southern african-german chamber of commerce and...

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Southern African-German Chamber of

Commerce and Industry

Enterprise and Supplier Development

Fund

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FUND MANAGEMENT

1. Fund black business

2. Pre-Investment Support

3. Post Investment Mentorship

ASSET MANAGEMENT

1. Investor Education

2. BEE Repository

3. Public Share Offers

4. Enterprise Development

Financial & non-financial support Culture of savings & investment

NEF MANDATE

Grow black economic participation

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Alignment of Mandate to Government

Objectives Broad Based Black Economic Empowerment

The Codes of Good Practice

NEF Sectors in line with national industrial objectives

NE

F A

ct:

Ob

ject

ives

Th

e d

ti

Ob

ject

ives

Government Apex Priorities:

1) Acceleration of economic growth and development

2) Infrastructure development to achieve social and

economic goals

3) Effective second economy interventions and

eradication of poverty

4) Enhanced impact in areas of education and training

5) Strengthening the capacity and machinery of

government

6) Enhancing focus on international relations

The NEF’s priority sectors are set in terms of the alignment of the NEF’s strategy to that of the dti, NDP and

IPAP, which have identified arts and culture, rural development agro-processing, and labour intensive sectors.

Also constituting a key focus for the NEF is the area of construction, which is in line with the government’s

national infrastructure development plans

Sectors

NEF

• BPOs; Tourism; Biofuels; Construction;

Agri-processing; Transport; ICT &

Media;

Mining services; Franchising

Industrial Policy Action Plan:

• Automotives, components, medium and

heavy commercial vehicles

• Plastics, pharmaceuticals and

chemicals

• Clothing, textiles, footwear and leather

• Biofuels

• Forestry, paper, pulp and furniture

• Strengthening linkages between

cultural

industries and tourism

• Business process servicing

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Element Weighting Points

(Amended Codes)

Weighting Points (Current Codes)

Ownership 25 20 plus 3 bonus points

Management control 15 plus 4 bonus points Management control - 10 plus 1 bonus

point

Employment equity – 15 plus 3 bonus

points

Skills development 20 plus 5 bonus points Skills development – 15

Enterprise and

supplier development

40 plus 4 bonus points Preferential procurement – 20

Enterprise and Supplier Development

– 15

Socio-economic

development

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Total 118 107

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Asset Management Department

Through the Asset Management Division, NEF:

provides black people with direct and indirect opportunities to acquire shares in State Owned and private business enterprises. A prime example of this is the NEF Asonge share scheme;

promotes the understanding of equity ownership among black people;

encourages and promote investments, savings and meaningful economic participation amongst black people; and

Performs a B-BEE advisory role.

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NEF BEE Facilitator Status……

NEF is a facilitator of the Codes of Good Practice of the Broad-Based Black

Economic Empowerment Act, 2003 (“Codes”);

This means if NEF buys equity in a Company, the company is allowed to claim

BEE points on the following:

100% Black ownership;

40% Black Women; and

10% Designated Group,

without any acquisition of debts

This will be verified pro-rata according to NEF’s shareholding in that company.

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NEF Funding Products

Rural & Community Development

Franchising

Procurement

Entrepreneurship

Expansion

Acquisition

Empowerment Dividend

Broad Based Black Economic Empowerment:

Ownership, Management Control, Skills

Development, preferential Procurement, Enterprise

and Supplier Development;

Black Women Participation;

Geographic Spread across all provinces;

Job Creation;

Entrenchment of BEE rights in early stages of

projects aligned to the NDP and IPAP strategy; and

Investment Return.

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NEF Invested Process Report

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NEF Investment by Sector

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NEF investment by province

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EC 8%

FS 1%

GP 50%

KN 22%

LP 5%

MP 3%

NC 1%

NW 1%

WC 9%

NEF Invested Portfolio by province by value for since inception - 31 March 2013

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SAGCC Enterprise and Supplier

Development Initiative

Initiative aimed at assisting German Multinational

Companies integrate seamlessly with the current

B-BBEE dispensation, in relation to Enterprise and

Supplier development and contribute towards the

development and growth of South African SMME’s.

