BRIEFING ON THE BROADENING PARTICIPATION BRIEFING ON THE BROADENING PARTICIPATION DIVISION OF the dti & THE NATIONAL DIVISION OF the dti & THE NATIONAL

EMPOWERMENT FUND (NEF) TO THE PORTFOLIO EMPOWERMENT FUND (NEF) TO THE PORTFOLIO COMMITTEE ON TRADE AND INDUSTRYCOMMITTEE ON TRADE AND INDUSTRY

PRESENTED BY: MOJALEFA MOHOTO PRESENTED BY: MOJALEFA MOHOTO THE ACTING DDG – BPDTHE ACTING DDG – BPD

11 JULY 201411 JULY 2014

1

CONTENT1. OUTCOME 4 AND BROADENING PARTICIPATION DIVISION’S

(BPD) PURPOSE2. BPD’S STRATEGIC OBJECTIVES 3. BPD’S SUB PROGRAMMES4. BPD’S CORE FUNCTIONS5. LEGISLATIVE MANDATE6. BPD’S ACHIEVEMENTS7. KEY CHALLENGES8. PRIORITIES9. ENTITIES CONTRIBUTING TO THE DELIVERY OF BPD

OBJECTIVES 10. DEPENDENCY ON OTHER SISTER DEPARTMENTS11. NATIONAL EMPOWERMENT FUND

2

OUTCOME 4 AND BPD’s PURPOSE

OUTCOME 4: Decent employment through inclusive economic growth.

PURPOSE: Develop policies and strategies that create an enabling environment for small, medium and micro enterprises, and enhance the competitiveness of local and provincial economies to achieve equity, growth and job creation.

(To be revised given the establishment of the new department)

3

BPD’S STRATEGIC OBJECTIVES

– Create an enabling environment conducive to the development and growth of SMME’s and cooperatives;

– The creation and expansion of economic opportunities for enterprises, previously disadvantaged citizens (i.e. black people, women, youth and people with disabilities) and underdeveloped regions;

– Fostering entrepreneurship and innovation through skills development and business support services;

– Enhance the competitiveness and productivity of enterprises through promotion of access to appropriate technologies, enabling infrastructure and skills; and

– Improve efficiency of organizational and institutional arrangements

(To be revised given the establishment of the new department)

4

BPD SUB-PROGRAMMES

• Enterprise Development: Enterprise Development comprises of the Innovation and Technology Unit and Skills for the Economy Unit.

• Equity and Empowerment: This sub-programme comprises of Black Economic Empowerment Unit.

• Regional Economic Development: This sub-programme comprises of Economic Infrastructure and Logistics, Industrial Clusters and Special Economic Zones.

5

BPD CORE FUNCTIONS

Black Economic EmpowermentPurpose: To create an enabling environment for the implementation of Broad- Based Black Economic Empowerment.

Skills for the EconomyPurpose: To advocate and facilitate the implementation of evidence-based skills policies, programmes and systems for the achievement of greater productivity and competitiveness of the economy.

Innovation TechnologyPurpose: To enhance industrial development and competitiveness through technology support measures.

6

BPD CORE FUNCTIONS cont…

Economic Infrastructure & LogisticsPurpose: To implement existing economic infrastructure and logistics policies and programmes

Regional Industrial DevelopmentPurpose: To develop policies and interventions to improve regional industrial competitiveness of the SA economy and build partnerships between government and its social partners.

7

LEGISLATIVE MANDATEBroad-Based Black Economic Empowerment Act,

Act No. 53 of 2003 as amended The purpose is to establish a legislative framework as follows: for the promotion of black economic empowerment; to empower the Minister to issue Codes of Good Practice and publish transformation

charters; to establish the Black Economic Empowerment Advisory Council; to promote compliance by organs of state and public entities and to strengthen the

evaluation and monitoring of compliance; to include the creation of incentive schemes to support black owned enterprises; to establish the B-BBEE Commission to deal with compliance of broad-based black

economic empowerment; and to provide for offences and penalties; and to provide for matters connected therewith.

8

BPD ACHIEVEMENTS 2013/2014 FY

• Broad – Based Black Economic Empowerment (B-BBEE) - The B-BBEE Amendment Act has been assented to by the State President and is awaiting promulgation into law. The Amended B-BBEE Codes of Good Practice were gazetted in October 2014 with a provision for an elective transitional period up to the end of April 2015.

