Assistance Provided to Export Oriented Businesses

1. Assistance Provided to Export Oriented Businesses Briefing to the Select Committee on Trade and International Relations 1 September 2010

2. Presenters Ms Philisiwe Buthelezi Chief Executive Officer Mr Andrew Wright Chief Financial Officer

3. 2 NEF Mandate …

4. 3 Promote and support business ventures pioneered and run by black people; Promote the understanding of equity ownership among black people; Provide black people with direct and indirect opportunities to acquire share interests in State Owned and private business enterprises; Encourage and promote investments, savings and meaningful economic participation among black people.

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6. Alignment of NEF Strategic Objectives to National Performance AgreementOutcome 4: Decent employment through Inclusive growth Promotion and support of business ventures pioneered and run by black people, thereby directly contributing to the outcome of inclusive economic growth. Contribution to the fourth output: Raising South Africa’s competitiveness through investments made by the NEF’s Strategic Projects Fund. Contribution to the sixth output : Critically review our support for cooperatives and small businesses .. address the circumstances of workers and enterprises in the survivalist sectors of the economy. The NEF has specific and measurable targets in terms of the number and value of deals. The provision of financial and non-financial support (mentorship programme) to small business. Focus on increasing sustainable investment to strengthen the NEF’s balance sheet. Development of new models for co-operative enterprise such as using the OVOP model from Japan. By focusing on its core objective, which is to promote and support business ventures pioneered and run by black people, the NEF is directly contributing to the outcome of inclusive economic growth. Fundamental to this objective is emphasizing the creation of new business and existing business growth rather than on only the pure acquisition of shares in existing businesses by black people. We can contribute to the fourth issue in the raising of SA competitiveness through our SPF which seeks competitive opportunities for the SA economy and the inclusion of black participation in these opportunities at the outset as opposed to during equity closure following feasibility study. Key output: The sixth output is to critically review our support for cooperatives and small businesses and to develop a clear plan to improve our performance in this regard, as well as to address the circumstances of workers and enterprises in the survivalist sectors of the economy. The NEF’s contribution to this output is outlined below. The NEF has clear objectives in terms of the number and value of deals (The target for 2010/11 is to approve 70 deals worth R600 million and disburse 62 deals worth R510 million). The NEF can assist in the review of the support for cooperatives and small business by assessing the impact of financial and non-financial support on the businesses funded by the NEF. The NEF has a positive impact on growing the size and vitality of cooperatives and small business through the provision of both financial and non-financial support (in the form of mentorship) to small businesses and has increased focus on sustainable investment (by improving the quality of deals supported in order to strengthen the NEF’s balance sheet which will enable the organisation to finance black-owned businesses in the longer term). By providing continuous business and technical support through mentorship programmes, businesses are given the opportunity to focus on key business issues that will sustain growth and employment. The development of new models for co-operative enterprise such as using the OVOP model from Japan which the NEF has been studying and is drafting an implementation plan in consideration and consultation with dti Co-op unit. By focusing on its core objective, which is to promote and support business ventures pioneered and run by black people, the NEF is directly contributing to the outcome of inclusive economic growth. Fundamental to this objective is emphasizing the creation of new business and existing business growth rather than on only the pure acquisition of shares in existing businesses by black people. We can contribute to the fourth issue in the raising of SA competitiveness through our SPF which seeks competitive opportunities for the SA economy and the inclusion of black participation in these opportunities at the outset as opposed to during equity closure following feasibility study. Key output: The sixth output is to critically review our support for cooperatives and small businesses and to develop a clear plan to improve our performance in this regard, as well as to address the circumstances of workers and enterprises in the survivalist sectors of the economy. The NEF’s contribution to this output is outlined below. The NEF has clear objectives in terms of the number and value of deals (The target for 2010/11 is to approve 70 deals worth R600 million and disburse 62 deals worth R510 million). The NEF can assist in the review of the support for cooperatives and small business by assessing the impact of financial and non-financial support on the businesses funded by the NEF. The NEF has a positive impact on growing the size and vitality of cooperatives and small business through the provision of both financial and non-financial support (in the form of mentorship) to small businesses and has increased focus on sustainable investment (by improving the quality of deals supported in order to strengthen the NEF’s balance sheet which will enable the organisation to finance black-owned businesses in the longer term). By providing continuous business and technical support through mentorship programmes, businesses are given the opportunity to focus on key business issues that will sustain growth and employment. The development of new models for co-operative enterprise such as using the OVOP model from Japan which the NEF has been studying and is drafting an implementation plan in consideration and consultation with dti Co-op unit.