Mentorship

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SAGCC Opportunity

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SAGCC

Enterprise and

Supplier

Development

Fund

SAGCC

Measured

Entities

German

Multinationals

NEF

(Fund

Facilitator)

Joint

Steer

Co

SA German

Training

Services

SME’s •NEF Applicants

•Measured Entity

value chain

•Setting up of local

suppliers

•German Training

Services

Supply /

Offtake

Agreement

Preferential

Procurement

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Enterprise and Supplier Development …

Paragraph 9.1.2.3 of Statement 400, Amended Code Series

400 – states that payments made by the Measured Entity to

suitably qualified and experienced third parties to perform

Enterprise and Supplier Development and Supplier

Development on the Measured Entity’s behalf.

Annexure 400(B) of Statement 400, Amended Code Series

400 – states that grant contributions made by a Measured

Entity receive 100% recognition on the benefit factor matrix.

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Does the GCOCI ESD Fund comply with Code

400 stipulations? Code 400 stipulations NEF ESD Fund characteristic

Companies can pay their ED (1%

NPAT) contributions to a suitably

qualified and experienced third

party to perform Enterprise

Development on its behalf; and

Companies can pay their SD (2%

NPAT) contributions to a suitably

qualified and experienced third

party to perform Supplier

Development on its behalf.

Utilise E&SD contributions to

provide financial and non-

financial support to beneficiaries

over time;

NEF enters into agreements with

Measured Entity for this purpose

thus enabling Measured Entity

full recognition for E&SD upon

receipt by the beneficiary of the

financial or non-financial support;

Contributions shall be monetary

and non-recoverable against the

NEF, which shall in turn act as a

conduit to the beneficiaries.

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Does the GCOCI ESD Fund comply with Code

400 stipulations?

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Code 400 Stipulations SAGCC ESD Fund Characteristics

Paragraph 3.7 of Statement 400,

Amended Code Series 400 –

states that E&SD beneficiaries

are EME’s or QSE’s which are at

least either 51% black-owned or

51% black women owned.

Provides funding to beneficiaries

who meet the minimum criteria of

the NEF Act and B-BBEE Act.

The existing database of Imbewu

(SME’s) and RCF (agriculture) as

dictated to by the NEF mandate

demonstrates black ownership

levels of in excess of 50%.

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Product / Fund Description Funding amounts

Entrepreneurship Finance For starting a new business R 250 000 – R 10 million

Procurement Finance For tenders and contracts R 250 000 – R 10 million

Franchise Finance For pre-approved franchise licenses R 250 000 – R 10 million

Acquisition Finance For black investors acquiring a stake in medium to

large companies R 2 million – R 50 million

Expansion Capital For growing an existing business R 250 000 – R 50 million

Project Finance * Participation in green-field projects R 5 million – R 50 million

Capital Markets Listing on the JSE or its junior Altx markets R 2 million – R 50 million

Liquidity and Warehousing

The NEF has Black Facilitator status, which can help

black shareholders and companies wishing to sell a

stake while keeping the shareholding black

R 2 million – R 50 million

Rural and Community Development

Fund *

for agri-processing, tourism, mining & beneficiation,

manufacturing etc R 1 million – R 50 million

Strategic Projects Fund *

Venture-capital fund investing in early-stage projects

for the purpose of developing strategic industrial

capacity in poverty nodes, in renewable energy etc...

R 1 million – R 50 million

On average, business loans are repayable over 4 to 7 years, and up to 15 years where marked with an asterisk (*) below:

Funding Products in Detail

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Qualifying Monetary Contributions

as per Code 400

Contribution Type Benefit Factor Tax Benefits to Measured Entity

Grant Contributions (100%) Contribution to NEF is tax

deductible

Interest Free Loans (70%) No donations tax deduction

Lower interest rate loans Prime rate – Actual rate None - interest is taxable

Standard loan to Black owned EME

and QSE

(50%) None - interest is taxable

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Investment Proposal

Grant funding from Measured Entity (100% recognition);

Investment as risk capital through existing NEF products

within Imbewu, uMnotho and Rural & Community Funds;

Investments will utilise debt and quasi equity instruments;

40% of beneficiary funding will flow from ESD Funds and

60% from NEF funds;

ESD funds are priced at a fixed rate of 5% while the NEF

funds are priced using a matrix which incorporates all

elements of the Empowerment Dividend;

Key driver is joint investment with ESD Fund leveraging up

on NEF funding.

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Benefits to Measured Entity

If sector focused, Measured Entity to assist with

pipeline through establishment of a Fund Steering

Committee;

Tax deduction of contribution to NEF;

High Impact development finance transactions in

advancement of B-BEE;

Ability of SAGCC with NEF as a suitably qualified

and experienced third parties to advance the

financial or non-financial support to identified

beneficiaries within the verification window period

(12 months).