• The Support Programme for Industrial Innovation (SPII) received 43 proposals and the Adjudication panel successfully approved 31 projects exceeding the target of 20. The total value approved amounted to R76.8 million with disbursements of R65.3 million during the financial year under review.

9

BPD ACHIEVEMENTS 2013/2014 FY Cont…

• The Technology and Human Resources for Industry Programme (THRIP) supported 1541 students and 1135 researchers from 364 projects approved.

• The Workplace Challenge Programme implemented productivity training programme in 318 new companies and supported 47 807 jobs.

• Planning work around the proposed 10 new SEZs is underway. The proposed zones are in Eastern Cape (Wild Coast region), Free State (Maluti-a-Phofung), Gauteng (Johannesburg), KwaZulu-Natal (eThekwini-Dube Trade Port), Limpopo (Tubatse and Musina), Mpumalanga (Nkomazi), Northern Cape (Upington), North West (Bojanala), and Western Cape (Atlantis).

10

KEY CHALLENGES

The division is faced with the following key challenges:

•Insufficient funding to implement all programmes of the Division

•Fronting retarding progress of the B-BBEE implementation

11

PRIORITIES 2014/15 FY

1.Implement the Broad Based Black Economic Empowerment Act And The Codes Of Good Practice

•Establishment of the B-BBEE Commission.•Development of regulations to give effect to the Amendment Act•Finalise phase 2 amendment Codes of Good Practice (Statement on Specialised entities, Qualifying Small Enterprises statement; Sector Charters statement and Statement on multinationals)•Finalise the process of establishing the B-BBEE Verification Industry regulator •Review of the Preferential Procurement Policy Framework Act (PPPFA) to align to B-BBEE objectives

12

PRIORITIES 2014/15 FY cont…

2. Implement the Regional Industrial Development (RID) strategyContinue to finalise business cases for viable Special Economic Zones (SEZs) and phased in operationalisation.

3. Finalisation of the Industrial Cluster FrameworkFinalise the development and approval of the Industrial Cluster Framework and related programmes.

4. Implementation of the Innovation and Technology programmesPilot Techno Industrial Facilities. Finalise the National Commercialisation Strategy.

13

PRIORITIES 2014/15 FY cont…

5. Implementation of the Skills for Economy programmesTo upscale the number of Supported companies through the Workplace Challenge (WPC) productivity programme. To finalise the SEZ Skills Strategic Framework, the development of IPAP Artisan Plan with employers and roll-out of the Itukise Unemployed Graduate internship programme.

6. Implementation of the Economic Infrastructure programmesForging strategic partnerships for infrastructure development across the 18 Strategic Integrated Infrastructure Projects (SIPS).

14

DEPENDENCY ON OTHER SISTER DEPARTMENTS

15

BPD PROGRAMME RELEVANT LEGISLATION NATIONAL DEPARTMENT

B-BBEE FRAMEWORK PREFERENTIAL PROCUREMENT POLICY FRAMEWORK ACT AND ITS REGULATIONS

NATIONAL TREASURY

SKILLS FOR ECONOMY PROGRAMMES

NATIONAL SKILLS DEVELOPMENT ACT

DEPARTMENT OF HIGHER EDUCATION

INNOVATION & TECHNOLOGY PROGRAMMES

WHITE PAPER ON SCIENCE AND TECHNOLOGY

DEPARTMENT OF SCIENCE AND TECHNOLOGY

BPD PROGRAMMES NATIONAL SMALL BUSINESS ACT

DEPARTMENT OF SMALL BUSINESS DEVELOPMENT

DEPENDENCY ON OTHER SISTER DEPARTMENTS

16

BPD PROGRAMME RELEVANT LEGISLATION NATIONAL DEPARTMENT

ECONOMIC INFRASTRUCTURE PROGRAMMES

NATIONAL TRANSHIPMENT STRATEGY DEVELOPMENT BY NATIONAL PORTS CONSULTATIVE COMMITTEE (NPCC)

PROGRAMME ON THE STRATEGIC INTEGRATED INFRASTRUCTURE PROJECTS (SIPs)

THE NATIONAL PORTS ACT AND MARITIME TRANSPORT POLICY

INFRASTRUCTURE DEVELOPMENT ACT OF 2014 (PRESIDENTIAL INFRASTRUCTURE COORDINATING COMMITTEE)

DEPARTMENT OF TRANSPORT

DEPARTMENT OF ECONOMIC DEVELOPMENT (COORDINATOR)

National Empowerment Fund

17

1818

Established by the National Empowerment Fund Act No105 of

1998, the NEF is a driver and a thought-leader in promoting and

facilitating Black economic participation through the provision

of financial and non-financial support to black empowered

business, as well as by promoting a culture of saving and

investment among Black people.