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8. 7 To focus exclusively on providing investment funding to black empowered businesses and wealth creating investment opportunities for black individuals; To be experts in investment and funding structures for black empowered businesses and black individuals in direct support of black empowerment policy; To stimulate sector targeted economic growth, job and wealth creation as a direct product of investment and funding activities; To act as a warehousing conduit for the transfer of valuable equity allocations and investments to the black public; To ensure broad-based and sustainable empowerment; To maximize the empowerment dividend in parallel to the financial dividend; To create a prudently and effectively managed fund with a time horizon of at least 10 years; To maintain and grow the capital base of the NEF for the benefit of its beneficiaries and provide a self sustainable real return to stakeholders; To differentiate against and work in syndication with existing business funding offerings by other operating Development Finance Institutions (DFIs) in promoting BB BEE; To work in partnership with both public and private sectors;

9. 8 To evaluate the effectiveness of black empowerment policy and the development thereof; To capitalise on the status of being the only gazetted “BEE Facilitator” and apply this status in the development of key sectors and the transformation thereof: Full black ownership status in the case of equity warehousing; Providing a BEE recognised fund allowing for full recognition for Enterprise Development scores for contributing companies; Effectively investing Enterprise Development contributions into mandated and recognised activities; Focusing on Enterprise Development contributions as a key source of additional capital for the NEF.

10. The Promotion of Exports by the NEF The promotion of exports is built into the NEF strategic plan as a product of the output applied to the dti regarding the need to raise our competitiveness, to raise our net exports and to grow our trade as a share of world trade. Addressed in the sourcing and evaluation of export orientated transactions within the existing product offering of the NEF. Given the growth potential for exporters, should Black empowered companies applying for finance from the NEF be positioning themselves for export, this aspect is used as a motivator for funding.

11. The Promotion of Exports by the NEF Once invested, the NEF actively seeks ways and means of assisting investees seek new export markets. These initiatives will involve: Introducing the investees into the dti Export Marketing & Investment Assistance Scheme (EMIA), Facilitating their participation on state and trade visits to countries of potential new foreign markets, and Sponsoring their participation on trade shows through the post investment non-financial support initiatives.

12. Standard NEF Investment Criteria Overall sustainability of the Black empowered business is firstly considered. Specific criteria for funding will vary depending on the type of funding requested, however generic criteria include: The Black applicant/s should be actively involved in the operation of the business; There should be a minimum Black ownership of 25.1% or 50.1%, depending on the funding product type; There should be clear industry experience of the BEE party/ies or non-BEE partners; The business model must be financially sustainability.

13. Export Oriented Investees The NEF has identified five (5) businesses as examples of Black empowered businesses that the NEF has funded which are currently involved in export activities or are positioning themselves to do so and in sectors aligned to IPAP: Amajuba Berries (Pty) Ltd DMS Powders (Pty) Ltd Safepak (Pty) Ltd Colliery Dust Control (CDC) Sun Space and Information Systems (SunSpace) (Pty) Ltd Amajuba Berries & Safepak have previously been considered for sponsorship by the NEF for exhibitions at international trade shows. 12

14. Export Oriented Investees

15. Export Oriented Investees

16. 15 Contact information … The National Empowerment Fund West Block 187 Rivonia Road Morningside, 2057 PO Box 31, Melrose Arch Melrose North, 2076 Tel: (+27)-11- 305 – 8159 Fax:(+27) – 11 – 305 – 8316 buthelezip@nefcorp.co.za

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