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NEF : PROGRESS AND PROSPECTS

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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

2
BACKGROUND
  • 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


3
NEF 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
4
HISTORY
  • 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

5
CURRENT STATUS
  • Acting CEO appointed August 2003 Mr Sydney
    Maree
  • Mandate currently under review
  • Capitalisation upon finalisation of the mandate
  • Finalisation of mandate pending


6
GOALS
  • 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

7
STRATEGY
  • 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

8
STRATEGIC 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

9
PROPOSED 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
10
PRODUCT 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

11
NEF 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.

12
PRIVATE 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

13
INVESTMENT 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

14
GUARANTEE 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

15
ADVISORY 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

16
MARKET MAKING
  • Prevent dilution of BEE shareholding
  • Seek strategic investments for BEE investment
  • Warehouse investment on behalf of appropriate BEE
    structures

17
NEF 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

18
  • NEF CONTACT DETAILS

National 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
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