NATIONAL EMPOWERMENT FUND (NEF) MANDATE

18

A High-Performing Organisation  Output Achievements

1 Approvals Approved 549 transactions worth about R5,46 billion for black-empowered businesses across the country.

2 Disbursement R3,9 billion has been committed to 455 of these companies.

3 Collections Cumulative collection of over R1 billion from funds disbursed across the country, in black-owned and managed businesses.

4 Strong SME support Over 60% of the NEF’s beneficiaries are SMEs, and these are in virtually all sectors of the economy.

5 Integrity Secured unqualified external audit opinions for 8 years running.

6 Supporting jobs To date the NEF has supported in excess of 46 000 jobs.

7 Industrialisation 21 strategic and industrial projects worth R32 billion, with the potential to support about 80 000 jobs.

8 A culture of savings & investment

In a transaction worth over R1,3 billion the NEF Asonge Share Scheme made available more than 12 million MTN shares to over 87 000 investors comprising black individuals and groups. 49% of investors were women.

9 Investor education Reached over 18 000 people in villages and townships through 80 community seminars on how to save and invest, personal financial discipline, shares, dividends, bonds, the property and money markets.

10 Entrepreneurship training / incubation

Business skills training provided to 1 460 potential entrepreneurs who attended 83 seminars before funding stopped.

A HIGH PERFORMING ORGANISATION

19

20

• FOCUS ON RECAPITALISATION

• MORATORIUM ON NEW APPROVALS

• PORTFOLIO HEALTH

• CLOSING THE GAP BETWEEN APPROVALS AND

DISBURSEMENTS

• PROPAGATING BRAND REPUTATION

• HIGH NUMBER OF RESIGNATIONS

CONTEXT

20

21

MTEF Application for R2.3 billion submitted on time. However no allocation

was made to the NEF during the 2014 budget vote.

Reclassification and Limited Borrowing Rights Made an application for limited borrowing rights and followed up on

application for the PFMA reclassification application made in the past.

NEF/IDC Fund Developed the model for the fund that assisted in exploring and better

understanding the impact of the proposed IDC pricing

RECAPITALISATION INITIATIVES

21

22

Temporary MoratoriumDeveloped up to 11 scenarios that were meant to explore funding options available and that would be viable for the NEF in the short to medium term. These were narrowed to a few options that were presented to the Board for final decision.Monthly unencumbered cash position tracked, and culminated in the proposal made in both Jan and April 2014 for the moratorium to be lifted.

RECAPITALISATION INITIATIVES cont….

22

23

NEF INVESTED PROCESS

23

24

Strategic Projects Fund (SPF)

A unit of the NEF established with a mandate to increase the participation of black people in early-stage projects

Aligned to national Government policy.

Seeks competitive opportunity for the South African economy and the inclusion of black participation in opportunities at the outset of projects, as opposed to

doing so during equity closure

STRATEGIC PROJECTS FUND (SPF) MANDATE

24

25

DEVELOPMENT AND ECONOMIC IMPACT

SPF Investment Sector Focus

SPF INVESTMENT SECTORS

RENEWABLEENERGY

MINERALBENEFICIATIO

N

AGRO-PROCESSING

BUSINESSPROCESS

OUTSOURCING

INFRASTRUCTURE TOURISM

Biofuels

Biomass

Biogas

Solar

Wind

Hydro

Exploration

Mining

Beneficiation

Chemicals

Food Sector

Textiles

Manufacturing

Call Centres

Telecoms

Roads

Airports

Dam and

Bridges

Sewer and

Services

Stadiums

Sky Towers

26

SPF INVESTMENT SECTOR FOCUS

26

27

SPF PROJECT DEVELOPMENT STAGES

28

Project Sector Current NEF Equity Total Invested Total Project Size NEF Future

Equity Rights

RMI Mineral Beneficiation 30% 13 500 000 15 000 000 000 2 250 000 000 SA Metals Mineral Beneficiation 29% 40 000 000 1 950 000 000 282 750 000 Coking Coal Mineral Beneficiation 85% 6 000 000 500 000 000 212 500 000 Silica Mineral Beneficiation 49% 7 000 000 1 500 000 000 367 500 000 Coconut Water Agro-processing 49% 5 000 000 50 000 000 12 250 000 Busamed Hospitals Healthcare 49% 260 000 000 1 600 000 000 - Milk for Life Agro-processing 49% 2 000 000 50 000 000 - Link Africa Infrastructure 30% 100 000 000 1 000 000 000 150 000 000

