e ex

pect

to

ac

cele

rate

gr

owth

an

d

trans

form

atio

n th

e ru

ral

econ

omy,

to

crea

te d

ecen

t w

ork

and

sust

aina

ble

livel

ihoo

ds,

and

furth

er

cont

ribut

e to

bu

ildin

g ec

onom

ic

and

soci

al

infra

stru

ctur

e.

This

form

s pa

rt of

the

rura

l dev

elop

men

t stra

tegy

that

is li

nked

to la

nd a

nd a

grar

ian

refo

rm, f

ood

secu

rity,

and

tour

ism

.

To

dat

e w

e ha

ve in

vest

ed R

165

mill

ion

in th

e Ag

ricul

tura

l sec

tor,

equa

ting

to R

79k

per

job.

Ave

rage

wom

en e

mpo

wer

men

t ac

hiev

ed is

abo

ut 6

0%

and

abou

t 90%

of t

he in

vest

ed p

ortfo

lio is

loca

ted

in o

utlin

ed P

rovi

nces

Nat

iona

lEm

pow

erm

entF

und

Stra

tegi

cPl

anfo

rth

eye

ars

2016

/17

–19

53

Sub-

Out

com

e A

ctio

ns

Indi

cato

rs

NEF

Tar

get &

Act

ions

The

follo

win

g pr

ojec

ts w

ere

conc

lude

d:

Ntu

si D

airy

- Mpu

mal

anga

, Pro

ject

(R22

milli

on in

vest

ed)

The

busi

ness

invo

lves

the

esta

blis

hmen

t of a

500

ha d

airy

farm

with

the

view

of p

rodu

cing

and

sup

plyi

ng m

ilk to

the

mar

ket t

hrou

gh C

love

r S

A. A

n of

f-tak

e

agre

emen

t ha

s be

en o

btai

ned

from

Clo

ver

SA

to

purc

hase

100

% o

f m

ilk

prod

uced

. The

farm

will

form

par

t of C

love

r Hig

hvel

d ro

ute

for m

ilk c

olle

ctio

ns.

Pie

t R

etie

f si

tuat

ed i

n th

e H

ighv

eld

Rou

te c

urre

ntly

has

nin

e (9

) fa

rms

that

supp

ly C

love

r S

A w

ith m

ilk.

The

proj

ect i

s fu

lly o

pera

tiona

l hav

ing

star

ted

its

oper

atio

ns in

Jun

e 20

14. H

owev

er, s

ubse

quen

t to

the

proj

ect i

mpl

emen

tatio

n

whi

ch n

ow m

ilks

150

cow

s, N

tusi

is s

uppl

ying

milk

to Z

aaib

erg

Dai

ry a

s C

love

r

SA

is

no l

onge

r co

llect

ing

milk

alo

ng t

his

rout

e, b

ecau

se t

hey

said

tha

t it

was

n’t p

rofit

able

.

The

busi

ness

is lo

cate

d in

Pie

t Ret

ief,

Mpu

mal

anga

Pro

vinc

e at

the

Mkh

ondo

Loca

l Mun

icip

ality

. Th

is a

rea

has

been

ear

mar

ked

by b

oth

the

Mpu

mal

anga

Pro

vinc

ial

Gov

ernm

ent

and

the

Nat

iona

l D

epar

tmen

t of

Rur

al D

evel

opm

ent

and

Land

Ref

orm

(D

RD

LR)

as o

ne o

f th

e P

rovi

ncia

l de

velo

pmen

t pr

iorit

y

area

s du

e to

hig

h le

vels

of u

nem

ploy

men

t and

und

er-d

evel

opm

ent.

The

area

has

suita

ble

clim

atic

and

soi

l con

ditio

ns fo

r dai

ry fa

rmin

g.

