Presentation to the Portfolio Committee on Arts and Culture Tuesday, 6 February 2018

1. Briefing by the National Empowerment Fund on its work and impact on the Arts and Culture Sector Presentation to the Portfolio Committee on Arts and Culture Tuesday, 6 February 2018

2. NEF delegation • MsPhilisiweMthethwa Chief Executive Officer • MsHlengiweMakhathini Divisional Executive – Venture Capital and Corporate Finance • Mr Chris Louw Western Cape Regional Manager

3. Presentation Outline • About the NEF • NEF’s role in the AC Sector • NEF Partnerships • DRDLR • Department of Tourism • Western Cape Department of Economic Development and Tourism • Private Sector • The DAC Partnership • Background • Why is Arts and Culture important in society? • AC domains and market failures • Trends observed in the Music Sector • AC- Socio-economic impact • Planned allocation per AC domain • Breakdown of recent pipeline • Challenges and suggested solutions • Strategic solutions

4. About the NEF 4

5. NEF Mandate… Established by the National Empowerment Fund Act No. 105 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-owned and managed businesses, as well as by promoting a culture of savings and investment among black people. 5

6. StrategicPlanning Framework… Broad Based Black Economic Empowerment The Codes of Good Practice • Sectors • NEF • Tourism; Biofuels; Construction; Agro-processing; Transport; ICT & • Media; Mining services; Franchising • Industrial Policy Action Plan: • Automotives, components, medium and heavy commercial vehicles • Plastics, pharmaceuticals and chemicals • Biofuels • Strengthening linkages between cultural industries and tourism • Business process servicing • Government Priorities: • Acceleration of economic growth and transformation, creating decent work and sustainable livelihoods; • Infrastructure development to achieve social and economic goals and rural development; • Skills and human resource development; • Build a developmental state and improve public service. NEF Act: Objectives The dti Objectives NEF Sectors in line with national industrial objectives 6 6

7. Funding Across the Economic Spectrum 5 specialist funds

8. Non-Financial Support Pre-investment As the first-point-of-contact the unit provides product advisory services, manages the online business-plan solution, manages the administration of applications, incubation and entrepreneurial training. Socio Economic Development Empower black people in existing NEF transactions and other broad based groups through various interventions such as promotion of saving and investments, social facilitation,entrepreneurial training, investor education, corporate governance training and market access for the acceleration of meaningful participation. Post-investment support Monitor investments, provide ongoing portfolio management, manage mentorship support and collections as well as legal compliance Turnarounds, Workouts and Restructuring Rehabilitate distressed transactions and reduce impairments Through a combination of measures including balance sheet restructuring, equity and /or working capital injection, operational restructuring, introduction of a strategic equity partner and / or turnaround specialist and business rescue.

9. Life to date performance milestones

10. The NEF’s role in the AC Sector – Existing portfolio 10

11. Summary of existing AC deals

12. Long Walk to Freedom • Background: • A movie based on President Nelson Mandela’s autobiography, Long Walk to Freedom. Mr Singh, the producer, is a South African film producer who has a successful record of accomplishment in the production of local and international films. • Funding approved - R50m. Fully disbursed. • Located in Durban, Kwa-Zulu Natal. • 799 jobs created: 668 for crew and 131 for cast (excluding extras)

13. The Sky Rink Studios (Pty) Ltd Background: Sky Rink Studios is a new venture started by Mr. Frank Mohapi, Mr. Miles Britton and Mr. Marvin Mathibe who were the owners of Diallo Works CC and BBDM BROS respectively. Diallo Works and BBDM were South African companies with extensive experience in communications, TV production, IT, digital media platforms and events production. Both companies have a history of producing TV and short films (from comedy to documentaries • Funding approved - R40m. R26.9m disbursed. • Located in Johannesburg, Gauteng. • Business employs 10 people

14. Accident Films (Pty) Ltd Background: The company was established by Forefront Media Group South Africa to co-produce a film called Accident with Suprebe Films, a French company. The film is made up of largely South African cast with the exception of a German actress. • Funding approved-R5m. R4.9m disbursed. • Located in Parkhurst, Gauteng. • The movie employed 215 people during production and post production

15. Bonngoe Production (Pty) Ltd Background: Bonngoe, a TV production company, was established in 2005 by Mr. KobediPokane. It is the 3rd largest (100% black owned) TV Production Company in South Africa after Morula Pictures that produces Generations and Word of Mouth Pictures producing Muvhango. • Second round funding approved - R15m. R11.8m disbursed. • Previous loan of R6.9m has been repaid. • Total disbursed to date - R18.7m • Located in Gauteng, Johannesburg • The company has created 17 jobs of which 14 are BEE and 3 are non-BEE.