Radisson Blu Kruger resort Tourism 40% - 250 000 000 50 000 000 TFST Renewable Energy 6% 5 313 210 1 800 000 000 57 600 000 MSW to Bioethanol Renewable Energy 49% 10 000 000 800 000 000 196 000 000 Waste Tyre recycling Renewable Energy 49% 8 000 000 50 000 000 12 250 000 KC Energy Renewable Energy 40% 48 000 000 150 000 000 - Tyre Manufacturing Research Manufacturing 100% 1 590 000 335 000 000 167 500 000 FIS Biodiesel Renewable Energy 30% 10 000 000 800 000 000 120 000 000 MIBT Manufacturing 35% 18 600 000 30 000 000 5 250 000

Richards Bay Wind Farm Renewable Energy 17% - 1 700 000 000 -

Paediatric Dental Facility Infrastructure 49% - - - Black Lite Solar Manufacturing 23% 2 300 000 2 200 000 000 253 000 000 Auto Disable Syringes Manufacturing 49% 7 156 600 200 000 000 49 000 000 Mabele Fuels Renewable Energy 9% 40 000 000 2 155 000 000 - Totals 584 459 810 32 120 000 000 4 185 600 000

NEF EQUITY RIGHTS

29

KC ENERGYThe cogeneration project aims to develop a Combined Heat and Power (CHP) plant producing steam (60 tph) and electrical power (6MWp) for process plant usage and will be based in Newcastle, KwaZulu-Natal province. The plant is currently under construction and is expected to come online in July/Aug 2014.Location Newcastle, KZNProject Development Stage ConstructionNEF Investment to date R48 millionNEF Equity 40%Project Promoter KC EnergyTotal Project Cost c. R184 millionNo. of Jobs Created 221

RENEWABLE ENERGY PROJECTS

30

MABELE FUELSThe project intends to develop a roughly 154 million litre per annum fuel grade bio ethanol plant, in Bothaville, in the Free State Province. The plant feedstock is grain sorghum and the production methodology involves a process utilising grain milling through starch conversion to sucrose as well as fermentation and drying that ultimately culminates in the production of saleable bio ethanol.

Location Bothaville, Free State

Project Development Stage Financial CloseNEF Investment to date R40 millionNEF Equity 11.76%Project Promoter Mabele Fuels (Pty)

LtdProjected Financial Close Requirement

R2.5 billion

No. of Jobs Created 636

RENEWABLE ENERGY PROJECTS

30

31

BUSA MEDBusamed is the first black-owned hospital group to compete with the big three. The vision is to be a consolidator of the fragmented health care market. This will be kick-started with the commercialisation of 4 hospital licenses for 630 hospital beds, spread over three provinces, namely Gauteng, Cape Town and the Free State. With the first being in the Western Cape, this hospital will be a world class cardiologic centre of excellence. The aim is to develop centres of excellence which will provide world-class services.

Location Cape TownProject Development Stage Financial CloseNEF Investment to date R260 millionNEF Equity 49%Project Promoter Goldenwood (Pty) Ltd

Projected Financial Close Requirement R1.6 billionNo. of Direct Jobs Created 3,000

INFRASTRUCTURE & MANUFACTURING

31

LINK AFRICAThe project aims to deploy Last Mile Fibre Optic cables across the national landscape of South Africa. Fibre optic infrastructure that is 4 times faster at less than half the cost of normal fibre will be deployed. Licensed patented technology that uses existing sewer and other currently existing infrastructure rather than the normal method of digging up trenches to lay fibre optic cables, will be utilised. An initial capital investment of ZAR300 million will lead to the establishment of a South African Last Mile Fibre Optic Infrastructure Company, i3 Africa.