Nat

iona

lEm

pow

erm

entF

und

Stra

tegi

cPl

anfo

rth

eye

ars

2016

/17

–19

54

Sub-

Out

com

e A

ctio

ns

Indi

cato

rs

NEF

Tar

get &

Act

ions

6. M

acro

-eco

nom

ic

cond

ition

s su

ppor

t em

ploy

men

t-cr

eatin

g gr

owth

Incr

ease

in in

dust

rial

finan

ce a

vaila

ble

In

crea

se in

in

dust

rial f

inan

ce

avai

labl

e

S

PF,

the

vent

ure

capi

tal f

und

of th

e N

atio

nal E

mpo

wer

men

t Fun

d (N

EF)

,

curr

ently

has

in e

xces

s of

23

proj

ects

und

er d

evel

opm

ent,

in w

hich

it h

olds

equi

ty th

at is

war

ehou

sed

for f

utur

e di

strib

utio

n to

B-B

BE

E e

ntiti

es

Th

e im

plem

enta

tion

of th

e af

orem

entio

ned

proj

ects

requ

ires

circ

a R

27

billi

on in

cap

ital,

of w

hich

circ

a R

4 bi

llion

is d

ue b

y th

e N

EF,

in re

spec

t of

its e

quity

inte

rest

s he

ld in

the

proj

ects

7. R

educ

ed

wor

kpla

ce c

onfli

ct

and

impr

oved

co

llabo

ratio

n be

twee

n go

vern

men

t, or

gani

sed

busi

ness

and

or

gani

sed

labo

ur

Dev

elop

men

t of

prog

ram

mes

to a

ddre

ss

wor

kpla

ce c

onfli

ct

thro

ugh

(a) i

mpr

oved

co

mm

unic

atio

n, c

aree

r m

obili

ty, s

kills

de

velo

pmen

t and

fa

irnes

s in

wor

kpla

ces,

an

d (b

) str

onge

r lab

our

rela

tions

sys

tem

s

Num

ber o

f w

orkp

lace

dis

pute

s de

clar

ed

The

NE

F be

lieve

s in

bui

ldin

g th

e re

quire

d hu

man

res

ourc

e ca

paci

ty t

hrou

gh

appr

opria

te

mec

hani

sms

that

w

ill

ensu

re

the

train

ing

and

deve

lopm

ent,

upgr

adin

g sk

ills,

know

ledg

e, c

ompe

tenc

e an

d at

titud

e th

at w

ill c

ontri

bute

to

the

achi

evem

ent o

f the

NE

F’s

goal

s an

d ob

ject

ives

.

The

NE

F’s

over

all t

rain

ing

and

deve

lopm

ent o

bjec

tives

are

to e

ncou

rage

and

supp

ort

empl

oyee

s to

atta

in t

heir

max

imum

pot

entia

l the

reby

con

tribu

ting

to

the

achi

evem

ent o

f the

NE

F’s

goal

s an

d ob

ject

ives

.

8. E

xpan

ded

econ

omic

oppo

rtun

ities

for

hist

oric

ally

Prog

ram

mes

to e

nsur

e in

crea

sed

acce

ss to

em

ploy

men

t and

en

trep

rene

ursh

ip fo

r

Shar

e of

you

th

empl

oym

ent o

r ed

ucat

ion.

The

NE

F ha

s es

tabl

ishe

d th

e W

omen

Em

pow

erm

ent F

und

(WE

F) th

at w

ill

focu

s on

onl

y su

ppor

ting

wom

en in

tran

sact

ions

. An

amou

nt o

f R22

0 m

illio

n

has

been

allo

cate

d to

the

fund

in th

e 20

15/1

6 fin

anci

al y

ear.

Nat

iona

lEm

pow

erm

entF

und

Stra

tegi

cPl

anfo

rth

eye

ars

2016

/17

–19

55

Sub-

Out

com

e A

ctio

ns

Indi

cato

rs

NEF

Tar

get &

Act

ions

excl

uded

and

vu

lner

able

gro

ups

w

omen

and

you

th in

the

cont

ext o

f str

onge

r su

ppor

t for

em

ergi

ng

and

smal

ler e

nter

pris

es

over

all.

Shar

e of

wom

en in

fo

rmal

em

ploy

men

t.

We

have

the

Kab

elo

Sei

tshi

ro B

ursa

ry S

chem

e w

hich

focu

ses

on fu

ndin

g

univ

ersi

ty s

tudi

es fo

r you

th a

nd s

uppo

rting

them

to q

ualif

y as

Cha

rtere

d

Acc

ount

ants

. Th

e N

EF

has

allo

cate

d R

1 m

illion

tow

ards

this

ann

ually

. T

he

NE

F is

in th

e pr

oces

s of

look

ing

at p

artn

ersh

ips

with

oth

er o

rgan

isat

ions

for

othe

r bur

sary

sch

emes

.

