Title: NEF : PROGRESS AND PROSPECTS
1- NEF PROGRESS AND PROSPECTS
- PRESENTATION TO THE PARLIMENTARY
- SELECT COMMITTEE ON ECONOMIC AND FOREIGN AFFAIRS
- (NATIONAL COUNCIL OF PROVINCES)
- Sydney Maree and Vijay Ramluckan
- 2 September 2003
2BACKGROUND
- History
- Established by NEF Act 105 of 1998
- Part of the DTI Group of DFIs
- Capitalisation through equity set asides of SOEs
- NEF designated equity in 12 SOEs
3NEF SOE EQUITY ALLOCATION
- MTN Group
- Telkom
- SAA
- Uthingo
- ACSA
- Connex Travel
- Viamax
- SAFCOL
- Syncat
- Transwerk Perway
- Sentech
- Sun Air
1.5 5 5 5 10 10 10 10 10 10 10 15
4HISTORY
- MTN Group shares transferred no other shares
transferred - Current MTN share valuation approximately
R427million - R200million general Venture Capital Fund
established in 2001, an NEF and IDC joint venture - Systems, processes and staff progressing
- New board of directors appointed in 2003
5CURRENT STATUS
- Acting CEO appointed August 2003 Mr Sydney
Maree - Mandate currently under review
- Capitalisation upon finalisation of the mandate
- Finalisation of mandate pending
6GOALS
- Spread ownership to HDPs
- Encourage and promote savings, investments and
meaningful economic participation of HDPs - Promote and support the development of businesses
pioneered by HDPs - Promote the understanding of equity ownership and
investments amongst HDPs - Contribute towards employment creation in South
Africa - Encourage Enterprise Development
- Play a central role in broad-based BEE Financing
7STRATEGY
- Focus on BEE SMEs, broad-based and mass
empowerment - Enterprise development
- Job creation
- Savings and wealth creation
- Procurement
- Market making
- Routine transactions
- Financial and investment literacy programmes
- Guided by the NEF Act and Government policy
- Focus on transformation sensitive sectors
- Other Government initiatives
8STRATEGIC OBJECTIVES
- Facilitate BEE savings, investments and finance
- Improve the accessibility of finance for BEE
groups - Provide value added services and products to BEE
groups - Focus on areas neglected by banks
- Greater propensity for risk provider of risk
capital - Complement current BEE products offered by other
DFIs - Leverage private institutional funding
- Create public-private partnerships
- Seek co-investment opportunities
9PROPOSED FUTURE STRUCTURE
Corporate Centre
Private Equity
Venture Capital
Investment Advisory Services
Guarantee products
Financial products for BEE business development
Investment products for mass broad-based
empowerment Advice to BEE Advice to Government
Parastatals
10PRODUCT OFFERINGS (currently under review)
- Finance for black business
- Private Equity
- Venture Capital
- Financial products for mass-based empowerment
- Community-based projects
- Employee share schemes
- Co-operatives
- Rural-based projects
- Guarantee Products
- Warehousing of equity
- Investment products for mass empowerment
- Mass-based savings and investment products
- Advisory services
- Market making
11NEF VENTURES
AIM Finance economic empowerment and black
business development
Nature of the Fund
Terms of the Funds Investments
- NEF and IDC joint venture
- R200 million general VC fund
- Seed, start up, early stage, expansion capital
and MA deals - Finance HDPs with minimum collateral into viable
projects - Investment size of R3 million to R10 million,
- R250 000 to R3 million fund to be introduced in
due course - Investment instruments
- equity
- quasi equity
- debt
- Investment horizon three to seven years
- Return commensurate with risk
- Investment of R5m completed
- Fund transactions where HDPs have an equity
interest and are operationally - involved, at senior management level.
- Invest in unlisted companies.
- The Fund will seek minority stakes in businesses
(up to 49). - Majority stakes in certain instances where there
is a clear mechanism to reduce stake to below 49
in the short term. - Will invest directly into the underlying
operating business rather than in an investment
holding company. - Invests in South African companies conducting
business predominantly within South
Africa.
12PRIVATE EQUITY
- Private Equity division will provide acquisition
and enterprise finance to - support empowerment.
- Focus will be on medium to large and mature
companies - with a profit history.
- Large transactions
- Funding will be provided for
- Developing growth companies
- Management buy-ins (MBIs)
- Management buy-outs (MBOs)
- Leveraged buy-outs (LBOs) and
- Recapitalisation of BEE investment structures
- Awaiting capitalisation
13INVESTMENT ADVISORY SERVICES
Overall aim
Investment Services Offers
- To increase HDPs participation in financial
markets and - formal savings vehicles.
- Emphasis is on the development of mass
empowerment broad-based investment and savings
products. - These will be supported by targeted investor
education programmes. - Structured investment products designed to limit
downside risk without compromising attractive
returns - Awaiting approvals for first mass empowerment
retail offering scheduled for 2004
- Retail share schemes for broad-based empowerment
using the NEF balance sheet - Retail share schemes for broad-based empowerment
using listed shares of non-empowerment companies - Warehousing of shares for forward sale through
mass empowerment schemes - Provide advisory, management and administrative
services for mass empowerment products to private
government companies - Empowerment unit trusts
- Economic and financial literacy campaigns
14GUARANTEE PRODUCTS
- Assistance with performance guarantees
- Assistance with financial guarantees
- Product designed to reduce cost of funding for
BEEs - Improve accessibility of funding for BEEs
- Leverage private institutional funding
15ADVISORY SERVICES
- Assist / Advice for Government Parastatals
- Provide assistance with business plan compilation
- Advise on deal structure, pricing, etc
- General economic and business advice to community
base organisations
16MARKET MAKING
- Prevent dilution of BEE shareholding
- Seek strategic investments for BEE investment
- Warehouse investment on behalf of appropriate BEE
structures
17NEF CHARTERS WORKING GROUP
- Assist with BEE financing strategy as part of
group of DFIs - NEF products not isolated from charter
requirements - Provide advice assistance to government
organisations developing charters and empowerment
policy and guidelines - Interact with other working groups/task teams
- Develop appropriate investment products for
charters
18National Empowerment Fund 23 Melrose Boulevard,
Melrose Arch P O Box 31 Melrose Arch Melrose
North 2076 Tel 011 772 8000 Fax 011 772
8100 Website http//www.nefcorp.co.za