Location KZN

Project Development Stage Financial Close

NEF Investment to date R100 million

NEF Equity 30%

Project Promoter Link Africa (Pty) Ltd

Projected Financial Close Requirement R900 million

No. of Direct Jobs Created 200

INFRASTRUCTURE & MANUFACTURING

32

33

Over the years the NEF has implemented this mandate through two core divisions, namely Fund Management and Asset Management, whose respective functions and outputs are outlined below:

Fund Management Asset ManagementFacilitates financial and non-financial support for black

enterprises requiring start-up, expansion and equity acquisition finance ranging from R250 000 to R75

million

Promotes a culture of savings and investments and the universal understanding of equity ownership among

black people

Pre-Investment – business development, entrepreneurship development, including training & incubation support, product advisory services, administration of applications and deal-sourcing

Develop and support public-share offers aimed at facilitating black equity ownership in State-Owned Commercial Enterprises and the private sector, e.g. Asonge and Sasol Inzalo

iMbewu Fund – SME Fund supporting Entrepreneurship, Procurement & Franchise Finance

Provide Investor Education and promote financial literacy and understanding of the equities markets among black people

uMnotho Fund – supports funding of New Ventures, Acquisition, Project Finance, Expansion, Capital Markets, Liquidity & Warehousing needs

Champion Enterprise Development by enabling measured entities to contribute 3% of Net Profit After Tax (NPAT) to the growth of black SMEs countrywide    

Rural & Community Development Fund - supports rural economic development through New Ventures, Acquisition and Expansion Finance Strategic Projects Fund – supports early-stage investment in manufacturing transactions with export-earning potentialPost Investment – monitor the performance of NEF investees and provide ongoing mentorship support

Promote entrepreneurship and contribute to the creation of sustainable employment and the overall growth of an inclusive South African economy.

TRUE TO THE MANDATE

  Output Achievements

1Approvals

Approved 35 deals worth R434 million against a target of 20 deals worth R175 million

2Commitments

Committed 38 transactions worth R304 million vs targeted 32 worth R220 million

3 Disbursement Disbursed R636 million against a target of R400 million

4Supporting jobs

Supported 3 621 jobs (2661 new jobs and 960 existing jobs) vs a target of 1 850

5 Unencumbered cash

Reduced outstanding commitments by 54% from the beginning of the moratorium

6 Enterprise Development

Achieved the target of 5 contributors with approximately R25.8 million received

7Collections

• Collected cash is 84% more than 2013 • Regions and Pre-Investment achieved collections of 92%

8 Black Women Empowerment

Achieved 25% target of black women participation in deals disbursed

9Media coverage

AVE coverage of R124 million, the highest in the history of the NEF. 85% of the coverage was positive, 10% neutral and 5% negative in totality.

34

ACHIEVEMENTS FOR 2013/14

  Output Achievements10 Industrial-

isationProgressed 10 SPF projects to subsequent development stages in portfolio, incl. BusaMed Hospitals (PFS to Construction), Link Africa (BFS to Operational), KC Energy (FC to Construction), Mabele Fuels (BFS to FC)

11 Sefa Secondment

Seconded IAs contributed 67% towards total Sefa approvals within a 6-month period

12 Rural & Community Development

Commitments on all long-standing approvals

13 Entrepreneurial Development

Progressing well with 6 Business Today training sessions provided, and 64 entrepreneurs referred to incubation partners

14 Workouts & Restructuring

Established turnarounds, Workouts and Restructuring Department

16 Deep dives Intense analysis of exited transactions and development of a tool to provide a forward looking view of the portfolio

17 Empowering Rural Women

44 socio-economic development interventions on behalf of enterprises owned and managed by black women, with 17 entity registrations facilitated, and training provided on a wide range of competencies, including corporate governance

35

ACHIEVEMENTS FOR 2013/14 cont…..

36

Over R1 billion collected cumulatively from loans disbursed across the country, in black-owned and managed businesses across virtually all sectors of the economy.

CASH COLLECTED

37

“The total assets of our Development Finance Institutions amount to some R230 billion.

However, their impact on development is not sufficiently broad-based and their investment programmes are not well coordinated.

The institutions will be repositioned in the next five years to become real engines of socio-economic development.”

State of the Nation Address By His Excellency Jacob G Zuma, President of the Republic of South Africa on the occasion of the Joint Sitting Of Parliament Cape Town,

17 June 2014

PRIORITIES GOING FORWARD

37

38

Thank you

38

APPENDICES

39

39

40

NEF APPROVED & DISBURSED DEALS BY VALUE SINCE INCEPTION

41

NEF APPROVED & DISBURSED DEALS BY VALUE SINCE INCEPTION

42

GRAPHIC ACTIVITY

42