As

part

of it

s in

tern

ship

pro

gram

me,

the

NE

F ta

rget

s gr

adua

tes

from

diff

eren

t

terti

ary

inst

itutio

ns a

nd p

rovi

des

them

on

the

job

train

ing

for

a ye

ar w

ith t

he

hope

of a

bsor

bing

them

in th

e sy

stem

bas

ed o

n th

eir p

erfo

rman

ce.

The

NE

F ha

s pr

evio

usly

man

aged

and

pro

vide

d ad

ditio

nal f

inan

cial

sup

port

to

the

JIP

SA

/AFD

Jun

ior

Man

agem

ent

Dev

elop

men

t P

rogr

amm

e, w

hich

is

an

exch

ange

pro

gram

me

for

juni

or S

outh

Afri

can

man

ager

s to

gai

n va

luab

le

busi

ness

sch

ool

train

ing

and

prac

tical

wor

k ex

perie

nce

in F

ranc

e. 3

4 ju

nior

man

ager

s pa

rtici

pate

d in

the

firs

t in

take

, w

hich

was

fol

low

ed b

y 58

in

the

follo

win

g ye

ar.

The

NE

F is

cur

rent

ly lo

okin

g at

dev

elop

ing

othe

r pa

rtner

ship

s

with

the

BR

ICs

and

EU

cou

ntrie

s fo

r sim

ilar p

rogr

amm

es.

We

have

set

our

selv

es a

targ

et o

f ens

urin

g th

at B

lack

wom

en p

artic

ipat

e in

Nat

iona

lEm

pow

erm

entF

und

Stra

tegi

cPl

anfo

rth

eye

ars

2016

/17

–19

56

Sub-

Out

com

e A

ctio

ns

Indi

cato

rs

NEF

Tar

get &

Act

ions

and

hold

eco

nom

ic b

enef

it of

a c

erta

in p

erce

ntag

e of

the

tota

l dis

burs

emen

ts

inve

sted

ann

ually

. A

nnua

l tar

gets

for t

his

are

40%

in 2

016/

2017

and

ther

eafte

r.

The

NE

F m

ust i

ncre

ase

the

num

ber o

f bus

ines

ses

owne

d an

d m

anag

ed b

y

Bla

ck p

eopl

e in

Sou

th A

frica

by

prov

idin

g fu

ndin

g to

suc

h en

terp

rises

. W

e ai

m

to a

ppro

ve n

ew tr

ansa

ctio

ns w

orth

R4.

1 bi

llion

by 2

019,

and

dis

burs

e

R3.

2 bi

llion

mor

e in

to th

e ec

onom

y du

ring

the

stra

tegi

c pl

anni

ng p

erio

d.

The

NE

F al

so a

ims

to p

rom

ote

econ

omic

par

ticip

atio

n of

peo

ple

hist

oric

ally

excl

uded

from

mai

nstre

am e

cono

my

by in

crea

sing

tran

sact

ions

in p

rovi

nces

with

low

act

ivity

and

in ru

ral a

reas

. Th

is w

ill be

ach

ieve

d by

incr

easi

ng th

e

over

all v

alue

of p

ortfo

lio in

und

er-re

pres

ente

d pr

ovin

ces

by e

nsur

ing

that

25%

of a

nnua

l dis

burs

emen

ts is

inve

sted

in th

e un

derr

epre

sent

ed p

rovi

nces

(nam

ely,

Nor

ther

n C

ape,

Eas

tern

Cap

e, L

impo

po, M

pum

alan

ga, N

orth

Wes

t

and

the

Free

Sta

te)

9. P

ublic

em

ploy

men

t sc

hem

es p

rovi

de

shor

t-ter

m re

lief f

or

the

unem

ploy

ed

and

build

Not

app

licab

le

Nat

iona

lEm

pow

erm

entF

und

Stra

tegi

cPl

anfo

rth

eye

ars

2016

/17

–19

57

Sub-

Out

com

e A

ctio

ns

Indi

cato

rs

NEF

Tar

get &

Act

ions

com

mun

ity

solid

arity

and

ag

ency

. 10

. Inve

stm

ent i

n re

sear

ch,

deve

lopm

ent a

nd

inno

vatio

n su

ppor

ts g

row

th b

y en

hanc

ing

prod

uctiv

ity o

f ex

istin

g an

d em

ergi

ngen

terp

rises

and

im

prov

ing

livin

g co

nditi

ons

of th

e po

or

Not

app

licab

le

N Em werme Fu d

ic r e years 2016/17 - 19 58

8. Financial Plan

The NEF’s strategic objectives are detailed in section 5 of this Plan, and detailed Financial

Projections are provided in Appendix A.