16. Ma-Afrika Films (Pty) Ltd Background: MAF’s main business is the acquisition of film rights and production. The long-term vision and plan of MAF and its shareholders is to establish a film development and production ompanythat tells local stories that are of international quality and which can be internationally marketed. • Funding approved - R35m. Fully disbursed. • The company is 100% black owned and managed. • Located in Stellenbosch, WC • Employs 19 people

17. On Digital Media (Pty) Ltd Background: ODM was a greenfields venture that operatwsa second pay TV channel in South Africa. Its products are sold nationally by over 3 000 outlets such as JD Group (857 stores), Massmart Group (92 stores), Ellerines, AltechAutopage ( 136 branches nationally) and PEP Stores. • Funding approved - R140m. R121m disbursed. • Located in Johannesburg, Gauteng • Business employs 30 people

18. Bay Leap Trading CC Background: Bay Leap Trading CC t/a Blackmarket Media supplies its clients with marketing solutions that are delivered across different media platforms. The company has services companies like MNET, Multichoice and DSTV, to name few forming the customer base. • Funding approved - R15m. Fully disbursed. • Located in Gauteng Province • 100% black owned • Business employs 12 people • Youth owned

19. CANOC Productions CC Background: CANOC is an acronym that stands for Creating a Nation of Creatives. CANOC is a leading promoter of live music events in the African urban market. Since the commencement of their live music events outfit, they have hosted 14 shows (with local and international artists) to an audience of more than 120 000. In addition to executing world class concerts, they also provide bespoke entertainment solutions to Africa. • Funded approved - R16.6m. Fully disbursed. • Located in Gauteng Province • 100% black owned • Business employs 6 people

20. MSG Broadcasting Background: Power FM (Pty) Ltd (“Power 98.7”) is a radio station which was launched on 18 June 2013 after the company was awarded a Gauteng based sound broadcasting licence by the Independent Communications Authority of South Africa (ICASA) in December 2011. In the FYE 2017, NEF approved R25.7m towards the establishment of two more radio stations, Beat FM (Free State) and Rhythm FM (Eastern Cape). These new stations follow the music radio format • Total approved for 3 radio stations – R75m. R58.2m disbursed. • Located in Houghton, Johannesburg. • The business employs 64 people, 66.6% are female employees

21. Project Development – Cape Point Film Studios (Pty) Ltd Background: Cape Point Film Studios aims to develop the first purpose built four precincts Sea & Underwater Sound Stage in the southern hemisphere. There has been growing demand for production facilities of an international standard in South Africa by Hollywood producers and therefore Cape Point Film Studios aims to address this shortfall by offering unique and niche water stage facilities that are currently not available in the country in addition to existing sound stages. The project has great job creation potential and will assist to revive an economically depressed area in Atlantis, Cape Town. NEF has invested R3.5m to secure a 22% equity stake. At financial close, the transaction will be worth USD40m.

22. NEF Enterprise Development Partners 22

23. ED Partnerships

24. List of ED Partners

25. DRDLR Partnership • The NEF and DRDLR concluded an MOU in January 2016 to partner in implementing the SRR programme called 50/50. • The SRR policy entails the government (through the DRDLR) purchasing land used for farming operations from a farmer/s. The farmer and the farm workers then establish a newco that will continue with and continue the previous farming activities. The farmer will own 50% of the newco, and farm workers will own the other 50%. The government then leases the land to newco over 30 years. • DRDLR has assigned about 36 SRR projects to the NEF since the commencement of the SRR program which consists of 12 projects which were finalised in the 2016 and 2017 financial years, 10 projects which were declined and 14 projects are earmarked for finalisation by 31 March 2018.

26. Milestones to date-approvals 26 26

27. National Dept. of Tourism/NEF Partnership • In 2017, The National Department of Tourism (“NDT”) signed a Memorandum of Agreement (MoA) with the National Empowerment Fund (“NEF”) to establish a Tourism Transformation Fund (“TTF”) . • NDT committed to transfer a total of R120 million to the NEF over a 3 year period (R40 million per annum for the 2017/18 to 2019/20 financial years) to be applied as grant funding to qualifying enterprises that meet the funding eligibility criteria as set out by the Project Steering Committee (“PSC”). • This will be matched on a 2:1 basis by the NEF through both debt financing and equity contributions to the value of a further R80 Million per annum. This effectively makes available around R120 million per annum to support black investors in the tourism sector. • The grant funding component will be limited to a maximum value of R5 million per transaction in order to stretch the reach of the fund to more beneficiaries. 27

28. Applications and enquiries to date 28 28

29. Western Cape Dept. of Economic Development and Tourism • In 2010 The NEF and WCDEDAT identified an opportunity to partner in order to identify private sector enterprises which are willing and able to participate in the delivery of sustainable B-BBEE solutions to black enterprises at an accelerated pace in the Western Cape. • The programme entails that the qualifying private sector enterprises making contributions to the existing NEF Enterprise Development Fund (“NEF ED Fund”), and thereafter the NEF shall utilise these contributions to co-fund into enterprise development beneficiaries (“Beneficiaries”) identified in partnership with WCDEDAT within the value chains of the identified Measured Entities. 29

30. WCDEDT/NEF Partnership Progress to date Since inception the WCDEDAT has committed funding to the value of R33 302 775,00 funding 21 Western Cape based transactions.