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Tax Effects

NEF is exempt from tax payment in terms of

s10(1)(cA) of the Income Tax Act 1962;

All grant contributions to NEF (donations) will not

attract donations tax (s56(1)(h)) and are tax

deductible (s18A deduction – limited to 10% of

taxable income before donation) in the hands of

the Measured Entity;

However donations may be subject to VAT if

there's a direct valuable benefit to the Measured

Entity.

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Next Steps for SAGCC

1. Identify Measured Entities for E&SD support and focus;

2. Develop these opportunities in partnership with the

SAGCC and NEF;

3. Calculate E&SD contributions as a Measured Entity; and

4. Enter into MOU and/or Participation Agreement.

Modular Innovative Building Technologies (MIBT)

Project Description

MIBT is constructing a 400 panels per shift (2 shifts per day) full-scale manufacturing plant in

Lyttleton, Pretoria, which will produce Modular Innovative (“MI”) panels used in the construction

of energy efficient and environmentally friendly “green” buildings. The pilot phase will enable

MIBT to commission the plant, which will operate at up to 50% capacity, and will reach COD* in

January 2013. MIBT will pioneer the “green” building materials manufacturing industry in

Southern Africa


188 jobs (60 direct jobs / 128 indirect jobs)

Pioneering the Southern Africa alternative construction industry

Supporting a BEE project promoter (SME to industrialist advancement)

Project Size R35 million

NEF Investment

BFS: R15 million (35% JV participation interest, to be maintained at Financial Close)

Financial Close: R20 million debt funding (to be raised on successful completion of pilot)

Project Stage Pilot phase (proof of concept and off-take expansion)

Province Gauteng (Pretoria)

* COD – Commercial Operation Date

KC

ENERGY

KC Energy (Pty) Ltd

Project Description

KC Energy is constructing a Combined Heat and Power (CHP) plant in Newcastle with a

production capacity of 60 tph (steam) and 6 MW (electricity), which outputs will be sold to

Karbochem, a synthetic rubber manufacturer. The project will break ground in December 2012

and reach COD in September 2013. The project benefits include; (a) technology and production

processes that are environmentally friendly, (b) easing of Eskom’s grid capacity constraints, and

(c) discard coal dump alleviation and a closed loop production process with the cementitious

waste ash used to produce bricks via an integrated brick manufacturing plant


221 jobs (47 direct jobs / 174 indirect jobs)

Pioneering the South African cogeneration industry

Creating new industrial capacity by establishing a BEE KC Energy plant O&M company and an

integrated BEE-owned brick manufacturing plant

Project Size R150 million

NEF Investment

Equity (NEF): R48 million (R12 million for 40% ordinary equity / R36 million shareholder loan)

Debt (IDC): R102 million senior debt (excl. cost overrun facility)

Project Stage Construction (COD: September 2013)

Province KwaZulu Natal (Newcastle)

* tph – tonnes per hour

* O&M – Operation and Maintenance

* COD – Commercial Operation Date

Jozini Tiger Lodge and Spa is a

R50 million project;

The NEF invested R28,3 million;

The Trust represents 22000

beneficiaries in the Jozini area

(Northern Kwa-Zulu Natal);

Overlooks the third largest lake

in South Africa;

The hotel has 60 rooms; and

Accommodates 144 guests.

The community owns this 4-Star hotel!

Jozini Tiger Lodge

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Development of a black owned and operated hospital group;

Black partner successfully awarded 4 licenses to build 480 beds

nationally;

Project Partners have extensive experience in building &

hospitals from Greenfield's level;

NEF has secured 40% equity in the project vehicle from

inception. To date NEF has invested R84 million while Standard

Bank have approved a facility of R1 billion

http://www.standardbank.com/Article.aspx?id=-305&src=; and

To date BUSA has established one hospital in Western Cape

(Strand) while construction is underway on the hospital in

Gauteng.

BUSA Hospital Group

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http://www.standardbank.com/Article.aspx?id=-305&src












Ma-Afrika Films

Provid ED Funding of R30 million

for the production of “A million

Colours” and “Winnie”

Ma-Afrika Films main business is

the acquisition of film rights and

production.

Ma-Afrika Films vision is to

develop local stories that are of

international quality and which

can be marketed internationally.

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THANK YOU

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