8.1. Projections of revenue, expenditure and borrowings

Revenue projections include interest on loans and investments, raising /origination fees

(newly introduced over the strategic period), interest on cash in bank and dividend income

from listed and unlisted shares. The interest on loans is projected at rates based on the

pricing policies of each fund and the interest rate projections over the entire investment

portfolio. Most of the NEF’s loan instruments are priced against the prime lending rate. Fees

are projected at 1% of a third of funds disbursed each year.

Interest on cash in the bank is projected at between 6% and 7%, which are the projected

rates achieved on money invested with the South African Reserve Bank.

Dividend income is particularly difficult to predict/project as these are linked to different

dividend policies of the NEF’s investee companies. The NEF has a portfolio of listed and

unlisted investments, the majority of which relates to the MTN shares allocated to the NEF

by Government. The dividend projections included in the overall revenue is therefore based

our best estimate of what the NEF could receive each year.

The Net Asset Value of the NEF has increased from R2.1 billion in 2005/06 to about

R6 billion as at 31 March 2015. This has largely been a factor of appreciation in fair value of

the NEF’s listed investment portfolio and retained earnings.

Total Expenditure (i.e. including funding for non-financial services offered by the NEF) has

increased in line with increased activities and targets. Operational expenditure includes

general & administration and employee costs, and apart from office rental and salaries, are

all budgeted for from a zero base. The overall methodology applied when budgeting for



operational expenditure is largely linked to the organizational targets and activities. The

NEF has continued with a targeted critical role recruitment drive since the lifting of the

funding moratorium.

The NEF also embarked on various mandate related projects (i.e. non-financial services) for

which specific budget allocations are required. To this end a further average of R 17m per

annum has been budgeted for over the next three years. Some of the projects that the NEF

is and will be involved in are Investor Education road shows, non-financial support to NEF

investees (mentorship, entrepreneurship development as well as governance training).

Over the strategic period, the efficiency ratio (based on total costs) is forecasted to breach

the intended long term range of 54%-58%. This is mainly as a result of ED contributions no

longer expected to be received at prior projected rates mainly because of the recent

changes made to the BEE codes. The new Codes have significantly diluted the ED Fund’s

offering due to the fact that our niche as a beneficiary and our ability support the immediate

allocation of points has been compromised. The new Codes have done away with the

“Category B Beneficiary” classification and paragraph 4.14 of Statement 400 clearly prohibits

the calculation and measurement of Contributions and points outside the verification window.

In addition, non-financial support activities are also not subsidised. In the event that the NEF

gets transfers from the dti to fully fund the non-financial services we currently undertake, the

efficiency ratio could be brought down from 65% and maintained around 61% over the

course of the strategic period .

The current and required capitalisation of the NEF will allow it to move forward and make a

meaningful contribution in achieving its mandate, with its investment approvals projected to

reach the R10 billion milestone by the end of the strategic period.

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8.2. Asset and liability management

The NEF, as a Schedule 3A entity under the PFMA, is required to operate fully on the basis

of neither budgeting for a surplus or a loss. Investment activity is funded out of cash

balances and thus all liabilities will at all times be off-set by cash balances.

Excess cash is managed through a cash management process where short term cash is

invested in call accounts of varying maturities at two approved banks to meet short term

cash requirements and excess cash with the South African Reserve Bank in terms of the

requirements of the PFMA.

8.3. Cash p ec ns

Please refer to Appendix A.

8.4. Capital expenditure pr ects

Annual capex allocation is mostly related to replenishment of existing capex items such as

computers, furniture and office equipment. The average budget allocation for capex over the

three year period is R6million.

8.5. Infrastructure plans

The NEF does not directly fund infrastructure for itself or the country as part of its mandate

though there may be an element of infrastructure funding provided through projects funded

by the Strategic Projects Fund that is a specific requirement of that project and in line with

national targeted strategic sectors. In addition, the NEF is involved in assisting with funding

for the PRASA and AREVA infrastructure development initiatives.

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8.6. Dividend policies

The NEF does not have a dividend policy with respect to any surplus reported. Surpluses

are retained following a section 53(3) application to the National Treasury each year in order

to meet further capitalisation needs of the NEF since it is not currently on the MTEF and thus

not a recipient of any government allocated funding.