31. DAC Partnership 31

32. The DAC’s Mzansi Golden Economy

33. The DAC’s Mzansi Golden Economy – Target Market of Each Fund • Established products and services and Entities requiring expansion and scaling up • Arts and Culture Organizations • Youth • Women • Legends • Professional Artists • Projects • Legacy Projects • Young artists at talent and apprentice level • Small grants • Artists needing support in forming enterprises • Capacity building

34. Background to the DAC Venture Capital Fund • In 2016, the Department of Arts and Culture (DAC) entrusted National Empowerment Fund (NEF) through a tender process to manage the Venture Capital Fund (VCF) for a period of 3 years with an allocated budget of R20 million (2016/17), R30 million (2017/18) and R50 million (2018/19). Purpose of the DAC Venture Capital Fund • Venture Capital Fund is designed to support black entrepreneurs wishing to start or expand existing businesses. • The Fund seek to redress past imbalances by addressing the lack of financing instruments for the creative industries, contributing to economic growth, and creating jobs. • Loans are from R250 000 • Entrepreneurship Finance • Supply Chain Finance

35. Why is Arts and Culture important in society? • Culture and creativity have been the cement that binds together not only hearts and souls, but entire societies and nations, even during tough economic times. • In 2014, the Arts and Culture sector contributed R90,5 billion (2.9%) towards SA’s GDP and created 562 726 job opportunities (41% of which are semi-skilled labours) contributing towards poverty alleviation and reducing unemployment amongst previously disadvantaged communities. • Arts and Culture contributes to social cohesion and sustains country’s heritage. • Impact on Capital formation of the sector is caR114 billion per year • Impact on Household Income amounts to caR69.9 billion, which reaches poor communities in SA. • Impact on fiscus amounts to caR24.4 billion through direct and indirect taxes, providing government with revenue used to improve quality of life of SA citizens. • Impact on the Balance of payments is a positive R35.7 billion per year.

36. Arts and Culture Domains Please note that this table excludes Cultural and Natural Heritage domain (museums, monuments etc.) Dominant Market Failures • Limited access to finance for SMMEs: The size of these businesses limits their ability to raise commercial bank financing, due to their lack of collateral and history of financial performance. • Businesses relying on government for grant funding is not sustainable. • Business revenue is based on once-off or infrequent projects. • Lack of supply chain finance to provide bridging finance for suppliers of goods and services with existing orders/contract.

37. Trends observed in the Music Sector 37

38. CD Sales – Beneficiaries of a CD sold at R99 CONSUMPTION EXHIBITION Site of exchange of rights to consume PRODUCTION Mass production, tools, infrustructure DISSEMINATION Distribution Wholesale Retail CREATION Content, origination, authoring ideas

39. Global vs Local Trends Music - Revenue

40. Live Music Festival

41. AC Socio-economic Impact 41

42. Ownership by Demographics Age Race Gender Most businesses in the Arts and Culture are owned and managed by people over 35 years. The Fund will target black, youth and women owned and managed businesses.

43. Provincial Dynamics • In 2014, Creative industry contributed R90,5 billion (2.9%) towards SA’s GDP and created 562 726 job opportunities of which 197 450 jobs are from Gauteng. • There are opportunities to create more job opportunities in other Provinces because creative industry is consumed Nationally. • Cost per job = R161 000 • Gauteng contributed 35% (i.e R31,9 billion) of the total creative industry GDP in 2014. • The fund aims to support projects across the different province. music.

44. Economic Impact • Fashion design and architectural services are the highest contributor to employment. • Performance and celebration such as Festivals and Events, Music and Performing Arts are the second highest contributor to employment. • Visual Arts and Crafts are the third highest contributor to employment. The Arts and Culture Fund will promote these three cultural domain due to high impact on job opportunities. • Films/movies will also be another focus as has an impact on boosting tourism. • 39.5% receive government grants as a source of income, 57% is derived directly from sales including royalties and the remainder of 4% is income from other donors.

45. Planned allocation per Domain

46. Breakdown of Recent Pipeline 46

47. Breakdown of deals

48. List of Recent Projects Breakdown – part 1 of 2

49. List of Recent Projects Breakdown – part 2 of 2

50. Yellowbone Entertainment Background: Rustilox (Pty) Ltd was incorporated for the production of a film called “Sew The Winter To My Skin”. Yellowbone Entertainment (Pty) Ltd, which is the production company that owns 100% of Rustilox, is an innovative and dynamic film production house focusing on quality entertainment and ground-breaking work by young black South African film makers. The total project size is R16 million. The NEF has approved funding to the tune of R3.5 million to be funded in conjunction with the DAC. The balance of the funding has been secured through the following institutions: • IDC – R7.8 million • NFVF – R1.2 million • DTI- R1.9 million • World Cinema Fund, Shangzhou Media, Sonya Swartz and own contribution – R1.5 million combined