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9. Strategic Risk Register

9.1. Risk Management around the NEF’s Strategic Objectives

The realisation of the strategic objectives presented by the NEF may be affected by the

following key risks as ranked in the NEF’s organizational Key Risk Register as at 31

December 2015:

1. Sustainability Risk: The risk that the NEF will not be financially sustainable due

to erosion of the capital base and the NEF not having adequate capital to fund

planned programs and meet medium term cash requirements.

The NEF was not allocated capital via the recent budget process and was required to

sustain itself over the strategic planning period (three years) out of current capital and

internally generated portfolio returns.

This risk will materialise should the current capital not be prudently managed and the

investment portfolio becomes significantly impaired in the absence of future funding being

allocated to the NEF or the NEF not being able to source additional capital.

Due to increase in the level of approvals, the risk is that the NEF approves transactions that

it does not have the available funds to follow through.

The current funding instruments (i.e. Equity, Shareholders loans etc.) used to structure

transactions and the use of moratoriums is also negatively impacting on the NEF’s cash-

flows.

The actions implemented to mitigate against the recapitalisation and sustainability risks

include:

• Close monitoring of unencumbered cash and regularly performing going-concern

cash analysis.



Close monitoring of the portfolio by the Post Investments Unit in collaboration with

the Finance Division.

Intervention by the Restructure and Turnaround Unit for businesses that are in

distress.

Engagements with the dti and National Treasury regarding funding requirements.

2. Recapitalisation Risk: The risk that the NEF will not be able to raise sufficient

capital to fund the NEF’s short to medium-term investment and operating

activities.

Without an injection of new capital in the medium term, the NEF will run out of capital to

finance new transactions going forward. The lack of adequate capital will also negatively

impact on the NEF’s ability to follow through on participation interest or equity options for

transactions within the NEF’s Strategic Projects Fund. This will have a negative impact on

the achievement of the NEF’s mandate and the ability to transform the economy.

The process of implementing an optimum business combination structure with the IDC is

underway. A detailed assessment of an optimal structure undertaken and subsequent

reports were presented to Trade and Industry Minister Rob Davies and Economic

Development Minister Ebrahim Patel. Formal approval has since been obtained from the

stakeholder Ministries for the NEF to become an Arms-length subsidiary of the IDC. Steps

are being taken to implement this process.

Various initiatives are underway regarding resolving the issue relating to the recapitalisation

of the NEF. MTEF and IDC applications are underway to secure funding. NEF is also

undertaking fundraising initiatives for Special Projects Fund transactions.

3. Credit Risk: The risk of exposure to high credit risk investments and poor

quality of the invested portfolio



The NEF is mandated to intervene in the economy through the provision of funding to black

owned enterprises which, due to past economic imbalances, may be of a higher credit risk.

This risk is exacerbated by the current tough economic climate that may impact on funded

businesses and their cash flows leading to the inability to honour loan repayments and

possible defaults on loans to the NEF. Due to the high risk mandate of the NEF, this risk is

rated as one of critical exposures facing the NEF.

Internally, the risk that the assessment processes of the NEF may not be able to inform

appropriate investment decisions does exist, as does the risk of not collecting on amounts

due and not being able to timeously identify distressed investments which may be able to be

rescued. The risk of funding the wrong “jockey’s” impacting on the performance of

investments and the portfolio also exists.

Inadequate controls mitigating this risk may negatively impact on the performance and

quality of the portfolio.

The controls introduced to attempt to mitigate this risk include

Appointment of skilled fund management teams

Due diligence investigation processes which include background checks

Adequately constituted and efficient approval structures

Portfolio management, monitoring and reporting processes

Use of pricing models according to a pricing policy which compels consideration of

credit risk.

An independent credit risk assessment process by the Risk Division.

Credit collection process managed by collaboration between the Post Investment

Unit and the Finance Division.

Adequate turnaround workout and restructuring process.



4. Business/Market Risk: The risk that changes in external market conditions

have a negative impact on the viability of funded transactions

The investment portfolio of the NEF consists of businesses in the commercial environment

that are susceptible to normal business risks of in an economic environment, fluctuations in

commodity prices and foreign exchange rates amongst other variables. The current volatile

local economic environment has led to significantly lower GDP growth rates. In addition

household personal finances are under financial strain due to an increase in living costs.

This is negatively impacting on business conditions and has placed strain on some of the

clients in the portfolio.

The NEF portfolio is arguably more susceptible to these variations given the nature of the

businesses being supported i.e. early stage business, inexperienced entrepreneurs, geared

balance sheets and hence not as able to absorb the impact of these fluctuations as well as

more established businesses.

In evaluating transactions, market conditions are considered, due diligence investigations,

modelling and structuring of transactions by the deal teams. In addition, a regular micro and

macro economy sensitivity is undertaken by our Post Investment Unit and NEF appointed

mentors are used to promptly advise NEF investees on appropriate course of action.

5. Information Technology Risk

The risk that the IT systems do not meet users’ requirements or that the system is not fully

utilized could impact on the efficiencies within the organisation and reliability of information.

The risk within this area of the organisation impacts on all areas of the organisation.

Various initiatives have been implemented to improve the controls within this area i.e. IT

governance structure, including an IT steering committee, which has been established and is

now responsible for overseeing implementation of IT projects. An exercise to identify

possible issues with the existing system was completed and a report has been issued. Due

to the business combination discussions currently underway, management felt that it would



not be prudent to incur significant costs at this point and thus the implementation of the

second phase for enhancements has been placed on hold. Focus is however being placed

on certain quick wins as well as providing additional training to users, to ensure that users

are aware of all of the functionalities within the system.

6. Mandate Implementation: The risk of the NEF not being able to meaningfully

contribute towards its mandate

The mandate of the NEF is clearly set out within the NEF Act. The risk does however exist

that in executing the mandate, the NEF does not achieve the desired impact in advancing

B-BBEE.

The contribution to this risk could be exacerbated through management and staff potentially

not fully understanding the operational implementation of the mandate of the NEF. They may

also be inadequately skilled or lack the capacity and thus may be too thinly spread to

consistently monitor adherence to mandate in all activities of the NEF.

The NEF strives to ensure that all departments are sufficiently resourced in line with the

annual performance targets with highly skilled individuals. The staff is also required to attend

a detailed orientation process, as well as the staff planning workshops, in which the mandate

is reemphasised.

This risk is further mitigated through the development of funding strategies and products

which are in constant development to address market failures and acceleration of the

execution of the mandate. An example is a strategy referred to as the SME strategy where

high volume and low value applications in the form of franchise, procurement invoice

discounting, contact and bridging facilities. In addition, a credit committee has been

established to approve the SME strategy loan applications as a rapid loan approval solution.

Furthermore, transactions are currently being assessed against a measure of impact termed

the NEF Empowerment Dividend. The NEF Empowerment Dividend leads to a discount in



the pricing of the transactions to encourage entrepreneurs to consider ventures with

opportunities of high employment, women empowerment and across all South African

provinces.

Inability to secure future funding will negatively impact on the ability of the NEF to implement

its mandate. Various actions, as indicated in item 1 above, are being implemented to deal

with the future funding requirements of the NEF.

7. Moratorium in funding new applications

Additional funding has not yet been secured. The NEF should have sufficient cash to fund

the approvals targets of R880 million. Should bridging finance not be obtained in the short

term, the NEF runs a risk of having to freeze funding on new applications due to cash

limitations.

8. Business Combination Risk: Business combination process not planned and

implemented effectively with resultant negative impact on the future

sustainability, reputation and mandate of the NEF.

The process of implementing an optimum business combination structure with the IDC is

underway. A project task team was established between the NEF and the IDC to ensure

that interests and objectives of both the NEF and the IDC are upheld and was responsible

for the monitoring of the progress of the business combination. A feasibility study has been

completed and reports presented to Trade and Industry Minister Rob Davies and Economic

Development Minister Ebrahim Patel, and plans for the incorporation of the NEF under the

IDC are at an advanced stage. The matter is being finalised and should be implemented

soon.

9. People Risk: Loss of key personnel due to uncertainty regarding the outcome

of recapitalisation and business combination processes



The NEF ensures constant information dissemination to all personnel regarding

recapitalisation and business combination process and plan. As at the end of the quarter

ending 30 September 2015, the level of resignations has increased from the previous

quarter and may be due to possible uncertainty with regard to the recapitalisation process.

This is being investigated further by Human resources. Succession plans are however in

place in which capable individuals have been identified, suitably trained and given exposure

at senior levels.

10. Reputation risk

The NEF regularly engages in marketing initiatives such as advertising and stakeholder

engagements, performs brand awareness and regular brand audits, engages the media and

administers perception survey to respondents.

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ic r e years 2016/17 - 19 69

10. Fraud Prevention Plan The Fraud Prevention Plan is the responsibility of all staff and management at the NEF.

This plan is a dynamic document and is updated regularly to reflect changes in the business

operations and circumstances of the NEF.

The NEF has developed and implemented a Fraud Prevention Strategy and Fraud

Prevention Plan to guide behaviour and to combat any fraudulent activities. Key aspects of

the Fraud Prevention Strategy and Plan are listed below.

10.1. Anti-Fraud Policy Statement

As a first step towards implementing an anti-fraud strategy, the NEF adopts and

publishes an Anti-Fraud Policy statement along the following lines:

The NEF recognises the possibility of fraud and corruption occurring in its operations. As

such it is the policy and mission of the NEF to strive for the protection of its employees and

its other stakeholders (such as applicants, investees, suppliers etc.) through the

implementation of an effective and efficient Fraud Prevention Strategy.

We believe that there is only one effective way of fighting fraud and other corrupt practices

and that is by instilling the reality amongst employees and other stakeholders, (such as

clients (investees), suppliers of goods and services, public,) that fraud and corruption do not

pay and will be detected and dealt with severely.

Therefore, the NEF’s view on fraud and corruption is one of zero tolerance, and as such the

NEF is committed to:

Aggressively detecting incidents of fraud and corruption;

The investigation of all allegations of misconduct by employees, clients and suppliers, said to

be occasioned by fraud and corruption; and

N Em werme Fu d

ic r e years 2016/17 - 19 70

The prosecution of all offenders criminally and, where necessary, the institution of civil and

disciplinary action against them.

10.2. Anti-Fraud Charter

In implementing the Fraud Prevention Policy of the NEF has adopted the following

principles:

• We have a zero-tolerance attitude to fraud

• We understand and manage our risks

• We are proactive in defending our assets

• We react swiftly when a crime is uncovered

10.3. Fraud Risk Management strategy

The key objectives of the NEF’s Fraud Risk Management Strategy are:

• To establish the necessary preventative, control and monitoring mechanisms/

systems to minimise the defrauding of the NEF funds, resources, assets and services

by any persons/organizations.

• To ensure that adequate measures are in place to protect the NEF from internal as

well as external fraud (i.e. supplier, potential applicants, clients, syndicates targeting

NEF i.e. false applications etc. )

• To ensure that adequate measures are in place to report fraud (whistle blowing policy

and hotline)

• To ensure that all reported matters are investigated

• To account to the Board, via the Audit Committee on all fraudulent activity within the

NEF



To take the necessary action against all parties involved in fraudulent activities

against the NEF and to punish and deter any fraudulent actions from continuing or

recurring.

The focus of such a strategy is the formalisation and implementation within the NEF of a

culture of zero tolerance for fraud and corruption, a high level of fraud awareness, and a

management and control environment that makes it as difficult as reasonably possible to

misappropriate assets or to succumb to corruption.

From the perspective of the NEF, good governance as it pertains to fraud prevention

includes:

a. Continuing the present focus on governance

b. A robust control environment

c. A strong and independent Internal Audit function

d. A relevant and well-communicated Code of Conduct

e. A whistleblowing policy and mechanism (fraud hotline) to report suspected fraud

or corruption.

From a fraud prevention point of view it is important that:

When management considers the strategy and direction that the organisation is

taking, they take into account the environmental factors relating to fraud and that they

insist that a suitably comprehensive fraud prevention strategy be put in place to

address such risks, this is done via the organisational risk assessment process.

Each manager brings his or her specialised industry knowledge or technical

background to bear when considering how fraud risks are to be avoided.

Regular monitoring of performance against pre-set objectives should take place.

Individual operational units are held accountable for their actions.



Constant pressure for improvement is exercised as this has a powerful impact on

reducing fraudulent activity. This is done via the implementation of internal and

external auditor’s recommendation, which is tracked.

The management team’s awareness of the possibility of fraud is monitored, as this is

also an active manner in which managers can encourage defensive strategies.

Regular monitoring of the internal control environment takes place to ensure that it

remains of sufficiently high standard.

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Documents

Strategic Plan 2016-2019 - 29Jan 2016 · National Empowerment Fund Strategic Plan for the years 2016/17 r 19 8 1. Provide finance to business ventures established and managed by black